Retail companies are investing heavily in their digital channels to capture online shopping demand and increase overall sales. TipRanks’ new website traffic filter is a quick and easy way to list the websites of publicly traded companies that have gained or lost website traffic over the month, quarter or year. Classes. We used TipRanks’ website traffic filter to select two retail stocks with favorable traffic trends – Ulta Beauty and Lululemon.
The relevance of e-commerce has emerged amid the pandemic, especially when social distancing restrictions have been put in place. Even after the reopening of physical stores, several retailers continue to see strong momentum in their online sales. Based on website traffic trends, one can make a useful analysis of quarterly business performance.
Ulta Beauty is the leading beauty retailer in the United States, selling mass and prestige cosmetics, fragrances, skin and hair care products, and also offering salon services.
Ulta Beauty’s fiscal first quarter results (ended April 30, 2022) exceeded analysts’ expectations. Sales rose 21% to $2.3 billion and comparable sales increased 18% as the company reported strong in-store sales after restrictions eased. Overall, higher sales and expanding margins drove EPS up 54% to $6.30.
As expected, e-commerce sales slowed in the first quarter of FY22 as physical stores reopened and were in line with company expectations. However, e-commerce sales as a percentage of overall sales fell 400 basis points year over year.
According to TipRanks’ website traffic tool, visits to ulta.com increased by 37.4% in June compared to May. Additionally, quarterly traffic (May-June period) for the second fiscal quarter is up 56.88% compared to Q1 FY22. In addition, traffic since the beginning of the quarter increased by 137.72% compared to the prior year period.
Raymond James analyst Olivia Tong believes Ulta is one of the most resilient stocks in the market as recession risks rise.
Explaining his bullish stance, Tong said, “In our view, Ulta is one of the best-positioned retailers due to the attractiveness of the high-growth/high-margin beauty category, Ulta’s rewards program which counts 38 million members (and data on their shopping habits), and the retailer’s wide price range, giving it a greater likelihood of retaining customers even as they start looking for cheaper substitutes.
Consistent with its bullish stance, Tong raised its price target to $485 from $475.
Overall, the street has a strong buy consensus rating on Ulta Beauty stock based on 13 buys and three holds. Ulta Beauty’s average price target of $476.73 implies 24.38% upside potential from current levels. Shares are down 7% year-to-date.
Activewear company Lululemon delivered impressive results for the first quarter of fiscal 2022 (ended May 1, 2022). Revenue jumped 32% to $1.6 billion, with comparable sales up 28%. EPS rose nearly 28% to $1.48 on an adjusted basis, although the company’s gross margin fell short of expectations due to increased air freight.
Lululemon’s first quarter performance reflects strong demand for its products despite supply chain issues and inflationary pressures. The company has seen robust traffic in its stores as well as digital channels.
Lululemon raised its full-year guidance as it expects continued momentum in its stores and digital sales. Overall, the company is optimistic about its future prospects with a focus on improving digital channels, men’s business and international sales.
Meanwhile, traffic to lululemon.com increased 36.06% in June compared to May. Additionally, Q2 FY22 quarter-to-date (May-June) website visits increased by 39.37% compared to the comparable period of Q1 FY22. Additionally, website traffic since the beginning of the quarter has increased by 55.92% compared to the prior year period.
After the first quarter print, BTIG analyst Camilo Lyon cut his price target for Lululemon stock to $420 from $491 to reflect reduced market multiples, but maintained a buy rating. Lyon noted first-quarter results were “strong” as the company beat revenue despite COVID-19 restrictions in China. Lyon believes the impact of the Beijing and Shanghai shutdowns should improve as those cities reopen.
Overall, the Street is cautiously bullish on Lululemon shares, with a Moderate Buy consensus rating based on 18 buys, six holds and one sell. Lululemon’s average price target of $399.88 implies 41.92% upside potential from current levels.
TipRanks’ Website Traffic Tool reveals encouraging website data for Ulta Beauty and Lululemon, which bodes well for their fiscal second quarter sales numbers. However, challenging macroeconomic conditions could impact consumer spending and dampen in-store and online sales at these retailers in the days ahead. Currently, Wall Street analysts are very bullish on Ulta Beauty shares, while they are cautiously bullish on Lululemon.