Shares of Ulta Salon, Cosmetics & Fragrance Inc. jumped Friday after the retailer reported a strong third quarter and upbeat fourth-quarter forecast.
THE SPARK: Ulta reported Thursday that its profit increased 43 percent on stronger sales and lower costs. Earnings of 59 cents per share on revenue of $505.6 million exceeded the 56 cents per share on revenue of $505.6 million that analysts polled by FactSet expected.
The company also forecast profit of 96 to 98 cents per share for its fiscal fourth quarter on revenue of $742 million to $745 million. Analysts estimated 96 cents per share on revenue of $735.5 million.
THE BIG PICTURE: In addition to a strong bottom line, the company boasted strong gains in key sales measures.
The company reported that sales at stores open at least 14 months increased 8.4 percent during the third quarter, which was better than analysts expected. That is a key measure of a retailer's financial health, since it excludes results from stores that recently opened or closed. Ulta, based in Boilingbrook, Ill., operates 537 stores nationwide.
THE ANALYSIS: Jefferies analyst Randal Konik said that he is thoroughly impressed with the company's performance.
"This is simply a great long-term story with a great management team and competitive position," Konik said in a research note.
The analyst said the company's fundamentals should continue to power ahead, but he remained on the sidelines given its current price and the balance of risk and reward. Konik kept a "Hold" rating and $100 price target on the shares.
SHARE ACTION: Ulta jumped $6.91, or 7.4 percent, to $100.06 in afternoon trading. The stock has traded between $62.94 and $103.52 in the past 52 weeks.