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Ulta Q1 Earnings Reaction: All Dressed Up With Nowhere To Go

Jun. 05, 2020 2:03 PM ETUlta Beauty, Inc. (ULTA)5 Comments
Michael W Byrne profile picture
Michael W Byrne


  • Ulta Beauty reported a predictably bad first quarter, with a loss of $1.39 per share and a Y/Y revenue decline of ~33%.
  • Not only were stores closed, Ulta also faced an additional headwind - with nowhere to go, there was simply not as much demand for cosmetics.
  • Moving forward, stores are already reopening and more importantly workplaces, events and society as a whole are slowly reopening, meaning demand for cosmetics should normalize.
  • The crisis seems to have also accelerated Ulta's already promising push into omnichannel and interest in its Augmented Reality offering, GLAMlab.

At this point, we're all familiar with the "work from home" trade, a previously unlikely combination of SAAS stocks like Slack (WORK) and Zoom (ZM) mixed with pizza deliverers like Papa John's (PZZA) and Domino's (DPZ) which have outperformed the market. We also all know the flip side of this trade where retailers of all stripes have suffered declining revenues as a result of the shutdowns/closures related to the COVID-19 pandemic. Let's be honest, if someone hasn't, they probably wouldn't be reading Seeking Alpha, so there's no need to take a deep dive into that theme here.

While big box retailers selling consumer staples like Walmart (WMT) that have been able to stay open and serve the public have thrived, it really should be no surprise to anyone that sales at other types of "non-essential" retailers have declined, as they literally have not been able to open for business and foot traffic has been non-existent. This is an obvious headwind facing retailers in the "consumer discretionary" space.

Q1 Performance

Ulta Beauty suspends new hires, defers pay rises and puts store ...

Image Source: Globalcosmeticnews.com

Ulta Beauty (NASDAQ:ULTA) is one such company (I've previously written a longer/more in-depth description of Ulta's business which you can read here, as this article is meant more to serve as an update on the current situation). Ulta reported Q1 results after the bell on May 27th, and results were ugly, although again that is what one would expect, as the company closed all of its stores on March 19th. The company saw year-over-year revenue decline by 32.8%. The typically profitable company reported GAAP EPS of -$1.39, missing analyst estimates by $2.17. While there is the aforementioned obvious reason for this, there's also an additional "demand killer" right now that is hurting Ulta specifically - so what is it and why am I feeling optimistic?

Nowhere to Go - the

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This article was written by

Michael W Byrne profile picture
Writer, individual investor, and MBA student. I also write and create content for several top fintech and cryptocurrency companies. I am particularly focused on cryptocurrencies and SPACs and I am also currently especially interested in energy and commodities, the digital payments space, and tech/software. I am interested in any opportunities that may arise outside of Seeking Alpha based on my work here so please feel free to contact me.

Analyst’s Disclosure: I am/we are long ULTA. 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.

Investing in equities can involve substantial risk. Potential investors should use this article as a starting point for their own research. Before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. I am not a professional/registered financial adviser; investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. This article is for general information purposes only, and should not be relied upon as a formal investment recommendation.

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