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What to expect from Ulta’s virtual investor conference

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Yahoo Finance's Brian Sozzi weighs in on how Ulta is faring ahead of its virtual evaluation meeting on Tuesday.

Video Transcript

- Welcome back to Yahoo Finance Live. It is time for Sozzi's take. In Sozzi tomorrow is Ulta beauty's investor day.

And I'm no makeup connoisseur. But apparently, there are some high expectations for this one. Give us the breakdown of what to expect.

- Well, I am a kind of story there because you're doing this live stuff every day. They are Brian Cheung. So I love me some good makeup.

But biannual investor day is tomorrow for the Ulta team and new CEO Dave Kimball. He took over from really the very well-regarded Mary Dillon on June 2nd here. So this is in many respects is coming out party on Wall Street. They know him. He's been at Ulta for a while.

But still it's a different ballgame when you're the CEO of a company. And it's your job to put forth presentations. And wow, the street and the Street is expecting to be wow. Let's not pull any punches here.

Ulta shares are up 8% over the past month. That is really outperformed. Estee Lauder we were just talking about Estee Lauder, which stifles mark astrakhan. That stock is down one point at 1.9% over the past month.

Cody's-- Coty shares really a major player in the makeup industry. That stock's down 7%. So Ulta leading the way here.

And I think the Street wants to see obviously a positive pronouncement from the company. That means a release before the presentation, where they come out here. And based on what I'm hearing, come out and say third quarter sales increased by more than 25%.

So this tree is expecting a lot from this company that they continue to rebound from the depths of the pandemic, where nobody was essentially buying makeup, because they were wearing masks. Makeup sales have continued to improve, and the Street is expecting a big sales number from this company to be pre-announced ahead of this presentation.

Number 2. I think the Street wants to see a very bullish outlook about these new Ulta shops opening inside of target. That has begun here. I do have one by me. But I'm looking forward to go into one and check out these shops here.

And that is going head to head, of course, with the new Sephora shops that are opening in Kohl's. Kohl's being very aggressive here. It's really the only thing they've been able to do right over the past year and a half is sign a deal with Sephora and start opening these shops.

So expectations are high ahead Ulta here. The stock is really outperform. You're at the point though guys here.

If Ulta even comes out with very positive news, can this stock can sustain-- can sustain these gains it's been seeing obviously that is to be determined.

- OK. Now, Brian, I just want to ask, though. I mean, where was the inflection point in all of this, right? Because I feel like the theme of everyone was in their sweatpants. And now, they're trying to kind of head out into the world again.

Was a thesis that we were hearing about in the beginning part of this year, right? So has all that already been priced into these stocks? Or is there still a lot of legwork to go in kind of getting a lot of these the volume, if you will, out there in what the third quarter of this year?

- Yeah, I would say the inflection point, Brian, at least for makeup sales came over the summer. And that's when the trends, the weekly trends Nielsen tracks the stuff. It's always good data to digest. Analysts watch it like a hawk.

That started to improve access as vaccinations started to improve. And people went out there, and went back out to restaurants, went back out to malls, and wanted to put more, more makeup on here. So that's when you saw at least a sales improve.

I am surprised, though, not to see Cody shares and Estee Lauder shares powering back here. Does immediately have me thinking that maybe stifles Mark Astrakhan is right. Maybe now at the time you do get into an Estee Lauder before they surprise the Street to the upside.

But for right now, the only stock in the space that seems to be working is in fact Ulta.

- Hey, I wanted to ask you something else about Ulta. The company gets a real minority of its revenue from salons in its stores. But what's the expectation around that business, which obviously was also extremely challenged during the pandemic? I assume most of those salons were not open.

- No, they weren't open. I think that has been a key. Really that's always been a key sales driver. It's very high margin type of business for Ulta. That is lagging the recovery and makeup sales.

And full disclosure here. I think they're missing a big opportunity any men's. And during the pandemic, I walked in there to get a haircut. And they looked at me like I lived in a different planet here because they normally, they told me I was the second person, the second male to actually visit that store and get my haircut.

It's apparently not a thing. It wouldn't let me book a male haircut online. I was very disappointed.

And frankly, they botched up my hair job. And I had to go to a local barber to get it fix. So I think a big missed opportunity--

- Wow.

- --for Ulta, maybe they we'll start getting into the male hair cutting market. They would have a potential customer in me. Again, really just a very terrible experience when I went though.

- What were your-- what were you trying to get? A fade? I know a good place just city. If you're trying to get like a good--

- I just want to do-- I just wanted to, hey, a quick fade, a little chop on the top. I still have some hair left maybe a nice shampoo and out the door in 20 minutes. I'm willing to pay. I'll pay the $50 to get my hair done. Just don't botch it.

I ultimately invested $100 into my head because they screwed it up so bad. So hopefully, they of course, correct that immediately.

- All right. We'll try to get you an undercut on the next one. But we'll save that for another time. Thanks, Brian.