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Citi cuts Ulta Beauty target, opens 'negative catalyst watch'
Citi analyst Kelly Crago lowered the firm's price target on Ulta Beauty to $375 from $400 and keeps a Neutral rating on the shares. The analyst also opened a "90-day negative catalyst" on the shares. The firm anticipates a Q2 earnings miss versus consensus, driven by weaker comps and lower gross margin. Ulta is facing headwinds from weakening category trends and increased competition that are making it difficult to drive traffic this year, the analyst tells investors in a research note. Given Ulta's commitment to protecting market share, Citi anticipates the company will rely more on promotions and marketing investments to drive traffic in the second half of 2024. As a result, it anticipates management will lower fiscal 2025 enrings per shared guidance to a range around $24.50 versus the current outlook of $25.20-$26.00. It also finds it likely that Ulta will reduce its long-term margin targets at the October 16 analyst day. Citi thinks the stock's risk/reward "skews negative" into the Q2 earnings print.