Ulta shares rally on word Kylie Cosmetics in stores by the holidays

Ulta Beauty shares rebounded Friday morning after falling in after-hours trading Thursday, as the makeup retailer announced it will be bringing Kylie Cosmetics to its stores, exclusively, ahead of the holiday season.

The stock skyrocketed as much as 10 percent, hitting a 52-week high of $268.88. On Thursday afternoon, shares fell more than 6 percent following Ulta’s mixed second-quarter earnings report. Investors were disappointed with the forecast for the third quarter, but welcomed the news of the Kylie Cosmetics launch, which has the potential to draw customers during the busiest shopping season of the year.

The Kylie Cosmetics beauty brand, started by TV personality and Kardashian family member Kylie Jenner, has amassed a loyal fan base selling only online and directly to consumers. The move into Ulta stores later this year will be Kylie Cosmetics’ first expansion beyond its own e-commerce platform and a handful of pop-up shops.

“Kylie Jenner is a highly influential force in the beauty industry,” Ulta CEO Mary Dillon said on an earnings conference call Thursday afternoon. “This brand addition is yet another example of successful digitally native brands valuing a brick-and-mortar partnership with Ulta Beauty to extend their reach with consumers.”

The company said it will share more details about the brand launch at a later date. Jenner also shared a tweet about the announcement to her 25.4 million followers.

Retail analysts expect the Kylie Cosmetics launch to create a buzz during the all-important holiday season. It will help differentiate the company further from its competitors, including LVMH‘s Sephora, e.l.f. Beauty and Macy’s-owned Bluemercury.

“ULTA continues to differentiate itself via these exclusive partnerships, and has uniquely positioned itself by carrying both the smaller, high-growth direct-to-consumer (DTC) brands, as well as the established legacy favorites,” Cowen & Co. analyst Oliver Chen said in a research note.

Ulta reported net income for the quarter ended Aug. 4 of $148.3 million, or $2.46 a share, compared with $114.2 million, or $1.83 per share, a year ago. Analysts polled by Thomson Reuters were calling for earnings per share of $2.41.

Revenue climbed a little more than 15 percent to $1.49 billion, in-line with analysts’ forecast.

Sales at Ulta stores open for at least 12 months were up 6.5 percent during the second quarter, short of the 6.9 percent growth expected by analysts.

For the third quarter, the company is calling for earnings per share in a range of $2.11 to $2.16, compared with the consensus estimate from analysts of $2.31 a share.

Looking to the full year, Ulta is still calling for same-store sales growth of as much as 8 percent. It says e-commerce sales should grow in the 40 percent range. And total revenue is forecast by the company to climb a low-teens percentage rate.

Given the earnings beat, some investors may have been hoping the company would raise its forecast for the year.

The launch of Kylie Cosmetics at Ulta “underscores the limitations of a pure digital footprint and the importance of traditional brick-and-mortar retail,” Evercore ISI analyst Omar Saad said in a research note. “Ulta is well positioned to help cultivate and capture this percolating wave of newness and innovation, a dynamic that should support continued comp strength for at least a while.”

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