Buy Rating Maintained on Ulta Beauty ($ULTA)
The ULTA shares gained over 11% after reporting better-than-expected 3Q results. The cosmetics segment accounts for just over half the company's business, and despite recent weak industry trends, Ulta's market share has grown in the cosmetics category. While cosmetics growth may be muted in the near term, we see market share gains driven by new product launches in the skincare and hair categories, store expansion, and strong growth in the company's e-commerce business.
The company has also used influencer partnerships, social media and other digital platforms, as well as traditional print and radio advertising, to substantially expand consumer awareness and engagement over the past three years - and position itself as the retailer with 'All Things Beauty, All in One Place.'
Meanwhile, it has boosted online sales through the Ultra Beauty app, attracted consumers by offering a wide range of 'tester' product samples, and benefited from partnerships with a range of cosmetics and fragrance manufacturers.
Ulta has the largest market share in the industry, with products across all categories, brands, and price points. We find value in the shares around the $250 level and have a 12-month target price of $305.
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