Ulta Beauty's stock plummeted 7% in after-hours trading on Thursday following disappointing second-quarter results and a reduction in its annual forecast, attributed to a drop in same-store sales during the latest quarter. This marked the company's first earnings per share miss since May 2020 and its first revenue miss since December 2020.

For the second quarter, comparable sales decreased by 1.2%, contrasting with an 8% increase from the previous year and falling short of the 1.2% growth anticipated by analysts, as reported by StreetAccount. CEO Dave Kimbell expressed in a press release that while there are many encouraging signs within the business, the second quarter's performance did not align with expectations, primarily due to a decline in comparable store sales. He noted that the company is aware of the factors negatively affecting store performance and is implementing measures to address these trends.

During the earnings call, Kimbell identified four main reasons for the sales decline, including an unexpected operational disruption linked to changes in store systems and lackluster results from promotional efforts. He also pointed to a growing caution among consumers regarding spending and increased competition within the beauty sector. Kimbell acknowledged that Ulta's market share is under pressure, stating that while the company maintained its position in mass beauty, it lost ground in the prestige beauty market, particularly in makeup and hair categories, according to data from Circana.

Kimbell remarked that while it is typical for retailers to face temporary sales declines due to new competitors or cannibalization from new Ulta locations, the current scale and speed of these changes have been unusual, affecting 80% of stores. He added that competitive pressures are likely to persist in the near future, but positive indicators such as customer engagement, the introduction of new products, the success of new store openings, and growth in the salon and loyalty sectors provide confidence in the underlying strength of the business.

The company has revised its full-year same-store sales forecast to a range of flat to a 2% decline, down from previous guidance of 2% to 3% growth. CFO Paula Oyibo indicated that the updated sales outlook reflects the expectation that it will take longer for the company's initiatives to positively impact sales, particularly in stores facing multiple competitive openings.

Ulta now anticipates full-year revenue between $11 billion and $11.2 billion, a decrease from the earlier forecast of $11.5 billion to $11.6 billion, and expects earnings per share to fall between $22.60 and $23.50, down from a prior estimate of $25.20 to $26.