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Ulta Delivers 8.5% Increase in Profits

Ulta reported strong second earnings based on product newness and the contouring trend.

Ulta’s momentum continues as the beauty retailer reported strong second quarter results and raised guidance.

Net profits rose 8.5 percent to $74.2 million from $60.8 million. Net sales increased 19.4 percent to $877 million, up from $734.2 million for the same period a year ago and easily beating the FactSet estimate of $870 million. Earnings per share of $1.15 also beat the estimate of $1.12 per share.

Comparable sales increased 10.1 percent, with retail up 8.8 percent, salon-only comps were up 10.1 percent and e-commerce growth was 43.4 percent. Gross profit dollars were up 18.2 percent to $360.5 million. Profits were helped by a high mix of prestige products and a more complete assortment on the Web site, plus less overall discounting.

Ulta is raising its sales and earnings forecast for the rest of the year. The chain expects to open 100 stores in 2015 and drive comparable sales in the range of 8 to 10 percent. Income per share for the third quarter is now expected to be in the range of $1 to $1.05 versus last year’s 91 cents. Earnings per share for the full fiscal year are expected to grow in the high teens and had originally been projected to grow by 15 percent to 17 percent.

Sales growth was driven by newness in products including innovative foundations from Too Faced and Smashbox, Urban Decay’s matte lipstick and rapid growth in It Cosmetics and It Brushes for Ulta. The contouring trend is strong and has driven sales in contouring kits.

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Chief executive officer Mary Dillon spoke about the newness in brands that brought in the customers. “So brands like Benefit and Urban Decay with the Smoky Palette, brands like Anastasia, across all categories Redken Frizz Dismiss, Mix is a hot brand, so there was really a lot of newness, as well as existing brand newness, new brands and just core brand growth,” said Dillon on the earnings conference call on Thursday.

Ulta is also beginning a national television advertising campaign, something new for the company and could result in increased sales.

Ulta stock moved up modestly in the early trading session Friday by 36 cents to $160.24. Overall the stock is still up 64 percent for the past year and that includes the recent market tumble.