Ulta Beauty Inc. trimmed its sales forecast as more US consumers cut back on makeup and cosmetics in the face of higher prices and elevated borrowing costs.
The retailer sees net sales of $11 billion to $11.2 billion in the current year, down from its earlier estimate of $11.5 billion to $11.6 billion. Second-quarter comparable store sales also missed Wall Street expectations.
The shares fell 7 percent in postmarket trading in New York as of 5:55 p.m. Through Thursday’s close, the stock had dropped 25 percent this year.
Ulta has seen swift sales in recent years, but the demand has weakened as shoppers pull back on discretionary purchases. The company is also facing more competition from rivals like Sephora, Target Corp., Walmart Inc. and online sellers such as Amazon Inc.
“Consumer behavior is starting to shift as consumers increasingly focus on value, and become more cautious with their spending,” Ulta’s Chief Executive Officer Dave Kimbell said on a conference call. “Our market share continues to be challenged” particularly for prestige makeup and hair care items, he said.
Sales moderated during the quarter as promotions boosted online sales but failed to drive store traffic.
Kimbell said pressures will likely continue in the near term, with more competitors opening more stores near Ulta locations. The beauty retailer has 1,411 stores across the US, and plans to add as many as 65 net new locations this year.
Ulta also lowered its comparable sales and earnings per share forecasts for the year.
The company’s disappointing results are an “alarm signal,” said Bloomberg Intelligence analyst Lindsay Dutch. The company’s second-quarter miss and fairly steep downward revision to guidance “contrast with broader beauty-category trends, suggesting the challenges are specific to Ulta and a turnaround plan is needed,” she said.
Bath & Body Works Inc., which also sells makeup and shampoo, lowered its revenue guidance for the year on Wednesday. The company said its store traffic has been pressured as US shoppers grow increasingly cautious about spending.
By Leslie Patton
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