Ulta Beauty Inc. shares fell 3.6% Monday, after Stifel analysts cut their stock price target by 17% to $270 from $325, on concerns that the U.S. beauty category is showing slowing growth, while juggernaut Amazon.com Inc. is expanding into prestige brands. “Numerous data points suggest U.S. beauty category growth slowed in 2Q17, including from retailers Macy’s and Sephora, beauty companies L’Oréal and e.l.f. Beauty , and scanner data measuring sales trends in food, drug, and mass channels,” said analysts led by Mark Astrachan. Slowing makeup and mass-priced product sales are key for Ulta, as each category accounts for about 50% and 40% of sales, he said. At the same time, L’Oreal’s CEO hinted on the company’s earnings call that it might be open to selling on Amazon, while Estee Lauder declined to rule out eventual availability on Amazon. “We remain favorable on Ulta’s longer-term growth trajectory anticipating continued share gains of beauty retail sales, benefiting from the accelerating shift from traditional sales channels to specialty retailers, online, and mobile, and attributable to Ulta’s increasing focus on its loyalty program, targeted promotions, and new credit card program,: said Stifel. “That said, we believe near-term trading could result in more downside than upside given broader multiple contraction in retail due to slowing category growth and fears of increased competition from Amazon.” Ulta shares have fallen 7.6% in 2017, while the S&P 500 has gained 8.2%.
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