Why Ulta Beauty Stock Popped Today

Shares of cosmetics retailer Ulta Beauty (NASDAQ: ULTA) popped on Friday after the company reported financial results for the fourth quarter of 2024. As of 11:45 a.m. ET, Ulta Beauty stock was up 13%.

The year ended better than expected

Yesterday, Ulta Beauty stock had dropped to its lowest price in nearly four years, showing just how much investors had turned on this beauty retailer. But the stock price is prettier now that the company just reported full-year net sales of $11.3 billion, higher than management's guidance of $11.1 billion to $11.2 billion.

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Additionally, Ulta Beauty had a full-year operating margin of 13.9%, resulting in full-year operating income of $1.6 billion. For perspective, management had only guided for a full-year operating margin of 12.9% to 13.1%. Granted, it had a 15% margin in 2023, so it was down year over year. But its 2024 results represent a significant outperformance of expectations nevertheless.

With sales stable and with margins holding relatively strong, it seems investors were realizing that they've been too hard on Ulta Beauty stock recently.

A couple of concerns for an otherwise healthy business

As encouraging as Ulta Beauty's 2024 results were, there are some concerns with its guidance for 2025. For 2025, management only expects 1% growth in same-store sales, at most. Moreover, it expects its full-year operating margin to slip from 13.9% down to a range of 11.7% to 11.8%.

Ulta Beauty's management says 2025 will be "a pivotal year" when it comes to finding ways to stimulate future growth. That's a less-than-ideal confident tone in my opinion. That said, the business will have another year with well over $1 billion in operating profit, so there's no real concern about the sustainability of this business. It's just that 2025 might be a slower operating environment, which is something for investors to be mindful of.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ulta Beauty. The Motley Fool has a disclosure policy.