Cosmetics retailer Ulta Beauty has announced a strong forecast for its fourth quarter, with insider Kecia Steelman set to replace retiring CEO Dave Kimbell in the top role. The news sent shares up 1.5% in extended trading.
Fourth Quarter Expectations
Ulta expects quarterly comparable sales to increase modestly, outperforming previous expectations. The company also anticipates its operating margin will be above the high end of its previously expected range of 11.6% to 12.4% of sales. This is due to stronger-than-expected demand during the holidays.
CEO Transition
Kimbell has spent 11 years with Ulta and in his nearly four years as CEO, the company grew to more than $11 billion in annual revenue. He will serve as an adviser through June 28. Steelman, currently president and operating chief of Ulta, has served in a variety of executive roles with the company since 2014. She will also join the board.
Industry Challenges
The CEO transition comes at a time when Ulta is battling a pullback in demand and rising competition in high-end skincare and makeup as years of inflation have strained consumer budgets. The company had to slash its annual sales and profit forecasts twice last year before raising them in December on signs of a rebound in demand during the holiday shopping season.
Analyst Reaction
"While we think Steelman is the right person to replace Kimbell, we remain sidelined as beauty retail competition continues to intensify with new entrants," Jefferies analyst Ashley Helgans said in a client note. The company’s decision to appoint Steelman comes amidst concerns about the competitive landscape and the impact of inflation on consumer spending.
Company Performance
Ulta in December forecast annual sales of between $11.1 billion and $11.20 billion and profit of between $23.20 and $23.75 per share. The company plans to report fourth-quarter results on March 13. Other major companies, including Nike, Starbucks, and CVS Health, reshuffled their top brass last year, leaning on experienced executives to take the helm in a bid to quell investor concerns amidst economic uncertainty.
Industry Trends
The beauty retail industry is witnessing increased competition due to new entrants. Despite this, Ulta has been able to maintain its market share through strategic investments and partnerships. The company’s focus on omnichannel retailing and personalized customer experiences has helped it stay ahead of the competition.
Impact of Inflation
Years of inflation have strained consumer budgets, leading to a pullback in demand for high-end skincare and makeup products. Ulta has been affected by this trend, but its decision to appoint Steelman as CEO suggests that the company is confident about its ability to adapt to changing market conditions.
Conclusion
Ulta’s strong fourth-quarter forecast and appointment of Kecia Steelman as new CEO are positive developments for the company. However, the competitive landscape remains challenging, and the impact of inflation on consumer spending will continue to be a key factor to watch in the coming months. The company’s ability to adapt to changing market conditions and maintain its market share will be crucial to its success.
Timeline
- December 2022: Ulta raises annual sales forecast due to signs of rebound in demand during holiday shopping season
- January 2023: CEO Dave Kimbell announces retirement and appointment of Kecia Steelman as new CEO
- March 13, 2023: Ulta reports fourth-quarter results