Ulta Beauty rides on resilient cosmetics demand to post beat-and-raise quarter

Ulta Beauty store in New York City

(Reuters) - Ulta Beauty on Thursday raised its annual earnings and revenue forecast bolstered by resilient demand for its premium cosmetics and fragrances despite a broader decline in discretionary spending, and posted a better-than-expected quarterly profit.

Shares of the beauty retailer rose about 2% in extended trading.

Higher-income consumers have splurged on beauty and skincare products even as higher borrowing costs and rentals squeezed household budgets, which has hit demand for other discretionary items such as athletic wear and accessories.

Foot traffic at Ulta Beauty's stores grew every month this year, in comparison to declines for other non-essential categories such as recreational and sporting goods, restaurants and gift stores, a report by data research firm Placer.ai showed.

Ulta earned $6.02 per share for the second quarter ended July 29, topping Wall Street's estimates of $5.85, as per Refinitiv data.

The company has appealed to younger customers and college students with its mix of products, which includes cheaper options for hair and skincare.

The retailer has been steadily hiking prices in order to soften the blow on margins from higher costs of goods, boosting quarterly sales which rose about 10% to $2.5 billion, and were slightly ahead of market expectations.

It now expects 2023 net sales between $11.05 billion and $11.15 billion, compared with its earlier forecast of $11.0 billion to $11.1 billion.

"The beauty category growth remains healthy across both prestige and mass price tiers as consumers maintain their post-pandemic routines and expand their definition of beauty," said Ulta Beauty's CEO Dave Kimbell in a post-earnings call.

Ulta now expects annual earnings per share between $25.10 and $25.60 per share, compared with its previous forecast of profit between $24.70 and $25.40 per share.

(Reporting by Juveria Tabassum; Editing by Shailesh Kuber)