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Is Ulta on a downward spiral as reports claim?

By Michelle Yeomans+

23-Jan-2014
Last updated on 23-Jan-2014 at 16:59 GMT

Some of the largest U.S. brands have been falling on hard times of late and rumours have been circulating that beauty retailer Ulta Salon is suffering most of all. Here, Cosmetics Design takes a look into the matter.

 

At the end of last year Ulta provided a somewhat grim outlook in terms of its' growth forecast, and is yet to reveal its sales figures from over the holidays which has spurred rumours and left investors concerned that it may not have much positive news to share.

The retailer which currently operates 664 locations in the US, seen its stocks gain momentum in 2013 despite both its' CEO and CFO resigning, however on releasing its third-quarter results in December, the company missed estimates on both the top and bottom lines, coming in much weaker-than-expected.

In that report Ulta stated that it expected to earn $1.07-$1.10 per share on revenue of $853 million - $867 million rather than the $1.24 per share on revenue of $895 million that analysts had initially expected.

A call for rumours?

According to the Motely Fool, these earnings transcripts indicate that the newly-appointed CEO Mary Dillon was handed a 'growth-at-any-cost' company when taking the reins mid last year.

"I've also seen we need to upgrade our capabilities in certain areas which will require additional investment over a multi-year horizon in order to achieve our growth aspirations," Dillion commented.

Its not all doom and gloom for Ulta though as top-line growth continued in the first three quarters of the 2013 fiscal year, with comparable retail store sales increasing 6% and e-commerce results trumping that number quite profoundly at 72%.

It has also been investing in a new facility, training its employees and augmenting its supply chain to support broader expansion and continue at its forecasted 15% rate of square footage growth.

Without such supporting capacity in place, growth can become unsustainable and adversely serve as a prime business case study in failed strategy.

The company was also quick to spot upcoming holiday trends and notify investors ahead of the changing landscape, rather than waiting until January, as did many large specialty retailers includingL Brands and Signet Jewelers.

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