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Best Stocks for 2017: Ulta Beauty Inc (ULTA) Stock Is the Best in Retail

ULTA stock is looking gorgeous, with a number of great opportunities

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Editor’s note: This column is part of our Best Stocks for 2017 contest. Tracey Ryniec’s pick for the contest is Ulta Beauty Inc (NASDAQ:ULTA).

A few months ago, I was somewhat reluctant to choose Ulta Beauty Inc (NASDAQ:ULTA) as my stock pick for 2017 given how much the powerhouse growth stock names were up in 2016, including Ulta. As a value investor, I believed that value stocks might finally start to take the lead in the new year.

Best Stocks for 2017: Ulta Beauty Inc (ULTA) Stock Is the Best in Retail

But I was, thankfully, wrong. 2017 has been dominated by the big growth names, with ULTA stock among them.

And with good reason.

Ulta continues to be the top-performing retailer in the United States. Its holiday results were something most retailers only dream about, and never achieve.

It has taken that momentum into 2017.

The party is still on.

Ulta Has the Best Comps in the Business

On March 9, Ulta reported its fourth-quarter results. Many expected it to be a disappointment, given the challenges the rest of the retailers experienced over the holidays.

Instead, Ulta crushed it with comparable-store sales up 16.6%. Stripping out e-commerce, comparables were still an incredibly strong 12.8%, up 8% in traffic and 5% in ticket. The salon comparables rose 8.8%.

E-commerce also strengthened, rising 63.4% to $154.9 million from $94.8 million in the prior year. It now makes up 380 basis points of the comp sales.

No other publicly traded retailer did double-digit comparable comps in the fourth quarter.


Loyalty Program is Still the Key

I always get asked, “What makes Ulta different from others? Why isn’t it being Amazoned?”

One of the reasons is its Ultamate Rewards program which is the most generous in the retail industry and which makes customers keep coming back for more. I will make sure I buy my shampoo at Ulta, instead of Target Corporation (NYSE:TGT), Walgreens Boots Alliance Inc (NASDAQ:WBA) or CVS Health Corp (NYSE:CVS), just to get the reward points.

At the end of December 2016, Ulta had 23.4 million reward members, up 28% year-over-year. They are loyal and spend more per ticket than non-reward customers.

Oh, and don’t forget, the free gift on your birthday, which is usually a mascara or something similar. It’s a nice touch, and it matters.

MAC Coming Soon

Ulta is finally going to get MAC. MAC is the No. 1 prestige cosmetics brand in the United States. Apparently, it was the most-requested brand by Ulta customers, and should drive website and store traffic.

MAC fans are rejoicing that they will now get reward points for buying their favorite cosmetics.

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