Ulta Guided for Modest Sales Growth. Its Website Traffic Jumped 48% in September

Ulta Beauty Inc’s (NASDAQ:ULTA) traffic accelerated to 48% year-on-year in September, which could be a "leading indicator" of stronger same-store sales growth in the back half of the year, according to BofA Securities. The Ulta Beauty Analyst: Analyst Lorraine Hutchinson maintained a Buy rating, while raising the price target from $650 to $700. The Ulta Beauty Thesis: Visits to the company’s official website have grown by 38% year-on-year in the first nine months of the year, including over 30% monthly growth since April and 48% in September, Hutchinson said in the note. Check out other analyst stock ratings. "Digital engagement is strengthening beyond its website, with TikTok followers up 27% YTD and Instagram engagement up 83%," she wrote. Together, the website visits and social media engagement data suggest that Ulta Beauty’s investments "are working," strengthening the company’s connection with consumers, the analyst noted. High consumer engagement on the site sparks optimism around Ulta Beauty’s ability to convert this higher traffic into sales, she added. Hutchinson further observed that: Digital sales have grown between low double-digits and mid-teens over the past few quarters This has outpaced the remaining business of the company, although it represents only around 20% of total revenue Ecommerce has the potential to drive "outsized growth in the coming periods," with traffic growing significantly above recent levels, the analyst stated. Ulta Beauty’s guidance implies comps of 2%-3% in the back half of the year, but the website data "points to potential upside," she added. "The opportunity for stronger comps should lead to multiple expansion as ULTA’s double-digit EPS growth algorithm stands out versus peers," Hutchinson further wrote. Beauty Category Spending: Consumers continue to spend more on beauty, with BofA’s card data showing 6.5% year-on-year growth in third-quarter spending and 8.6% in September, the analyst said. This represents an opportunity for Ulta Beauty, she noted. The company has "called out early green shoots in bolder makeup trends, and its increasing focus on wellness, with most loyalty customers already shopping wellness elsewhere," Hutchinson wrote. ULTA Stock Price Activity: Ulta Beauty shares are trading higher by 1.96% at $603.22 at the time of publication on Tuesday, according to Benzinga Pro data. Read Also: Fuel, Freight and Supplier Costs Bite: How Walmart, Costco, Target and Other Retailers Are Fighting Back Photo: Gregory C Sanders / Shutterstock.com