Breakfast News: Ulta’s Beautiful Earnings
December 6, 2024
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Source: Image created by Jester AI.
1. Ulta’s Business Stabilizes
Investors cheered Ulta Beauty's (ULTA -3.07%) Q3 results, helped by beats on net revenue and earnings per share, plus a slight increase in full-year guidance. The Stock Advisor recommendation looks set to open around 12% higher this morning.
- “Improved sales trends and strong financial discipline”: Emerging well from a tough period last quarter, CEO Dave Kimbell has emphasized a patient, long-term mindset for future growth (sound familiar, Fools?).
- Largest U.S. specialty beauty retailer: The business is exposed to cyclical ups and downs in demand, so shares of Ulta are slightly more volatile than the overall market.
2. Next Up: Jobs Report
Thursday’s slight market pullback reflected a little uncertainty ahead of this morning’s November jobs report. Analysts believe positive news on this front is already priced in.
- What to watch: Nonfarm payrolls are anticipated to rise by 215,000, according to Bloomberg consensus estimates. Unemployment is expected to remain the same as October’s 4.1%.
- “The downside risks appear to be less in the labor market”: Federal Reserve Chair Jerome Powell appeared bullish midweek on the U.S. economy, particularly on the ‘pursuit of maximum employment’ half of its dual mandate.
3. Executive Exclusives
There were plenty of business leaders making appearances at the New York Times DealBook Summit this week, including Alphabet (GOOG -0.67%) CEO Sundar Pichai and Amazon (AMZN 0.01%) executive chairman Jeff Bezos.
- “The low-hanging fruit is gone. The hill is steeper”: Pichai believes development of artificial intelligence will slow down in 2025, but is confident AI performance has not plateaued.
- “The downside risks appear to be less in the labor market”: Federal Reserve Chair Jerome Powell appeared bullish midweek on the U.S. economy, particularly on the ‘pursuit of maximum employment’ half of its dual mandate.
4. Chewy's Deep Customer Relationships
Alicia Alfiere
Under the Radar
Rule Breakers rec Chewy (CHWY 1.23%) added a lot of customers during the pandemic. More recently, however, customer counts have declined. These declines continued into the most recent quarter and might have disappointed some investors.
I wasn’t one of them. Here’s why.
Despite declining customers, Chewy’s revenues are growing. That’s partially because pet parents spent more on Chewy’s Autoship program, which provides automatic product deliveries. But these customers don’t forget about Chewy after signing up for the convenient service, they come back and spend on additional items.
Pet parents are also spending more with Chewy in general. In its latest quarter, net sales per active customer grew 4.2%. Also, according to the company’s internal data, customers tend to spend more with Chewy over time.
This growth in Autoship and customer spend points to a company with deep customer relationships. But Chewy isn’t resting on its laurels, and recently expanded into Vet Clinics. While this segment is new, it can potentially help Chewy win more customers, deepen existing customer relationships, and increase its share of pet spending.
But if you’re still bummed about customers, there’s potentially good news for you too: Chewy now expects to end the year with a slight increase in customers.
5. Foolish Fun
Walmart CFO John David Rainey has highlighted today’s "resilient, yet choiceful" U.S. consumer.
What's your go-to discount retailer when you're watching the bottom line? Share with friends and family, or become a member to hear what your fellow Fools are saying!
