More All-Time Highs After Ulta Earnings

Thursday after the markets closed, Ulta Salon, Cosmetics & Fragrance Inc. (NASDAQ: ULTA) released its fourth-quarter and full-year earnings report. This specialty retailer had $1.35 in earnings per share (EPS) on $1.05 billion in revenue for the fourth quarter, compared to Thomson Reuters consensus estimates of $1.27 in EPS and $1.02 billion in revenue. The fourth quarter from the previous year had $1.09 in EPS and $868.08 million in revenue.

The company gave guidance for the first quarter of 2015 as net sales in the range of $833 million to $847 million and EPS is expected to be in the range of $0.88 to $93. There are consensus estimates of $0.91 in earnings per share and $832.1 million in revenue.

Comparable sales increased 11.1%, compared to 9.2% in the fourth quarter of last year. This was driven by 7.7% growth in transactions and 3.4% growth in average ticket. At the same time, e-commerce sales grew 55.2%, aiding in the growth of comparable sales as a whole. Operating income increased 20.4% to $137.5 million, or 13.1% of net sales, compared last year’s fourth quarter.

Ulta ended the quarter with 774 stores and square footage of roughly 8.18 million, which represents a 14% increase in square footage compared with the same period last year. During the fourth quarter, the company opened 10 new stores.

About $148 million of free cash flow was generated in the 2014 fiscal year, compared to $102 representing an increase of 45%. Ulta ended the fiscal year with $539 million in cash and cash equivalents.

Mary Dillon, chief executive officer of Ulta, said:

ULTA Beauty wrapped up a very strong year of sales and profit growth with an excellent fourth quarter, which we are proud to celebrate as our first billion dollar sales quarter. Our best comparable sales increase of the year was driven by accelerating traffic growth, continued strength in prestige and mass color cosmetics, a successful holiday selling season, execution of more effective marketing and CRM strategies, a double-digit comp in our salon business, and a 55% comparable sales increase in our e-commerce business.

In the days ahead of the earnings report, a couple of analyst firms made calls on Ulta. Cleveland Research initiated coverage with a Buy rating and a price target of $165, implying upside of 13.9% from Thursday’s close. Oppenheimer maintained an Outperform rating for Ulta and moved its price target to $160 from $150, implying upside of 10.5%.

Ulta shares closed Thursday up 2% at $144.82, after hitting a new all-time high in regular trading hours. Following the release of the earnings report, the initial reaction was very positive and shares were up another 6% at $153.46 in after-hours trading, pushing even higher highs. The stock has a consensus analyst price target of $146.13 and a 52-week trading range of $83.54 to $145.90.

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