Ulta Q3 growth in line with forecasts

09-Dec-2013 - Last updated on 09-Dec-2013 at 14:16 GMT

Related tags Gross profit margin Real estate Stock market

Ulta Beauty Salon has reportedly met its growth forecast for the third quarter of 2013 with respectable increases in sales and net profits.

Net profits increased by 19% from $185.49m to $231.66m, marking a reasonable quarter for the company. Gross profit margin also increased slightly from 36.6% to 37.43%.

In its financial statement Ulta focused on positive aspects of the results, including its hefty increase in footprint since the beginning of the year and continued profit growth in the face of a difficult market, and said they expected similar performance going forward to 2014, with sales growth in the low twenties.

In a statement, CEO Mary Dillon commented: ”The Ulta Beauty team delivered solid top line growth, with particular strength in our on-line sales, despite a challenging environment.”

Investor disappointment

According to media reports, Ulta's growth for 2013 disappointed analysts, who were expecting higher share price increases than the $0.11 recorded from 2012-13. The company’s shares reportedly collapsed in trading following the announcement of their financial results, declining by 18% according to a report by Forbes.

VP of investor relations Laurel Lefebvre commented to CosmeticsDesign.com: "We saw very strong sales trends well into Q3 this year, but we did see a slowdown in late September into October, and we adjusted our tactics to ensure we continue to drive top line growth and market share gains into the holiday season."

"We are very pleased with our business model and our ability to gain market share, and deliver very strong same store sales of 6.8% in the third quarter...You can look for us to build an even stronger business for the long term informed by the strategic planning process we are currently undergoing."

Footprint growth will remain high

Ulta has made a considerable expansion of its physical footprint in 2013, opening 125 stores since the beginning of the year for a total of 22% square growth. According to Lefebvre, the company plans to slow down its breakneck growth in 2014 to 15% in view of their need to perform remodels and refreshes of their planogram.

Lefebvre commented: "As we looked at all the other projects we’re working on, and how many remodels and refreshes of the planogram we’d like to do, we decided to moderate store growth a bit in 2014, and feel comfortable that 15% square footage growth is the right number in the context of total real estate projects."

"The current real estate market is very favorable for finding attractive sites for our 10,000 square foot suburban model."