Ulta Salon, Cosmetics & Fragrance, Inc. Rallies On 5-Year Plan; Analysts Applaud

September 12, 2014

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Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ: ULTA) gained more than 20 percent Friday after the company unveiled a five-year plan for impressive growth.

Analysts broadly applauded the Bolingbrook, Illinois, retailer and salon service provider's business goals, which suggest 2019 sales of $6 billion, compared with $2.67 billion for the year ended February 2.

"They provided a road map to over 20 percent earnings growth long term," Credit Suisse's Gary Balter said in a note anticipating Friday's stock gains.

Balter, who rates the shares Outperform, with a $115 target, said second-quarter results assuaged "considerable skepticism" over growth rates.

The company told Wall Street that its second-quarter same-store sales grew nine percent in the recent period.

Its five-year financial targets, unveiled Thursday, include annual earnings growth in the low 20 percent range. But supply chain investments are expected to reduce the 2015 and 2016 earnings growth rate by the mid-single digits.

Sterne's Ike Boruchow called Ulta "one of the most compelling growth stories in retail," maintaining a Buy rating and $125 target.

Continued traffic improvement along with growing consumer awareness of the brand appear likely to push an on-going upside to the shares, according to Citi's Oliver Chen, who raised his target to $130 while maintaining a Buy rating.

J.P Morgan's Brian Tunick noted that supply chain investments will pressure margins in the next couple of years, but nonetheless maintained his Overweight rating on the shares.

Ulta traded recently at $114.58, up 17.5 percent.