11:30 AM EDT, 08/30/2024 (MT Newswires) -- Ulta Beauty's ( ULTA ) lower-than-expected earnings and comparable sales for the fiscal second quarter and its downgraded guidance are expected to be a drag on the beauty retailer's share price in the near term, Evercore ISI said in a Friday note.

Ulta Beauty ( ULTA ) late Thursday cut its full-year earnings-per-share guidance to between $22.60 and $23.50 from $25.20 to $26 previously projected. Revenue is now expected between $11 billion and $11.2 billion, down from its prior outlook of $11.5 billion to $11.6 billion. Comparable sales are estimated to be flat to down 2%, versus a 2% to 3% increase previously modeled.

Analysts polled by Capital IQ currently expect GAAP EPS of $23.31 and revenue of $11.18 billion for the ongoing fiscal year. Ulta's stock was falling 2.7% in Friday trade.

"In addition to reflecting our first half performance, our updated outlook for sales assumes it will take more time for our actions to change the top line trajectory, and that stores impacted by multiple competitive openings will continue to be pressured more than the rest of the fleet," Chief Financial Officer Paula Oyibo said on an earnings call with analysts on Thursday, according to a Capital IQ transcript. "The operating environment remains dynamic, and the low end of our range implies incremental pressure on consumer spending."

Evercore ISI called the guidance update a "tough, but necessary" cut, saying the company is now in a better position to avoid further negative revisions for the year.

A second-half guidance that assumes no improvement in same-store sales trends, or even a deceleration by about 400 basis points from the first half, "is more believable given the market share and margin pressures Ulta is facing today," the brokerage said.

"While the stock is certainly reflecting a tough back half, we think it was the right move ahead of Ulta's October analyst day to avoid the risk of having to lower the baseline year for its three-year targets," according to Evercore ISI.

For the three-month period ended Aug. 3, Ulta Beauty ( ULTA ) reported EPS of $5.30, compared with $6.02 a year earlier and below the Capital IQ-polled consensus of $5.45. Revenue rose to $2.55 billion from $2.53 billion, but missed Wall Street's estimate of $2.61 billion. Comparable sales fell 1.2%, while the Street was estimating a 1.4% increase.

"Our second quarter performance did not meet our expectations, driven primarily by a decline in comparable store sales. We are clear about the factors that adversely impacted our store performance, and we have actions underway to address the trends," Chief Executive Dave Kimbell said in a Thursday statement. "We are focused on driving stronger sales and traffic and continuing to exercise financial discipline."

Price: 357.54, Change: -10.05, Percent Change: -2.73