Ulta Shares Tumble On Beauty Slowdown As Consumers Pull Back  

Shares of Ulta Beauty plunged 15% on Wednesday, the largest daily decline since March 2020, after the company warned investors at the JPMorgan Chase & Co. conference that first-quarter demand for beauty products cooled. 

"We have seen a slowdown in the total category," CEO Dave Kimbell told investors. 

Kimbell continued, "We came into the year—and we talked about this on our [earnings] call a few weeks ago—expecting the category to moderate. It has [had] several years of strong growth, as I said. We did not anticipate it would continue at the rate that it's been growing."

He predicts first-quarter comparable sales at the lower end of the low-single-digit growth range than previously forecasted for the first half of this fiscal year. He noted the company lost market share in the prestige makeup and hair category.

Kimbell said the slowdown is a " bit earlier and a bit bigger" than previously anticipated and pointed to high credit card debt and student loan payments as some of the financial pressures on consumers. 

Responding to the CEO's comments, Oppenheimer analyst Rupesh Parikh wrote in a note to clients that his team is "surprised by the moderation, and, at this point, are unclear whether this represents just a shorter-term blip." 

Investors dumped Ulta shares in New York on Wednesday, closing the session down 15%, the largest intraday loss since March 2020. 

Ulta's plunge sent beauty stocks tumbling: Estee Lauder Cos dropped 4%, Coty -6%, and Elf Beauty -12%.

Beauty products have been one of the hottest retail categories over the last several years. But the Federal Reserve's hiking cycle is squeezing debt-saddled consumers - and now higher for longer has forced low-tier consumers to quit. 

Last month, restaurant group Darden Restaurants warned about a slowdown in sales across its eight brands: Olive Garden, LongHorn Steakhouse, Cheddar's, Yard House, Ruth's Chris, The Capital Grille, Seasons 52, Bahama Breeze, and Eddie V's. It said consumers with incomes under $75k were reducing spending. 

Also, discount retailer Dollar Tree offered a dismal outlook in the first quarter when it said average spending at its stores fell. 

The consumer slowdown is set to broaden with gasoline prices at the pump surging. 

The continued squeeze on the consumer is bad news for the Biden administration ahead of the presidential elections in November. Furthermore, the failure of Bidenomics is showing up at the polls among Gen Zers who revolt against Democrats because nothing in the economy is affordable.