Ulta Beauty stock tumbles on operating margin guidance in earnings beat

The Yahoo Finance Live team discusses Ulta Beauty shares trading lower despite the company beating earnings estimates, as well as the impact of theft on retailers.

Video transcript

DIANE KING HALL: Shares of Ulta trading lower down double digits this morning, down about 11-- 10%, 10-and-a-1/2 percent. The company did beat analysts' expectations on earnings and revenue earnings at 6.88 is shared. That doesn't matter, though. Investors aren't liking the company's full-year outlook. The cosmetics retailer lowered its forecast for operating margins. Now expecting for 10-and-a-1/2 to 14.8% down from 14.7% to 15%. One of the factors hurting margins, and we heard this talked about at various retailers, is shrink as they call it or theft, as we know it. A story we've been seeing at a lot of the retailers this quarter.

And keep in mind, we know that Ulta has a big presence in Target. Target was a big-- highlighted that as a big problem within that retailer. So you're certainly seeing the effect of that. Ulta also talked about kind of some of the trends of-- you know, they've seen some strength within-- people coming-- returning to office and buying the latest beauty trends, but that's cooled some.

JULIE HYMAN: Yeah. I mean, sales are not the problem here. Comp sales were up 9.3%. That was better than estimated. So now we've heard from Target, we've heard from Dollar Tree, we've heard from Ulta that have really talked about this theft problem here. The interesting here-- thing here in Ulta is it's gotten worse. It's not necessarily new, but it's gotten worse. And the company said they put in place a bunch of measures last year.

DIANE KING HALL: Right.

JULIE HYMAN: And they thought it was going to get better, and it didn't. Those measures were not successful. They talked about the need for law enforcement and for, you know, maybe some help from the municipal authorities, et cetera. So obviously, this is a big and growing problem.

DIANE KING HALL: It is. People are selling lipstick. I mean, you know, that can--

JULIE HYMAN: Well, but--

DIANE KING HALL: I mean, I'm ain't encouraging that.

JULIE HYMAN: But that's not the problem that we're talking about here. We're not talking about an individual going into these stores and selling--

DIANE KING HALL: It's organized crime.

JULIE HYMAN: It's organized crime. If it was just like these one offs, that wouldn't be as big an issue.

DIANE KING HALL: Right.

JULIE HYMAN: It seems to be that it is a more organized fashion. So it's a really interesting story that we're going to continue to--