Why Ulta Salon Shares Looked Stunning Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of beauty retailer Ulta Salon, Cosmetics & Fragrance surged 17% today after its quarterly results easily topped Wall Street expectations.

So what: The stock has been sluggish in recent weeks on concerns over declining profitability, but today's blowout second-quarter results -- adjusted earnings surged 30% on a 25% jump in sales -- are quickly easing those worries. In fact, same-store sales increased a solid 8.4% while gross margins expanded 50 basis points, giving analysts plenty of optimism about Ulta's competitive positioning and store growth potential going forward.

Now what: Management now sees third-quarter EPS of $0.71 to $0.74 on revenue of $613 million to $623 million, with same-store sales expected to grow in the range of 5% to 7%. "I am incredibly excited about the future potential of Ulta Beauty, and I look forward to working with the team to build on the solid foundation they have built," said CEO Mary Dillon. Of course, with the stock now up more than 60% from its 52-week lows and trading at a forward P/E of about 30, much of that potential may already be baked into the price.

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The article Why Ulta Salon Shares Looked Stunning Today originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Ulta Salon, Cosmetics & Fragrance. The Motley Fool owns shares of Ulta Salon, Cosmetics & Fragrance. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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