Ulta Beauty lifts annual forecasts on demand for cosmetics

Ulta Beauty raised its annual sales and profit forecast on Thursday, betting on strong demand for its makeup and skincare products going into the holiday season. (Target via AP)

Ulta Beauty raised its annual sales and profit forecast on Thursday, betting on strong demand for its makeup and skincare products going into the holiday season.

Shares of the company, which also reported third-quarter results above estimates, were up about five per cent in trading after the bell.

The cosmetic retailer enjoyed strong sales at its outlets, helped by its trendy and affordable offerings, along with marketing efforts, which helped attract shoppers, especially younger demographics.

Ulta also benefits from fast-growing demand for fragrances, as well as the popularity of celebrity-owned labels on its shelves, including Rihanna’s Fenty Beauty.

The positive outlook comes at a time when budget-conscious consumers are pulling back on discretionary spending amid macroeconomic uncertainty, causing expectations of muted holiday spending in the U.S. this year.

“As we look ahead to the all-important holiday season, we know many consumers’ wallets are pressured and they are seeking value,” CEO Kecia Steelman said in a statement.

Meanwhile, lower e-commerce shipping costs and inventory shrink - a term used for lost or damaged stock - helped the company’s margins.

The company now expects annual net sales of about US$12.3 billion, compared with its prior forecast of $12 billion to $12.1 billion.

It expects comparable sales to rise in the range of 4.4 per cent to 4.7% in fiscal 2025, compared with its prior growth forecast of 2.5% to 3.5 per cent.

Ulta Beauty said it expects annual profit of $25.20 to $25.50 per share, higher than its prior forecast of $23.85 to $24.30.

Third-quarter sales rose 12.9% to $2.86 billion, compared with the average analyst estimate of $2.72 billion, while earnings per share of $5.14 beat estimates of $4.64, as per data compiled by LSEG.

(Reporting by Neil J Kanatt in Bengaluru; Editing by Maju Samuel)