Buffett sold out? Ulta Beauty (ULTA.US) soared after earnings, with Q3 revenue and profits both exceeding expectations.

Beauty company Ulta Beauty's performance in the third quarter exceeded Wall Street expectations, alleviating concerns about increased competition and slowing demand for cosmetics and skincare. The retailer also slightly raised its full-year outlook to reflect better-than-expected performance. The company stated that net sales for the fiscal year are expected to be between $11 billion and $11.2 billion, compared to previous guidance of $11 billion to $11.1 billion. The company also anticipates full-year earnings per share to be between $22.60 and $23.50, higher than the previous range of $22.60 to $23.50. Full-year same-store sales are forecasted to decline between 1% and remain flat. Same-store sales track the sales of Ulta stores open for at least 14 months, as well as online sales. Despite the improved outlook, the company expects a low single-digit decline in same-store sales during the holiday season. CEO Dave Kimbell stated that he is "proud of the progress the company has made" and is "encouraged by early signs that our efforts to strengthen our market position and drive performance are gaining traction." After the financial report was released, Ulta's stock price surged over 12% in after-hours trading on Thursday. Beauty products have been a strong category for many retailers, and despite inflation tightening household budgets in recent years, the beauty industry continues to maintain strong momentum. The resilience of this category has prompted companies like Target Corporation, Walmart Inc., Kohl's, and Macy's to expand their supply of cosmetics and skincare products. However, Ulta hinted at potential troubles back in April, with Kimbell warning at an investor conference that beauty demand was cooling. In recent quarters, Ulta's performance has reflected discerning shoppers and intense competition. Due to declining same-store sales, the company's performance fell short of expectations and it lowered its full-year outlook in August. This marked the first time in about four years that the retailer failed to meet Wall Street's expectations. Poor performance may have been one of the reasons Warren Buffett, "the Oracle of Omaha," almost completely sold off his Ulta shares. In the second quarter of this year, Buffett took a stake in the beauty company, but just a quarter later, the prominent American investor nearly divested from the stock, reducing his holdings by 96.49% from the previous quarter. As of Thursday's closing, Ulta's stock price has fallen approximately 19% year-to-date, lagging behind the S&P 500's gain of about 28% over the same period. In the third quarter, the retailer's net profit was $242.2 million, or $5.14 per share, exceeding market expectations of $4.54 per share, compared to $249.5 million, or $5.07 per share, in the same period last year. Revenue increased from $24.9 billion in the same period last year to $25.3 billion, surpassing market expectations of $25 billion. Same-store sales grew by 0.6% year-over-year, with both customer traffic and average ticket slightly increasing. Online and in-store customer transactions increased by 0.5% year-over-year, while average ticket (the amount shoppers spend during a store visit) grew by 0.1%. During the company's earnings call, Kimbell mentioned the launch of new brands, digital tools, and in-store events that helped drive Ulta's better performance in the quarter. For example, Ulta is selling an exclusive makeup line related to the Universal Pictures movie "Wicked." It has also added new features to its online store, including virtual try-on enhancements and new digital shopping guides. The company has also hosted in-store events such as seminars, where customers receive guidance from Ulta stylists. For beauty retailers like Ulta, the holiday season is a crucial time of the year. Kimbell stated that the company is "encouraged by our performance on Cyber Monday." However, he hinted at a challenging backdrop. He noted that the company is prepared for the shopping season, but "our insights suggest that concerns about the economy are driving people to be more value-focused." During the earnings call, CFO Paula Oyibo stated that the company will continue to "cautiously monitor the consumer and operating environment" and incorporate it into their forecasts. She mentioned that there are five fewer days between Thanksgiving and Christmas this year, which could also impact sales.