Simeon Siegel, an analyst from BMO Capital, maintained the Hold rating on Ulta Beauty (ULTA – Research Report). The associated price target remains the same with $404.00.
Simeon Siegel has given his Hold rating due to a combination of factors impacting Ulta Beauty’s financial performance. The company has shown an increase in total products and exclusive offerings, which is a positive development, but there is a noticeable decline in the penetration of cosmetics and haircare products, with a shift towards skincare and fragrance. This shift in product mix has implications for the company’s gross margin, which has experienced a decline due to deleverage in merchandise margins and increased supply chain costs.
Additionally, the SG&A expenses have been affected by rising store payroll and benefits, driven by minimum wage increases, impacting overall profitability. While Ulta Beauty is investing significantly in IT and supply chain improvements, which could support future growth, the increase in part-time employees and the cautious outlook on revenue and margin growth suggest a balanced risk-reward scenario. Therefore, despite Ulta’s strong brand and growth in membership and spending per member, the potential for slowing growth keeps the stock’s valuation in check, justifying a Hold rating.
In another report released on March 25, Jefferies also maintained a Hold rating on the stock with a $334.00 price target.