Ulta Beauty Inc. shares slid 5% in premarket trade Friday, after the specialty cosmetics retailer reported third-quarter per-share earnings that surpassed Wall Street expectations but same-store sales growth slowed and the fourth-quarter outlook was mixed. J.P. Morgan analysts said they expect the stock to suffer only minor pressure given the quarterly beat, the outlook for “relatively improved” merchandise margin performance in the fourth quarter and re-commitment to 20% plus growth in 2018. “This will likely stave off what could have been a tough day for the stock given the 110-bp decline in gross margin,” they wrote in a note. “That been said, the uncertainty on gross margin and what we view as a lost opportunity to lower the sales bar could leave the stock in the show me camp until we get clarity on 4Q and gross margin in 1H18.” J.P. Morgan rates the stock overweight. Raymond James analyst Joseph Altobello reiterated his market perform rating on the stock. “While valuation appears somewhat attractive given the stock’s pronounced pullback in recent months, we believe the recent slowdown in comps (with another tough compare coming in 4Q) and ongoing margin pressures, coupled with investor concerns over heightened competitive activity within the beauty retail space is likely to limit meaningful upside and exacerbate volatility in the shares in the near-term,” he wrote in a note. Shares are down 13% in 2017 through Thursday, while the S&P 500 has gained 18%.
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