Ulta Delivers 15th Beat in 16 Quarters as e.l.f. Profitability Crumbles

e.l.f. Beauty (NYSE: ELF) and Ulta Beauty (Nasdaq: ULTA) precocious reported net revealing other trajectories. e.l.f. bushed estimates with $0.68 per stock versus $0.57 expected connected November 5, yet the banal crashed implicit 20% that day. Ulta delivered its 4th consecutive double-digit bushed connected December 4 with $5.14 per stock versus $4.60 expected, and shares held dependable adjacent expert targets.

e.l.f. grew gross 14.2% year-over-year to $343.9 cardinal successful Q2, but nett income collapsed 84.8% to $3 million. The institution posted an operating nonaccomplishment of $0.7 cardinal contempt a 69.4% gross margin. Selling, general, and administrative expenses deed $231 million, obliterating profitability. Management burned $37.9 cardinal gathering inventory portion operating margins compressed to 2.24% connected a trailing basis. CEO Tarang Amin and different executives sold implicit $24 cardinal successful banal during September and October astatine prices betwixt $130 and $150, weeks earlier the net study sent shares plunging to the $70s.

Ulta posted $2.9 cardinal successful revenue, beating estimates of $2.7 billion, with comparable income up 6.3% driven by higher summons sizes and accrued transactions. Net income held level astatine $230.9 million, maintaining a 9.93% nett margin. Gross borderline expanded to 40.4% from 39.7% a twelvemonth earlier. CEO Kecia Steelman said results "exceeded our expectations, reflecting the dependable advancement and momentum our squad is building." Operating borderline remained unchangeable astatine 10.8%. Cosmetics represented 41% of sales, skincare and wellness different 24%. The institution reaffirmed full-year guidance of astir $12.3 cardinal successful income and $25.20 to $25.50 successful net per share.

e.l.f. traded astatine 58 times net with operating margins nether 2.5%. That aggregate typically belongs to high-growth bundle companies, not quality manufacturers with razor-thin margins and slowing earnings. Return connected equity sits astatine 8.77% portion carrying $831.6 cardinal successful semipermanent indebtedness against a $4.85 cardinal marketplace cap. Ulta trades astatine 23 times net portion generating a 48% instrumentality connected equity and 10.8% operating margins. Ulta is 8.4 times larger by quarterly gross yet commands a valuation aggregate little than fractional of e.l.f.'s.