Ulta Beauty, a popular beauty retailer, experienced a significant decline in its stock value as CEO Dave Kimbell cautioned investors about the slowing demand for beauty products. This warning sent shockwaves through the industry, causing stocks of other beauty companies like E.L.F. Beauty, Estee Lauder, and Coty to also fall.
During an investor conference hosted by JPMorgan Chase, Kimbell revealed that the beauty category has experienced a notable slowdown. He explained that the industry had enjoyed several years of strong growth and that Ulta had expected the category to moderate this year. However, the slowdown has been more pronounced than anticipated, affecting various price points and beauty categories, particularly prestige makeup and haircare.
The beauty industry has been a standout performer in the retail sector, even as consumers cut back on discretionary spending. People have continued to invest in makeup, skincare, and other beauty products. This strength has encouraged many retailers to increase their focus on the beauty category. For example, Target has been opening Ulta Beauty shops within its stores, while Kohl’s plans to introduce Sephora shops in all of its locations. Macy’s is also expanding its beauty chain Bluemercury.
Despite the industry’s previous success, Kimbell highlighted that beauty shoppers are not immune to economic pressures. He mentioned factors such as rising credit card debt, geopolitical conflicts, and the upcoming presidential election that might cause consumers to cut back on spending. These external factors create a challenging environment for consumers to navigate.
Ulta had previously announced its projected net sales for the fiscal year 2024 to range between $11.7 billion and $11.8 billion, exceeding the $11.2 billion reported for the previous fiscal year. The company also anticipated comparable sales to increase by 4% to 5% this year, which is a slowdown compared to the growth rates of 5.7% and 15.6% in the previous two fiscal years, respectively.
As a result of these revelations, Ulta’s stock experienced a decline, falling approximately 13% on Wednesday. Currently trading at around $447, the stock has seen a significant drop from its 52-week high of $574.76 in mid-March. Year-to-date, Ulta shares have fallen almost 8%, lagging behind the 10% gains of the S&P 500.
The beauty industry’s recent challenges serve as a reality check for investors and retailers who have been betting heavily on its continued success. While the category has thrived in recent years, the current economic climate and external factors are beginning to take their toll. It remains to be seen how Ulta and other beauty companies will navigate this slowdown and find ways to reignite demand in an increasingly uncertain market.
