Beauty retail giant Ulta Salon Cosmetics & Fragrance (O:ULTA) is set to report Q3 2015 earnings today after the market closes. Amidst an overall weak retail sector, Ulta has emerged as one of stronger companies, boasting double digit sales and earnings increases over the past few years. Shares are up over 380% across the past 5 years and over 30% this year alone. The company carries over 20,000 products from 500 different companies and has been able to secure a very loyal customer base. Expectations for today’s results are optimistic, as analysts are certain of year-over-year increases in EPS and revenue. The Estimize consensus is calling for EPS of $1.06 and revenue of $873.81 million while Wall Street analysts are forecasting EPS of $1.05 and revenue of $879.02 million.
Ulta prides itself on the customer in-store experience. Locations average 10,000 square feet, and are a major hub for all things beauty, including cosmetics and unique salon products and services. The company claims its store layouts and wide array of merchandise and full service salons differentiate it from online retailers like Amazon (O:AMZN) and generalist retailers like Target (N:TGT) and Wal-Mart (N:WMT). By snagging market share from competition, Ulta has been able to attract a new and highly lucrative demographic. Teenagers have been increasingly shopping in stores and are attracted to some of the new indie and trendy lines of beauty products. As Ulta keeps up with the latest styles, teenagers will continue to flock to stores.
In the previous quarter, Ulta opened 22 new stores, adding the total count to 817. Fifty-nine additional locations are expected to open by the end of the fourth quarter, quite opposite from the store closings several other retailers have been suffering. More store openings means that comparable sales have been strong and the company guidance expects an increase of 8-10% this quarter. The beauty powerhouse has been able to consistently introduce fresh new products and the integration of its loyalty rewards program has brought in about 80% of total sales.
Furthermore Ulta has been working hard to expand its e-commerce business. Evidence of growth was seen in Q1 and Q2, where online sales increased by 49.8% and 43.4%, respectively. With figures as large as these, analysts and investors will expect to see similar evolutions this quarter. Internet revenues accounted for 10% of total sales in fiscal 2014.
The Bolingbrook, IL based cosmetics chain does face a problem. With progression nearly every quarter, how much more can the firm grow? In Q32014, Q42014, and Q12015, comparable sales grew 9.5%, 11.1% and 11.4 %, respectively. These are very strong numbers and it remains to be seen whether or not consistent growth is sustainable. However, this quarter will be strong, especially with the holiday season shopping spree getting ready to kick off.