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Will Loyalty Program Drive Ulta Beauty (ULTA) in Q1 Earnings?

Zacks Equity Research

Ulta Beauty, Inc. ULTA is scheduled to release first-quarter fiscal 2019 results on May 30. This renowned beauty retailer has outperformed the Zacks Consensus Estimate by average of 2.7% over the trailing four quarters.

Let’s see how the company is positioned ahead of the upcoming quarterly results.

Ulta Beauty Inc. Price and EPS Surprise

Ulta Beauty Inc. Price and EPS Surprise

Ulta Beauty Inc. price-eps-surprise | Ulta Beauty Inc. Quote

What to Expect?

The Zacks Consensus Estimate has remained stable in the past 30 days at $3.06, which indicates a sharp rise of 16.3% from the year-ago quarter’s reported figure. The consensus mark for revenues is $1,745 million compared with $1,544 million reported in the year-ago period.

Factors Impacting Results

Ulta Beauty is likely to gain on its solid loyalty program, which was a major sales driver in fourth-quarter fiscal 2018. To this end, the company’s Ultimate Rewards Loyalty program is yielding results, with increased active member count. Ulta Beauty is set to benefit from robust merchandising and marketing efforts along with improved store traffic and productivity. Further, the company focuses on personalization efforts through relevant product recommendations and replenishment to boost the loyalty program. Moreover, addition of brands, maturation of loyalty members and higher penetration of the credit card program are expected to strengthen the program, which should aid performance in the quarter to be reported.

Ulta Beauty’s performance is also set to be positively impacted by its omnichannel strategies, which have been boosting e-commerce and in-store sales. To this end, the company’s focus on developing and enhancing its distribution centers bodes well.

Rising SG&A expenses is a concern for the company’s profits, given the costs associated with store labor, innovation and other growth initiatives. Further, higher costs of investments toward digital channels, salon services, infrastructure, personalization efforts, brands and initiatives to enhance customer experience are likely to raise corporate overheads. Though these factors weigh on the operating margin in the quarter under review, we expect the aforementioned sales-drivers and strong merchandise offerings to help offset the hurdles.

What the Zacks Model Unveils

Our proven model shows that Ulta Beautyis likely to beat bottom-line estimates this quarter.  For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ulta Beauty has a Zacks Rank #2, which along with its Earnings ESP of +0.09% makes us reasonably confident of a positive surprise.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Dollar General DG has an Earnings ESP of +1.51% and a Zacks Rank #2.

Abercrombie & Fitch ANF has an Earnings ESP of +0.26% and a Zacks Rank #2.

Costco COST has an Earnings ESP of +2.10% and a Zacks Rank #3.

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