Lululemon and Ulta Beauty Report Disappointing Results
Following the record plunge of Dollar General, two other consumer discretionary icons, Lululemon and Ulta Beauty, have reported disappointing results.
Ulta Beauty's Disappointing Results
Ulta Beauty, a popular choice among upwardly mobile women and a recent acquisition by Warren Buffet's Berkshire, reported Q2 results that missed across the board. The company reported a decrease in EPS from $6.02 y/y to $5.30, net sales of $2.55 billion, which is only a 0.9% increase y/y, and comparable sales of -1.2% vs. +8% y/y. Additionally, the gross margin was 38.3% vs. 39.3% y/y, and merchandise inventories were $2.00 billion, a 10% increase y/y.
The company's 2025 forecast was even more disappointing. The company sees net sales dropping from the previous guidance of $11.5 billion to $11.6 billion to $11.0 billion to $11.2 billion. The EPS is also expected to drop from the prior guidance of $25.20 to $26 to $22.60 to $23.50. Comparable sales are expected to drop from +2% to +3% to -2% to 0%.
As a result of these disappointing results, Ulta shares plunged as much as 8% in after-hours trading.
Lululemon's Disappointing Results
Lululemon's results were not much better. The company reported net revenue of $2.37 billion, missing estimates of $2.41 billion, and total comp sales of +3%, missing the estimate of +5.63%. However, the company did beat the EPS estimate of $2.95 with $3.15.
The company's Q3 and full-year forecast were also disappointing. The company sees net revenue for Q3 to be between $2.34 billion to $2.37 billion, missing the estimate of $2.41 billion. The EPS for Q3 is expected to be between $2.68 to $2.73, missing the estimate of $2.76. For the full year, the company sees net revenue to be between $10.38 billion to $10.48 billion, down sharply from the previous forecast of $10.7 billion to $10.8 billion. The EPS for the full year is expected to be between $13.95 to $14.15, also below the previous guidance of $14.27 to $14.47.
These disappointing results have raised concerns that frugal consumers are no longer willing to pay for pricey yoga pants and that increased competition is taking away customers.
Bottom Line
These disappointing results from Lululemon and Ulta Beauty suggest that US consumers may be hitting a brick wall. It raises the question: are consumers becoming more frugal, or are these companies simply not meeting consumer demands? What do you think about these disappointing results? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is every day at 6pm.
