Analyst boosts Ulta Salon rating, price target

Jeffries analyst boosts Ulta Salon's rating and price target, says more room for expansion

Associated Press

NEW YORK (AP) -- A Jefferies analyst boosted his rating and price target Thursday for Ulta Salon, Cosmetics & Fragrance Inc., citing innovative products and room to grow its store count.

Randal Konik raised the beauty products company's rating to "Buy" from "Hold" and increased its price target to $100 from $85.

In a client note, the analyst said that anti-aging products are among those that should continue to lift Ulta's revenue. Konik said that baby boomers between the ages of 49 and 67 have significant disposable income that they are spending on anti-aging skincare products and devices.

The analyst also said that the addition of more high-end brands like Benefit, Lancome, Philosophy and Clinique at its stores should also help the Bolingbrook, Ill., company.

While Ulta currently has 550 stores, Konik believes this is still "a relatively early stage of growth," and feels that the retailer may be able to more than double its store base. Ulta's long-term store target is 1,200, but Konik believes the company may top that.

The analyst said Ulta's distribution model is also attractive to shoppers, as it offers mass brands, prestige brands and salon services all at one location. Konik feels that this concept will "continue to chip at the share of department stores, drug stores and discount retail, which provide more limited offerings."

Laurel Lefebvre, vice president, investor relations at Ulta Salon, called the company's results in the fourth quarter excellent and said it expects the "strong sales and earnings performance to continue in 2013."

The company opened 102 new stores in 2012 and plans to open 125 this year — one-third of them in markets where Ulta has yet to operate, Lefebvre said. New product lines will include Perricone MD's skincare products and Lipstick Queen.

That gives Ulta "a significant opportunity to connect with customers who have never discovered the brand, while forming a deeper relationship with its existing guests," the executive said.

Ulta Salon shares rose $2.73, or 3.3 percent, to $84.72 in afternoon trading Thursday. Its shares have traded in a 52-week range of $72.51 to $103.52.

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