ULTA on watch list

I am a week late with both this post and my purchasing. Ulta Beauty is a brick and mortar purveyor of
cosmetics and fragrances as well as salon services. I invested in it in the 2014-2015 timeframe, but
sold in January 2016. The reason I sold was that the quarterly filing stated that ULTA foresaw 1200 stores or more and I ignored or did not note the “or more”. At that time they had 860 stores and were
adding 100 per year. That left 3-1/2 years of growth which could easily have justified a “hold”.
However, p/e had risen from 26 to 37. We had recently been through the Skechers episode where growth
rate was declining while p/e was growing which led to a sharp drop in share price at the first bit of
fear and doubt. So I exited. I put it in CAPS as underperform over 5 year period. Somewhere I posted
all this, either Weekly Analysis Club or ULTA though I haven’t found that post. I figured ULTA would
out perform for a year or so but over 5 it would underperform. So, ULTA has been a drag on my CAPS for
nearly 2 years.

I don’t check CAPS regularly. But I did last Thursday or Friday and was surprised that ULTA was a plus
on my CAPS scorecard. I investigated and saw that ULTA had dropped from around $310 to 190 since about
July. Most recently, the Amazon flue hit it with stories that Amazon was entering or increasing focus
on cosmetics, et. al.

Over the weekend I checked the press releases and recorded the revenue and eps which are as follows:

Quarter Revenue eps
Q3 13 619 0.70
Q4 13 887 1.09
Q1 14 714 0.77
Q2 14 734 0.94
Q3 14 746 0.91
Q4 14 1048 1.35
Q1 15 868 1.04
Q2 15 877 1.15
Q3 15 911 1.11
Q4 15 1268 1.69
Q1 16 1073 1.45
Q2 16 1069 1.43
Q3 16 1131 1.40
Q4 16 1581 2.24
Q1 17 1315 1.86
Q2 17 1290 1.83

Comes to 23% growth of TTM revenue and 29% of TTM eps. Not ground shaking but at the time the p/e had
come from 48 down to 26 . With earnings coming up, TTM earnings could be $7.60 to $7.80.
Unfortunately, ULTA popped 4.5% Friday and a little more Tuesday, closing at $202.28.

I bought a micro position yesterday and have an alert set at $187. ULTA is another understandable
business as is LGIH. That is worth something in putting together a portfolio. If TTM earnings come to
$7.70 and a 29% eps growth, one could project $223 fair price at p/e of 29. Ulta has traded at 30 to 40
p/e for three years until five or six weeks ago. The chart is about as ugly as any you will find right
now. IMO, ULTA is worth putting on your watch list.



Hi KC, I held ULTA briefly over the summer because it had become “cheaper”.
However, - once I read somewhere that for the first time in decades, stores like Macy’s started discounting items in beauty section in their stores to attract more foot traffic - sort of last weapon to fight against Amazon.
This scared hell out of me about Ulta and I immediately sold.
I haven’t done more research on this - just sharing something to consider.


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ULTA is going to have a similar coiled spring jump in price at some time in the future that SKX just had (up 42% in a day after a good earnings report). I unfortunately cannot time when that will happen, so I’ve been continuing to build my position and will hold indefinitely at this point.

…stores like Macy’s started discounting items in beauty section in their stores to attract more foot traffic…

This, and of course the ever present threat of Amazon destroying everyone they come up against have conspired to give a great entry point into this wonderful growth stock, whose business execution and growth have not shown any slowing down yet due to any of these “threats”. Yes, they are risks, but ULTA has shown they have dealt with them with their rewards program and their growing online presence.