Ulta Beauty surged to a 13-month high Friday after a bullish quarterly report, and retail stocks capped a week of sharp divergences.
The cosmetics chain late Thursday reported sales increased 4.5% to $2.8 billion in the quarter ended May 3. Earnings climbed 4% to $6.70 a share. Both numbers beat analysts' estimates, according to FactSet. Same-store sales rose 2.9%, also above views.
Ulta raised its profit forecast for the current fiscal year to $22.65-$23.20 per share, from an earlier estimate of $22.50-$22.90. It slightly raised the upper end of its full-year sales estimate to $11.5 billion-$11.7 billion.
It also raised its same-store sales estimate to 0% to 1.5%, though it cited uncertainty over tariffs in the remainder of the year. For now, the company says its customers are not letting up.
"Consumer engagement with beauty remains healthy, and our insights indicate beauty and wellness remain a top priority for beauty enthusiasts, who tell us that they're more willing to make trade-offs in other discretionary areas to maintain their beauty regimens," CEO Kecia Steelman said in a conference call with analysts.
"At the same time, they are cautious; and value is an increasingly important priority as they navigate ongoing wallet pressures."
Analysts Raise Price Target On ULTA Stock
About a dozen analysts raised their price targets on Ulta stock, underscoring the company's success in various strategies.
The top stock gapped up nearly 12% in heavy volume, clearing a resistance level around 422. On May 12, shares broke out of a cup-with-handle base, according to MarketSurge pattern recognition. Its Composite Rating is 85.
Ulta stock has a 21-day average true range (ATR) of 2.39%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
Top Stocks, Laggards In Retail
In a week that saw many important retailers announce earnings, some separated themselves as leaders. Others felt the wrath of investors.
Abercrombie & Fitch gapped up more than 14% Wednesday after the retailer beat April-quarter expectations. The stock has since given back much of that gain, however, and has been trading below the 200-day moving average since Jan. 13.
February-April quarter same-store sales rose 4%. The retailer raised the upper end of its fiscal-year sales growth forecast to 3% to 6% but it cut its earnings estimate to $9.50-$10.50 per share from $10.40-$11.40.
Abercrombie's Hollister brand was the quarter's star, with its 22% sales increase more than making up for a 10% decline at A&F stores. Abercrombie executives estimate a tariff impact of around $50 million this fiscal year, and have no plans to raise prices broadly.
The stock has an ATR of 6.24%. Its Composite Rating is 56.
Gap Plunges After Results
But Gap plummeted 18% in heavy trading Friday despite that its 2% quarterly sales increase and 24% EPS gain beat estimates. Shares found some support at the converged 50-day and 200-day moving averages.
Gap — the largest specialty apparel retailer in the nation — estimates $100 million to $150 million in costs from tariffs after adopting strategies to limit the cost. It is reducing its sourcing from China to 3% as it diversifies foreign suppliers.
Comparable sales rose 2%. Barclays, UBS and Citi cut their price targets on Gap stock, reports said.
The company, whose brands include Old Navy and Banana Republic, has a Composite Rating of 91. The stock's ATR is 3.70%.
American Eagle Outfitters fell as much as 10.5% at Friday's open but reversed modestly higher in afternoon trading. The stock bounced from around the 10 price level, a level of support that has held going back to 2022.
The company said it was "disappointed" with its April-quarter results, which missed analysts' estimates. Sales fell 5% year over year while the company posted a loss of 29 cents a share. CEO Jay Schottenstein told analysts that American Eagle entered Q2 with inventory for the season better aligned with sales trends. It is also bolstering its supply-chain network.
The stock's ATR is 5% and the Composite Rating is 27.
Urban Outfitters Is Group's Top Stock
Meanwhile, Urban Outfitters climbed to a record high this week as the company emerges as the top stock in the teen and young-adult apparel category.
The stock on May 22 soared nearly 23% in heavy volume after results beat expectations and the company posted its third straight quarter of accelerating EPS growth. Despite economic uncertainty, CEO Richard Hayne said shopping trends remained firm. "We haven't seen any sign of demand slowdown," he said.
With its latest results, Urban Outfitters solidified its place as the No. 1 stock in the apparel and footwear industry group. It has the top Composite, EPS and Relative Strength Ratings of 30 stocks in the group.
Shares are extended from the most recent buy point at 61.16 but have reversed lower from a peak at 75.80. Earlier this week, the stock climbed as much as 24% above its entry — a gain that justifies taking at least some profits in top stocks.
URBN stock has an ATR of 4.73%.
