Ulta Beauty
stock was rising Tuesday after an analyst upgraded the cosmetics retailer on confidence of higher-end products.
In midday trading, shares of Ulta (ticker: ULTA) were up 3.9% to 441.06.
Loop Capital’s Anthony Chukumba changed his rating of the stock to Buy from Hold and increased his per-share price target to $520 from $490.
“We believe the addition of luxury brands (including Chanel, Hourglass, Natasha Denona, Dior, and Lancôme Absolue with more likely to come) to
Ulta Beauty
‘s merchandise assortment will provide a multi-year comparable sales growth driver,” Chukumba said in a research note on Tuesday.
Ulta stores are split into two sides: luxury products and less-expensive ones. Chukumba believes expanding the higher-end line will in bring more shoppers as well as lead customers already at Ulta to buy the premium products.
More sales, especially of luxury products, would help the company. Ulta, which was a Barron’s stock pick early in the year, cut operating margin estimates and warned investors of moderating growth when it reported fiscal first-quarter earnings in May.
“Similar to what other retailers have shared, we continued to see pressure from inventory shrink this quarter and we have updated our full year guidance to reflect the persistence of this trend,” Chief Executive David Kimbell said on the earnings call last month.
Chukumba, however, said luxury sales can help Ulta, with high-end products selling at a price point 20% higher than their drugstore counterparts.
The stock is off 6.7% for the year.
Write to Angela Palumbo at [email protected]
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