Why Ulta Beauty Stock Sank on Wednesday

Investors didn’t like what management had to say this morning.

Shares of cosmetics retail chain Ulta Beauty (ULTA -14.94%) sank on Wednesday following some commentary from management at J.P. Morgan‘s 10th Annual Retail Roundup investor conference. As of 1:20 p.m. ET, Ulta Beauty stock was down 14%.

Management tempers expectations

Ulta Beauty CEO Dave Kimbell and future CFO Paula Oyibo gave a fireside chat at the aforementioned conference at 9 a.m. ET this morning. The duo warned investors that the company is seeing “Slower growth than anticipated in the category so far this year,” according to The Fly.

On March 14, Ulta Beauty gave financial guidance for its fiscal 2024, saying that it expected 4% to 5% full-year growth for same-store sales. However, now just 20 days later, management says that tepid growth in the first half of the year will cause full-year fiscal 2024 results to be closer to the low end of its guidance.

This downer commentary spooked investors today and it’s why shares of Ulta Beauty were down so sharply on an otherwise quiet day.

Is this a classic overreaction?

From the way the stock is behaving, you’d think that Ulta Beauty’s management threw out guidance. But it didn’t; it simply said it expects to be on the low end of guidance based on current trends. To me, this points to a market overreaction today.

That said, perhaps there is room for a little caution with Ulta Beauty stock considering something appears to have changed in just the past three weeks. The current trend could be an early manifestation of a bigger slide to come.

Thinking bigger-picture, the cosmetics space is a resilient category and Ulta Beauty is one of the stronger players. I think today’s dip could be an opportunity for investors with a long-term view.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Ulta Beauty. The Motley Fool has a disclosure policy.

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