Ulta Beauty Inc. shares are down 4.3% in Monday trading after a lawsuit filed in Chicago federal court alleges the chain sold used cosmetics. A Chicago Tribune report says a California woman is seeking class-action status for the suit, which accuses Ulta of repackaging returned cosmetics and selling them alongside never-opened merchandise. Former employees have tweeted alleging the practice. “The suit is not based on evidence of a health outbreak or product efficacy, which may ultimately make it easier to defend,” wrote Jefferies analysts in a note. “But in the court of public opinion, any sort of social driven campaign that challenges consumer perception of safety is a risk.” Analysts expect that Ulta will likely enact more strict vendor requirements for packaging and take other measures to address the issue. Jefferies rates Ulta shares buy with a $300 price target. MarketWatch has reached out to Ulta for comment. Ulta shares are down 22.5% for the last year while the S&P 500 index is up nearly 15% for the period.
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