Ulta Beauty Plunged by 30%!

The US market is merciless and punishes a counter when it misses analysts’ estimate and/or when management adjusts its guidance lower.

Ulta Beauty released its Q2 results last night with revenue up by 12%, net income up by 8.7% and EPS up by 12.2%. In its earning call, management highlighted the headwind faced by its cosmetics section which only has low single digit growth year to date. CEO Mary Dillon guided that the entire cosmetics industry will continue to face softness for the rest of the year. In view of that, the company has adjusted their annual diluted EPS guidance to $11.86 to $12.06 as compared to previous guidance of $12.83 to $13.03.

Do the math and the new guidance is about 8% lower than previous one. With the new guidance, diluted EPS would still grow between 8-10% over the previous year. Yes, the growth rate is no where near what it is used to for the previous few years but as CEO guided, this is probably just a speed bump and they will return to growth trajectory in time to come.

Unfortunately, I just added some shared at US$330 last month which brought my average price to US$252. So with this plunge, it wiped out my 30+% gain and I am in negative territory for this counter now. The good thing is Ulta only occupies 3% of my portfolio and so a 30% plunge only cause my portfolio to drop 1.4%.

I am tempted to add more since I am still confident of its long term prospect but will probably wait a while before committing the purchase.