Ulta Beauty Inc. (ULTA) shares fell 15 percent on Wednesday at 3:51 EDT, hours after its CEO spoke of a slowdown in the beauty category at an investor conference held by the largest bank in the U.S. Other beauty company shares, such as Elf Beauty. Inc. (about 12 percent decline), Coty (about 4 percent decline), and Estee Lauder (about 6 percent decline), also fell like dominoes.
During an investor conference at JP Morgan Chase on Wednesday morning, David Kimbell, CEO of Ulta, said, “What we’ve seen so far is a slowdown in the total category across price points and segments. That’s a bit earlier and bigger than we thought.”
Earlier on March 14, Ulta estimated same-store sales growth of 4 percent to 5 percent for fiscal 2024. However, after the Wednesday conference, the beauty company indicated the lower end of the growth range for the year.
Many beauty companies have been partnering with major retailers to promote beauty products, which, unlike clothing, have continued to attract some discretionary spending by consumers these past years.
In 2022, Ulta Beauty enlarged its brand presence by partnering with Target. The giant retailer said it would add 250 Ulta stores initially and increase the number to 800 in the next few years.
In 2021, Ulta’s main competitor, Sephora, had partnered with another giant retailer, Kohl’s, to add about 850 Sephora stores at the department stores locations across the nation.
Although larger retailers are seeing a fall in discretionary purchases and beauty companies are partnering with them to come together for mutual benefit, consumers will ultimately decide where and on what they would spend their discretionary dollars.
Rising grocery and restaurant prices are reducing consumers’ earnings, and beauty products are apparently the next category in which consumers are cutting their discretionary spending.
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