A key use case of using alternative data for long-term investors is validating management commentary, as we mentioned in our “Using Alternative Data as a Long-Term Investor” article published in September. Whether it’s tracking the performance of a strategic initiative or comments on category or financial performance that aren’t regularly reported in financial statements – alternative data can help validate these trends. Our ULTA research is a prime example of this, providing insights into category trends, newness, and discounting that management confirmed during its recent earnings call.
Sales Growth by Category
Source: Consumer Receipt Panel
Skincare was clearly the most resilient category in F3Q23, with all other categories seeing limited Y/Y growth. Mix shifts can be important narratives given the varying margin profile of different categories, which can have an effect on profits. ULTA’s management confirmed this strength in Skincare:
‘Turning to performance by category. Skincare was again our fastest-growing category’ – David Kimbell, CEO, Q3 2023 Earnings Call, Nov 30, 2023
Percentage of GMV from new SKUs
Source: Consumer Receipt Panel Note: New SKUs are defined as items purchased in our consumer panel for the first time as identified by the captured UPC number in the trailing 3 months.
Newness and innovation have traditionally been key drivers of growth in the U.S. Beauty category. Our data specifically flagged an inflection in GMV during F3Q23 from new SKUs in the “Fragrance and Bath” category, once again validated by management:
‘The fragrance and bath category delivered low double-digit growth. Newness from Ariana Grande, Burberry, and YSL contributed to the category’s performance.’ – David Kimbell, CEO, Q3 2023 Earnings Call, Nov 30, 2023
SKU Level Discounting by Category
Source: Consumer Receipt Panel
U.S. beauty remains a highly competitive space, with ULTA vying for customers alongside other specialty beauty retailers (e.g. Sephora), big box stores (e.g. Target), and more recently Amazon. Our data suggested that F3Q23 discounting percentage was above last year’s levels, confirmed by management as one of the drivers of lower gross margins compared to last year.
“Q3 gross margin decreased 130 basis points to 39.9%, compared to 41.2% last year. The decrease was primarily driven by lower merchandise margin…. Overall merchandise margin was lower primarily due to lapping the timing benefit of retail price changes last year, as well as increased promotional activity this year” – Scott M. Settersten, CFO, Q3 2023 Earnings Call, Nov 30, 2023
YipitData’s coverage of ULTA showcases the power of granular data and analysis, allowing you to fact-check management and track the most important narratives that are central to your investment process.
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