Ulta Beauty Maintains Neutral Rating Despite Reduced EPS Forecast
BofA Securities analyst Lorraine Hutchinson has reiterated a Neutral rating on Ulta Beauty, Inc. (ULTA), with a price objective of $380. However, the analyst reduced the FY25 EPS estimate by 8% to $22.41, citing a 3% decline attributed to increased store openings and lower margins.
Despite this revision, Ulta Beauty remains optimistic about its long-term growth trajectory. The company projects annual sales growth of 4-6%, comparable sales growth of 3-4%, and low-double-digit EPS growth. Hutchinson acknowledges that FY25 might be a transitional year, with results potentially falling short of long-term targets as the company navigates softer sales while investing in initiatives to strengthen its market position and reignite growth.
To further bolster its financial position and fuel future growth, Ulta Beauty announced a new $3 billion share buyback program. Hutchinson estimates that this program could contribute a substantial 500 basis points to annual EPS growth.
The analyst emphasizes that the company will focus on enhancing its product assortment through the introduction of new offerings and strategic brand partnerships. These initiatives, which drive 20%-30% of annual revenue, have a strong pipeline according to management.
Ulta Beauty is also committed to improving the customer experience both in-store and online. This includes boosting its loyalty program, expanding its social media presence, refining its promotional strategy, and directing investments towards marketing, loyalty initiatives, sampling, digital exposure, major events, employee training, and in-store activities.
Looking ahead, Hutchinson lowered the FY26 EPS estimate to $22.41 from $24.44. However, the company’s commitment to strategic initiatives and its new share buyback program suggest that Ulta Beauty remains well-positioned for future growth.