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03 April
Ulta Beauty’s stock is on pace for its biggest drop in four years. Executives blame this ‘soup of activity’ for slowing demand.
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Shares of Ulta Beauty Inc. were on pace for their biggest percentage drop in more than four years after the beauty-products retailer on Wednesday said industry-wide demand had slowed more than expected over the past two months, threatening same-store sales growth.

Ulta ULTA, -14.69% Chief Executive Dave Kimbell said during an investor conference that demand, while easing, was still up, and that shopper enthusiasm was still high. But he said an array of issues — the usual suspects that other executives have called out, like price increases for basics, higher credit-card debt, the return of student loan payments, conflicts abroad and the U.S. presidential election this year — had made consumers anxious.

“It just creates this soup of activity for our consumers that they’re trying to navigate through,” he said.

“Consumers have been, largely, in beauty, performing well and engaging highly in the category,” he continued. “What we’re seeing right now, as we’re two months into our fiscal year, we have seen a slowdown in the total category.”

He added later that the slowdown had occurred “a bit earlier” and been “a bit bigger than we thought,” and that the growth rate had come down “probably faster than we anticipated.”

Chief Financial Officer Paula Oyibo said that if those trends continue, she expected the chain’s first-quarter same-store sales to be “on the lower end” of a prior forecast for growth in the low-single-digit range for the first half of the company’s fiscal year.

Ulta Beauty’s stock slid 13.9% on Wednesday. The stock was on pace for its largest percent decrease since March 18, 2020, when it fell 16.87%.

Ulta executives have said that they expected demand for beauty products to moderate, after several years of stronger growth, driven in part by the economy’s reopening as people ventured back out into public life. But the chain last month forecast full-year profit that was just shy of forecasts, and said the industry had gotten more competitive.

During the conference on Wednesday, Kimball said that through most of last year, demand for mass-market makeup was strong, helped by newer offerings such as Nyx and Morphe. But he said demand for prestige brands took a hit as they get sold in more places.

Ulta is trying to keep the flow of new offerings steady. On Wednesday, it introduced WYN Beauty, a new makeup line founded by tennis icon Serena Williams. Ulta said the line was geared toward a more active lifestyle, and that it would be selling it exclusively starting on Sunday.

Shares of Ulta Beauty are down 18.3% over the past 12 months.