Ulta Beauty plummets as CEO predicts weak demand in the first quarter

Ulta Beauty's stock fell 14.5% on Wednesday due to a slowdown in demand and intense competition, which negatively impacted competitors Estee Lauder, Coty, and elf Beauty.

Ulta Beauty's stock fell as much as 14.5% on Wednesday following the company's leaders' comments about a slowdown in demand in all categories during the first quarter and fierce competition, which hurt competitors Estee Lauder, Coty, and elf Beauty. Ulta Beauty is forecasting moderate mid-single-digit growth in its cosmetics category, following a slowdown across all price points and segments. CEO David Kimbell informed J.P. Morgan analysts that the company's stock was about to experience its worst day since May 26, 2023. Elf Beauty, which launches new tabs, saw a 12.2% decline in shares, while Estee Lauder and Coty both saw a 5% decline.

Kimbell noted a competitive environment, particularly in luxury makeup brands and high-end fragrances, driven by resilient demand at Ulta over the past three years. Analyst Dylan Carden of William Blair believes ambiguity, rather than concrete awareness of potential earnings declines, is causing the share price to drop, highlighting the intense competition in certain sectors.

Ulta's yearly profit forecast for this month was lower than Wall Street projections due to higher promotions and supply chain expenses that reduced its profit margins. Estee Lauder announced in February that it would lay off employees due to market challenges in China, while Ulta reaffirmed its yearly goal of 4% to 5% growth in comparable sales.