It wasn’t long ago that Warren Buffett and his team (NYSE:BRK.B) added shares of Ulta Beauty (NASDAQ:ULTA) to the Berkshire Hathaway portfolio.
And it wasn’t long after they added it that Buffett and his team dumped the stock entirely. In fact, Ulta was only in the Berkshire Hathaway portfolio for around six months, as it was added in Q2 of 2024 and exited in Q4 of 2024.
That is among the shortest amount of time that the noted long-term investor has held a stock.
So, what has Ulta Beauty stock been up to since then? The stock price is up about 41% year-to-date and on Friday it was one of the day’s top gainers, rising 13% after reporting third quarter earnings.
Ulta posted huge numbers, which catapulted shares upward. Here are the key stats.
What was most promising was a 6.3% increase in same-store sales, up from a 0.6% increase in the same quarter a year ago. Also, Ulta lowered its cost of sales as a percentage of revenue, which led to the 15% spike in gross profit.
Further, the chain opened 28 new stores, remodeled 15, and closed one store, so it now has 1,500 in the U.S. Through the first three quarters it has opened 58 new stores, relocated four, remodeled 24, and closed three stores.
Net income, however, was lower year-over-year due to higher selling, general and administrative expenses, which spiked 23% in the quarter to $841 million. This was mainly due to higher incentive compensation, store payroll and benefits, store expenses, and amortization of cloud-based software investments.
But higher net sales and gross profit numbers allowed earnings to soar past analystsʻ expectations – and Ulta’s too.
“Our third quarter results exceeded our expectations, reflecting the steady progress and momentum our team is building as we execute our Ulta Beauty Unleashed Strategy. Exciting assortment newness, improved in-store and digital experiences, and bold marketing efforts are resonating with our guests and drove strong sales results, market share gains, and growth across all categories and channels, with notable strength in ecommerce,” Kecia Steelman, president and CEO of Ulta, said.
Ulta Beauty also raised its outlook for the fiscal year, calling now for $12.3 billion in net sales, up from the previous range of $12B to $12.1B. Also, comp sales projections were lifted to 4.4% to 4.7%, up from 2.5% to 3.5%.
In addition, the operating margin range was raised to 12.3% to 12.4%, up from 11.9% to 12.0%. Further, earnings were bumped up to $25.20 to $25.50 per share, up from $23.85 to $24.30 per share.
“The holiday season is in full flight, and we’re pleased with our Black Friday and Cyber Monday performance. At the same time, we know the biggest selling weeks are still ahead of us, and we’re mindful of the challenging macro backdrop,” Steelman said on the earnings call.
It’s not clear why Buffett dumped the stock so quickly, but it certainly would have helped with its performance this year.
As for where it’s headed, Ulta got a slew of price target upgrades, with UBS raising it to $690 per share, DA Davidson boosting it to $650, and Telsey and Evercore raising their targets to $640 per share. That would indicate a return of between 6% and 14% over the next 12 months. Also, it is trading at a healthy 20 times earnings.
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