Ulta Beauty‘s stock experienced a sharp decline, plummeting up to 14.5% on Wednesday, after the company’s executives highlighted a notable deceleration in consumer demand across various product categories for the first quarter, coupled with intensified competition.
This downturn has also adversely affected related beauty companies such as elf Beauty, Coty, and Estee Lauder.
Following a period of robust expansion, Ulta Beauty now projects a more modest growth rate, expecting its total market segment to grow at a moderate mid-single-digit rate.
Ulta Beauty’s CEO, David Kimbell, expressed concerns during a discussion with J.P. Morgan analysts, noting an unexpected and significant slowdown in the beauty sector.
“What we’ve seen so far is a slowdown in the total category across price points and segments. That’s a bit earlier and a bit bigger than we thought,” Kimbell stated.
This downturn has led to the company’s shares plunging towards their steepest decline since May 26, 2023.
Similarly, shares of elf Beauty, Coty, and Estee Lauder also saw significant declines, with elf Beauty’s shares experiencing their largest drop since May 2020, and both Coty and Estee Lauder’s shares falling by about 5%.
Kimbell also pointed out the fierce competitive landscape, mentioning specific challenges in retaining market share in premium makeup and facing difficulties in the haircare segment.
Despite these challenges, Ulta Beauty had previously enjoyed increased sales, buoyed by strong demand for luxury makeup brands such as MAC Cosmetics, Clinique, and Anastasia Beverly Hills, in addition to premium fragrances.
Analysts, such as William Blair’s Dylan Carden, suggested that the decline in Ulta’s stock value reflects market uncertainty rather than a direct response to anticipated earnings shortfalls.
“We believe the decline in shares reflects uncertainty rather than a more tangible understanding of earnings downside,” Carden remarked.
Compounding its challenges, Ulta Beauty last month set its annual profit forecast below analysts’ expectations, attributing the adjustment to rising supply chain costs and the necessity for more aggressive promotional activities.
Furthermore, Estee Lauder, in February, announced job reductions stemming from difficulties in the Chinese market.
Despite these setbacks, Ulta Beauty reaffirmed its target for comparable sales growth, aiming for a 4% to 5% increase throughout the year.