No. of Recommendations: 5
For 2024, Ulta (ULTA) expects a profit of $26.20 to $27 per share on sales of $11.7B to $11.8B. The Street is expecting a higher profit of $27.03 on $11.7B in sales.
Comparable sales are expected to increase 4% to 5% versus comparable sales of 5.7% in 2023. The operating margin is expected to contract to 14% - 14.3% from 15% in 2023.
https://seekingalpha.com/news/4079722-ulta-shares-...
Stock has fallen by about 7% and is now trading at just below 20 fwd PE at mid-point of guidance.
The beauty segment of retail esp. Ulta has much higher growth, margins, ROE/ROTC than dollar stores / DG. With Ulta sporting a forward PE valuation slightly below DG, maybe Ulta is the better buy.
What do you think?
p.s. Sorry to post about Ulta on DG board, but Ulta does not have an active board.20x next year's earnings seems like a reasonable multiple for a company growing so quickly. I don't see much of a comparison with dollar stores, obviously they are targeting a quite different retail segment. But at first glance, they seem to have some advantages over dollar stores that I can think of, and one disadvantage.
I think dollar stores have some challenges because they (i) have higher prices than competitors like Walmart, (ii) are under some threat from ecommerce (although perhaps not so much as other retail segments), and (iii) are highly reliant on things one would have taken for granted 10 years ago, like theft being a rarity.
Ulta, on the other hand, seems to cater to people who maybe want to spend a little more, and beauty products I would think are moaty - judging from my wife's consumption patterns, once a customer settles on a product she likes, she is unlikely to switch because of a small price change.
I don't know Ulta well enough to be sure, but it seems they also offer some on-site beauty services, like hairstyling, manucures, and so on. That would seem like an ideal context for selling beauty products with a higher margin, and creating some brand loyalty.
If we do ever get a recession, on the other hand, beauty products and services seems like one of the first things that would be cut, by a consumer who is starting to feel pinched.
They contemplated expansion into Canada before the COVID furore, but didn't go ahead with it.
So I would be curious to whether you have any direct experience with them, what you think of them as a company, and to know more about the kinds of services Ulta offers, what proportion of their sales these represent, and what kind of loyalty customers feel towards the brand.
Thanks for the idea,
Regards, dtb
