Why Ulta Beauty Stock Is Down Today

stock Ulta Beauty (Ulta -4.82%) Both the results and guidance looked pretty good, although it did decline on Friday after the company reported its fiscal fourth quarter results after the close on Thursday. As of 12:55 PM ET, Ulta Beauty shares were down about 4.5%, but were down as much as 11% earlier in the session.

Another beautiful year at Ulta

In the fourth quarter of fiscal 2023, which ended Feb. 3, Ulta Beauty exceeded management’s guidance by reporting net sales of more than $3.5 billion, up 10% from the previous year. Sales increased due to new store openings and a 2.5% increase in existing store sales.

Ulta Beauty’s operating profit for the quarter was also strong, at $517 million. This is a 15.5% increase over the previous year, and fiscal year operating profit increased to $1.7 billion. Importantly, this improved the company’s fiscal year operating margin to 15%, compared to 14.8% at the high end of its margin guidance range.

Of course, Ulta Beauty is leading the way in 2024 with slower sales growth and a slight decline in operating margins. But things still look good for the beauty chain, which has nearly 1,400 locations.

Is Ulta Beauty stock a buy?

Ulta Beauty stock is up about 70% over the past three years, but I don’t think it’s overvalued in the least. According to the midpoint of management’s guidance for 2024, the company should again earn approximately $1.7 billion in operating profits. The company is valued at approximately 16 times this assumption, which is reasonable.

What the assumption does not take into account is the possibility of management repurchasing shares. Ulta Beauty spent $1 billion on stock buybacks in 2023, and management just received permission to use $2 billion more for additional stock buybacks. Depending on how quickly management acts and the stock price, buybacks can make reasonably valuable stocks look significantly cheaper.

So Ulta Beauty is definitely a stock to consider after Friday’s slight decline.