On Friday, Evercore ISI adjusted its financial outlook for ULTA Salon (NASDAQ: ULTA), reducing the price target slightly to $630 from the previous $635, while maintaining an Outperform rating on the stock. The revision follows ULTA Salon's fourth-quarter earnings release, which surpassed analysts' earnings per share (EPS) expectations with a reported $8.08 compared to the predicted $7.63 by Evercore ISI and $7.53 consensus.
ULTA Salon reported a 2.5% increase in same-store sales (SSS), slightly above Evercore ISI and Street estimates, which were both at 2%. Despite the positive sales performance, the company's guidance for 2024 presented mixed signals. It indicated a more optimistic revenue forecast but a less favorable margin outlook than initially suggested 90 days prior.
The competitive landscape, particularly influenced by the expansion of Kohl's (NYSE:KSS) and Sephora, is noted to be intense, adding an element of risk due to potential market share shifts.
The analyst from Evercore ISI outlined that ULTA Salon is expected to maintain or exceed its 4-5% same-store sales growth guidance, which is considered robust in comparison to its retail peers. Although the market may react negatively in the short term to the disappointing margin guidance, the analyst predicts that focus will eventually shift to ULTA's stronger-than-anticipated revenue projections.
The company is believed to have a compelling narrative for comp acceleration throughout the year, benefiting from easier comparisons and decreasing costs. This is expected to lead to a significant improvement in earnings before interest and taxes (EBIT), with an acceleration of approximately 15 percentage points in the second half of the year compared to the first half.
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