Despite All Time High Share Price, Ulta Salon Still A Long-Term Buy

| About: Ulta Salon, (ULTA)

Ulta Salon, Cosmetics & Fragrance (NASDAQ:ULTA) soared to all time high share prices Thursday after a second quarter earnings beat. The salon and beauty product retailer saw shares trade up 2.5% during the day's trading session, and rocketed up another 9% in after hours trading. Shares now trade at $103.80, easily passing a fifty two week high of $98.42, and representing the highest shares have ever traded.

In the second quarter, Ulta Salon saw net sales increase 22.1% to $481.7 million. Last year the company reported sales of $394.6 million. Gross profit margin increased eighty basis points in the quarter to 34.8%. Net income increased 46.4% to $35.0 million. Earnings per share increased 42.1% to $0.54.

Sales at locations open more than fourteen months increased 9.3%. In last year's second quarter, same store sales increased 11.3%.

Ulta Salon opened 22 new stores in the second quarter. Along with the new stores, the company also relocated one and remodeled nine. In the first six months of the fiscal year, the retailer has now opened forty new stores. At the end of the quarter, there were 489 Ulta Salons in 45 states. The company will add 52 additional locations in the third quarter.

One of the biggest contributors to same store sales increases is the company's addition of boutiques in its stores. The company is extending its partnership with Lancome and will add fifty more in-store boutiques. The company also increased its partnership with Clinique, a beauty products company ownd by Estee Lauder (NYSE:EL). There are currently thirteen stores with an in-store Clinique. This number will add thirty five additional locations.

The company is working hard on its five components for multi year growth. Those components are:

· Accelerating store growth

· Introducing new products, services, and brands

· Enhancing our loyalty program

· Broadening our marketing reach

· Increasing digital focus with

In the third quarter, the company is now forecasting sales of $494-$503 million. Earnings per share are expected to be $0.54-$0.56. Analysts on Yahoo Finance see the company earning $0.51 in the third quarter. For the full year, analysts see Ulta posting a profit of $2.55 from $2.19 billion in sales. The following year, analysts see the company jumping to a profit of $3.23.

Previously announced goals for the fiscal year were:

· Same store sales growth of 8%

· Earnings per share of $2.58-$2.60

· Square footage increase of 22%

· Addition of 100 retail stores

Shares are trading with a high valuation of around forty times earnings per share targets of $2.60. Plans call for the company to open 1200 stores in the United States. With 489 stores, the company is only 40% towards its long term goal. The company is well positioned for the long term with a dominant market of women's beauty products. If the chain can continue its strong loyalty club results (recently surpassed 10 million members who make up 50% of sales), open additional stores, and create in-store boutiques, then the double digit same store sales will continue. This is a long term stock pick for patient investors. I think shares will drop back down over the next couple of week as investors take profits. Consider this specialty retailer for your portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.