Ulta Beauty Inc. shares slid 29% Friday, putting them on track for their biggest ever one-day percentage decline, after the beauty products retailer warned that sales headwinds would dent future earnings.
The move weighed on other cosmetics stocks with e.l.f. Beauty Inc. ELF, -2.27%[1] down 4.3% and Estée Lauder Cos. Inc. EL, -2.97%[2] down 2.4%.
Bolingbrook, Ill.-based Ulta ULTA, -29.11%[3], which was riding high earlier this year thanks to the boost it was enjoying from the cosmetics line launched by reality TV star Kylie Jenner,[4]said it earned $161.3 million, or $2.76 a share, in the second quarter,[5] compared with $148.3 million, or $2.46 a share, in the year-earlier period. Revenue rose 12% to $1.67 billion. Analysts polled by FactSet expected earnings of $2.80 a share on sales of $1.68 billion.
But it was the lowered guidance that really hammered the stock. Ulta lowered its same-store sales growth expectations to 4% to 6% for the year, from previous guidance of growth of 6% to 7%. It cut its per-share earnings forecast to $11.86 to $12.06 from a previous $12.83 to $13.03.
“We believe the industrywide challenges in the make-up category will continue in the near term, and as a result, we’ve adjusted our outlook for the rest of 2019 to reflect ongoing volatility in the category,” Chief Executive Mary Dillon told analysts on the company’s earnings call, according to a FactSet transcript.
The news triggered at least four downgrades as analysts cut estimates and slashed stock price targets. The average price target of analysts polled by FactSet fell to $307.17 early Friday from $376.56 at the end of July.
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Morgan Stanley analyst Simeon Gutman downgraded the stock to equal weight from overweight, and trimmed his stock price target to $275 from $395. The quarter was a “thesis changing” one with the growth outlook for half the business — cosmetics — slowing meaningfully, Gutman wrote in a note to clients.
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When Morgan Stanley upgraded the stock back in January of 2018, analysts were expecting several drivers to help it outperform, including that the business had an extra year of square footage growth as it built out its stores.
“We...