On Thursday, the beauty retailer reported better-than-anticipated results for its fiscal third quarter, surpassing Wall Street's expectations. This performance alleviated concerns regarding increased competition and a potential decline in demand for cosmetics and skincare products. In light of these positive results, the company slightly raised its full-year financial outlook.

For the current fiscal year, it now projects net sales to fall within the range of $11.1 billion to $11.2 billion, up from the previous estimate of $11 billion to $11.2 billion. Additionally, it expects full-year earnings per share to be between $23.20 and $23.75, an increase from the prior guidance of $22.60 to $23.50.

Despite this upward revision, the company anticipates a low single-digit decline in comparable sales during the holiday quarter. In a press release, CEO Dave Kimbell expressed his pride in the company's progress and noted that early indications suggest their strategies to strengthen their market position and enhance performance are gaining momentum.

The company's updated full-year comparable sales forecast ranges from a 1% decrease to no change. This metric measures sales at Ulta stores that have been open for at least 14 months, as well as online sales. Despite the improved outlook, the company anticipates a slight decrease in holiday-quarter comparable sales. CEO Dave Kimbell stated in a news release that he is "proud of the progress" the company has made and "encouraged by early signs that our efforts to reinforce our market position and drive improved performance are gaining traction."

Here's a breakdown of Ulta's reported financials for the three-month period ending November 2, compared to Wall Street's expectations, based on a survey of analysts by LSEG:

• Earnings per share: Actual $5.14 vs. Expected $4.54
• Revenue: Actual $2.53 billion vs. Expected $2.50 billion

Following the release of these results, Ulta's shares experienced an increase of over 10% in after-hours trading. The beauty category has remained robust for many retailers, maintaining strength even as inflation has strained household budgets and led many consumers to cut back on discretionary spending. This resilience has prompted companies such as Target, Walmart, Kohl's, and Macy's to expand their beauty product offerings.

However, Ulta first signaled potential challenges in April when CEO Kimbell warned of a cooling demand for beauty products at an investor conference. In recent quarters, Ulta's financial results have reflected the behavior of discerning consumers and increased competition. The company missed earnings expectations and reduced its full-year outlook in August following a decline in same-store sales, marking the first time in about four years that the retailer failed to meet Wall Street's expectations. Shares of the company have also declined, with Ulta's stock down approximately 19% year-to-date, underperforming the S&P 500's roughly 28% gains over the same period.

For the fiscal third quarter, the retailer reported net income of $242.2 million, or $5.14 per share, compared to $249.5 million, or $5.07 per share, in the same period last year. Revenue increased from $2.49 billion in the year-ago quarter. Comparable sales saw a modest 0.6% year-over-year increase, driven by a slight uptick in customer traffic and average ticket size. Customer transactions across its website and stores grew by 0.5% year over year, while the average ticket, the amount spent by shoppers during those visits, rose by 0.1% year over year.

On the company's earnings call, Kimbell attributed Ulta's improved performance in the quarter to the launch of new brands, the introduction of digital tools, and in-store events. For instance, Ulta is offering an exclusive line of makeup in conjunction with the release of Universal's "Wicked" movie. It has also added new online features, such as virtual try-on enhancements and digital buying guides, and hosted in-store events, including workshops where customers received guidance from Ulta's stylists on achieving "salon-worthy blowouts."

For beauty retailers, including Ulta, the holiday season is a crucial period. Kimbell stated that the company is "encouraged by our performance through Cyber Monday." However, he also hinted at ongoing challenges, noting that the company is prepared for the shopping season, even as "our insights suggest that economic concerns are driving a greater focus on value." CFO Paula Oyibo mentioned on the earnings call that the company maintains a "cautious view of the consumer and operating environment" and has incorporated this into its forecast. She also noted that the compressed holiday season, with five fewer days between Thanksgiving and Christmas, could negatively impact sales.