Ulta Beauty, Inc. (ULTA – Free Report) reported mixed second-quarter fiscal 2018 results, wherein earnings outpaced the estimates while revenues missed. However, both the bottom and top line improved on a year-over-year basis. Further, management issued guidance for the third quarter and reiterated its view for the fiscal year.

Results were fueled by the company’s retail business, solid store-expansion efforts, adoption of new revenue standard, higher market share gains along with sturdy e-commerce sales and salon operations. Solid growth in prestige boutique brands, skin care as well as fragrance aided the performance as well.

However, shares of the company lost nearly 4.7% in after-hours trading on Aug 30. Decelerated comparable sales (comps) growth in the reported quarter and third-quarter earnings guidance, which fell shy of analysts’ expectations, hurt the stock. In the past month, this Zacks Rank #4 (Sell) stock has gained 2.7% while the industry rallied 6.9%.

Q2 Numbers

Ulta Beauty’s adjusted earnings came in at $2.46 per share, which exceeded the Zacks Consensus Estimate of $2.40. The bottom line also surged 34.4% year over year.

Net revenues of this cosmetics retailer grew 15.4% year over year to $1,488.2 million but marginally came below the Zacks Consensus Estimate of $1,490 million. We note that Ulta Beauty adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers on Feb 4, 2018. Including the effect from adoption of this new revenue standard, the company’s top line grew by $9.4 million in the reported quarter.

Comps (including stores and e-commerce) climbed 6.5% compared with 11.7% growth in the prior-year quarter. Increase in traffic and ticket along with stupendous e-commerce improvement led to comps growth. During the fiscal second quarter, the company registered transaction growth of 3.1% while average ticket was up 3.4%.

Retail business (comprising retail and salon) witnessed comps growth of 4%, including 1.7% improvement in salon comps. Sales for the salon business grew 8.8% to $74 million. Also, Ulta Beauty saw 37.9% surge in e-commerce sales to $132.8 million, reflecting about 250 basis points (bps) of total comps growth in the quarter under review.

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