Ulta Beauty shares experienced a notable decline on Wednesday after CEO Dave Kimbell cautioned about a slowdown in demand for beauty products. This warning led to a ripple effect, with stocks of other companies in the beauty segment, such as E.L.F. Beauty, Estee Lauder, and Coty, also dropping during Wednesday morning trading.
Kimbell addressed investors at a conference hosted by JPMorgan Chase, stating, “We have seen a slowdown in the total category.” He explained that while Ulta had anticipated a moderation in demand, the slowdown occurred earlier and to a greater extent than expected. This trend was observed across various price points and beauty categories, with prestige makeup and haircare experiencing a more significant impact.
Beauty products had been a standout category in retail, with consumers continuing to invest in makeup, skincare, and other beauty items even amidst cautious spending on discretionary items like clothing. This strength prompted many retailers to increase their focus on beauty, with initiatives such as Target opening Ulta Beauty shops within its stores and Kohl’s planning to introduce Sephora shops in all its locations.
However, Kimbell noted that beauty shoppers are not immune to economic pressures, citing factors such as rising credit card debt, geopolitical tensions, and the upcoming presidential election. These factors contribute to uncertainties that may influence consumer spending behavior.
Ulta previously forecasted net sales between $11.7 billion and $11.8 billion for the fiscal year 2024, higher than the $11.2 billion reported in the previous fiscal year. However, it expects a slowdown in comparable sales growth, projecting an increase of 4% to 5% compared to the previous fiscal year’s growth of 5.7%.
Ulta’s stock, which had reached a 52-week high of $574.76 in mid-March, was trading around $447 midday on Wednesday. Despite this decline, Ulta’s shares remain down nearly 8% for the year, trailing behind the gains of the S&P 500.
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