Ulta Salon tumbles after guidance misses expectations

theflyonthewall.com

Ulta Salon (ULTA), a retailer of beauty products, is sinking after the company reported stronger than expected fourth quarter results but provided weaker than expected guidance for the current quarter. Ulta said that its business had experienced "choppiness" last quarter and in the early part of this quarter, and that consumers were utilizing its coupons and promotions at a greater rate during both periods. The company expects its earnings per share growth for its current fiscal year to be at the low end of its long-term guidance of 25%-30%. Meanwhile, Ulta stated that it would make significant investments in its business during fiscal 2013 and that these investments would reduce its earnings per share by 13c in that period. Despite those elements of its forecast, several research firms recommended buying Ulta's stock on today's weakness. Ulta's margins are expected to drop in the first quarter, but downward pressure on margins should lessen later in the year, Sterne Agee analyst Ike Boruchow wrote. Moreover, the company still has many growth opportunities over the long-term, as it plans to build many more stores and can gain market share in its large, fragmented market, according to the analyst. Credit Suisse upgraded the stock to Outperform from Neutral, as the firm believes that the company's problems are temporary and that it can grow at a 25%-30% rate going forward. In late morning trading, Ulta Salon sank $12.42, or 14%, to $75.95.

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