Ulta Salon, Cosmetics (ULTA) runs health and beauty retail stores. This has been a fast growing chain. After the close Ulta Salon reported earnings of $0.37 per share $0.06 more than the consensus. Revenues rose 20.5% to $386 million vs $372 million.
The Ulta Salon has high short interest and thus a pop on these earnings is reasonable.
Our issue is with the headlines describing Ulta Salon’s guidance. Headlines are screaming ‘upside guidance’. Ulta Salon’s guidance is $0.31 to $0.33 vs. $0.30 for the earnings. Revenue guidance is $378 – $384 million vs. $378 million consensus. The guidance is clearly better than expected but projections in the guidance are only minimally above the expectations. We think over $7.00 gain is unwarranted.
We have entered a 10% tranche in Alta Salon (10% of full core position size) in the after market at $56.82.
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Temporarily, we are not entering a stop on Ulta Salon due to high volatility, but will rely on keeping the quantity small to control the risk.
Our target zone is $50. to $53.25.
We will provide real-time updates on this position on the Real Time Feed of the ZYX Short Sell Change Alert.
Caution: this is a short-term trade for experienced traders only. Conservative investors should not enter this position on Ulta Salon as the risk of loss is high and managing the trade through a short squeeze may be required.
