Is Ulta Beauty Stock Outperforming the Dow?

Ulta Beauty, Inc. (ULTA), headquartered in Bolingbrook, Illinois, is a specialty beauty retailer offering a wide range of branded and private label beauty products. With a market cap of $26.7 billion, the company offers cosmetics, fragrance, skin, and hair care products, as well as salon services. 

Companies worth $10 billion or more are generally described as “large-cap stocks,” and ULTA definitely fits that description, with its market cap exceeding this threshold, reflecting its substantial size, influence, and dominance in the specialty retail industry. ULTA boasts a diverse portfolio of approximately 25,000 products from 600 beauty brands, appealing to a wide range of consumer preferences. The company's partnership and investment in digital innovation have enhanced customer engagement and set industry standards. Its omnichannel retailing strategy, combined with a strong Ulta Beauty Rewards program, drives customer loyalty and provides valuable consumer insights for tailored experiences and promotions. 

Despite its notable strength, ULTA slipped 1.8% from its 52-week high of $611.90, achieved on Dec. 5. Over the past three months, ULTA stock rose 16.5% outperforming the Dow Jones Industrials Average’s ($DOWI) 5.6% gains during the same time frame.

In the longer term, shares of ULTA climbed 30% on a six-month basis and surged 45.8% over the past 52 weeks, outperforming DOWI’s six-month gains of 12.1% and 8.6% returns over the last year.

To confirm the bullish trend, ULTA has been trading above its 50-day and 200-day moving averages since late April, with some fluctuations. 

ULTA's strong performance is driven by enhanced in-store experiences, its expanding loyalty program with 46.3 million members, and exclusive brand launches like Beyoncé's Sacred hair care line. Its e-commerce growth and digital engagement are also key contributors, with 65% of online transactions via the app. ULTA's investments in digital capabilities and new store formats support long-term growth, despite near-term margin pressures from higher SG&A costs.

On Dec. 4, ULTA reported its Q3 results, and its shares closed up by 12.7% in the following trading session. Its EPS of $5.14 exceeded Wall Street expectations of $4.56. The company’s revenue was $2.9 billion, beating Wall Street forecasts of $2.7 billion. ULTA expects full-year EPS to be $25.20 to $25.50, and revenue is expected to be $12.3 billion.

ULTA’s rival, Bath & Body Works, Inc. (BBWI) has significantly lagged behind the stock, with a 26.7% dip on a six-month basis and 49.3% losses over the past 52 weeks.

Wall Street analysts are reasonably bullish on ULTA’s prospects. The stock has a consensus “Moderate Buy” rating from the 25 analysts covering it, and the mean price target of $625.24 suggests a potential upside of 4.1% from current price levels.