Why Ulta Beauty Stock Was Sliding This Week

Shares of the beauty retailer fell on a disappointing update.

Shares of Ulta Beauty (ULTA 5.82%) were pulling back this week after the beauty retailer gave downbeat guidance in an investor conference with JPMorgan Chase on Wednesday. CEO Dave Kimbell noted a slowdown across the company’s product categories several times at the investor conference. As a result, the stock was down double digits on Wednesday.

As of Thursday at 12:28 p.m. ET, the stock was down 13.2% for the week, according to data from S&P Global Market Intelligence.

Image source: Getty Images.

Ulta stumbles

Kimbell said there wasn’t one factor weighing on the company’s performance. However, a number of other consumer discretionary companies in apparel and related industries have also reported disappointing results recently, indicating a trend.

Consumers may still be fatigued from inflation and higher interest rates, and the post-pandemic rebound may be fading as beauty sales were encouraged by the economic reopening. Management said it expected comparable sales for the year’s first half to be at the lower end of its guidance, weighing in the beauty sector more broadly, pushing down stocks like e.l.f. and Coty.

Despite the downbeat commentary, several analysts reaffirmed buy ratings on Ulta stock, showing that Wall Street believes the headwinds are just short term.

Is Ulta a buy?

The double-digit sell-off on Wednesday seemed a bit extreme, and shares recovered some of those losses on Thursday, with the stock up 4.8% in early afternoon trading.

Ulta stock now trades at a price-to-earnings (P/E) ratio of 18 after the sell-off. While estimates for this year’s earnings report will likely come down after the commentary at the investor conference, a P/E of 18 still looks like a good price for a category leader and proven winner like Ulta.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Ulta Beauty, and e.l.f. Beauty. The Motley Fool has a disclosure policy.

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