People walk past an Ulta Beauty store in the Manhattan borough of New York City, New York, U.S., March 8, 2022.
- Shares of Ulta fell on Wednesday, as the retailer warned of cooling demand in the beauty category.
- CEO Dave Kimbell said Ulta expected demand to moderate, but the slowdown has been "a bit earlier and bit bigger than we thought."
- Many retailers, including Macy's and Kohl's, have been trying to drive sales growth by expanding their focus on beauty.
Ulta Beauty shares tumbled about 15% on Wednesday as CEO Dave Kimbell warned of cooling demand for beauty products.
Other stocks in the segment, including E.L.F. Beauty, Estee Lauder and Coty, also fell on Wednesday morning.
"We have seen a slowdown in the total category," Kimbell said at an investor conference hosted by JPMorgan Chase. "We came into the year — and we talked about this on our [earnings] call a few weeks ago — expecting the category to moderate. It has [had], as I said, several years of strong growth. We did not anticipate it would continue at the rate that it's been growing."
Get top local stories in Philly delivered to you every morning. Sign up for NBC Philadelphia's News Headlines newsletter.
He said Ulta expected sales to grow in the mid single-digits for the year.
But Kimbell added that slowdown has been "a bit earlier and bit bigger than we thought." He said that trend has cut across price points and different beauty categories but has been more significant in prestige makeup and haircare.
Beauty has stood out as one of the hottest categories in retail. Even as U.S. consumers watch their spending on discretionary items like clothing, they have continued to spring for makeup, skincare items and other beauty products. The strength of the category has inspired many retailers to place bigger bets on beauty.
Money Report
Target has opened a growing number of Ulta Beauty shops in its stores. Kohl's plans to open Sephora shops in all of its locations. Macy's is expanding its beauty chain Bluemercury.
In his remarks on Wednesday, however, Kimbell said beauty shoppers aren't immune to feeling economic pressures, even in a category that's been red-hot. He referred to dynamics that may cause them to pull back on spending, including rising credit card debt, geopolitical conflicts and the upcoming presidential election.
"It just creates this soup of activity for our consumers that they're trying to navigate through," he said.
Ulta said last month in an earnings call that it expected net sales to range from $11.7 billion to $11.8 billion for its 2024 fiscal year. That would be higher than the $11.2 billion of sales that it reported for the most recent fiscal year.
The retailer said it anticipates comparable sales, a metric that takes out the impact of opening and closing stores, to increase by 4% to 5% this fiscal year. That would be a slowdown from a growth of 5.7% in the previous fiscal year and 15.6% in fiscal 2022.
Ulta's stock closed on Wednesday at $439.98. Its shares hit a 52-week high of $574.76 in mid-March, just ahead of its release of holiday-quarter results. As of Wednesday's close, Ulta shares are down about 10% so far this year, trailing the gains of the S&P 500.
