Ulta Beauty, Victoria’s Secret earnings add to strange economic snapshot

Maybe you’ve heard: The economy is…weird.

Every new bit of economic data paints an increasingly muddy portrait, and the latest update is no different. US consumers, formerly glum, are feeling a bit better: Consumer sentiment ticked up to 53.3 from a final reading of 51 in November, according to the University of Michigan’s preliminary reading released December 5. Heck, even Black Friday spending was up—to a record $11.8 billion, per Adobe Analytics—and we spent $14.25 billion online on Cyber Monday.

Keep in mind: Consumers are still decidedly gloomy: The index nosedived from a 71.7 reading in January. But that gloom is only weird because consumers are also clearly spending.

For evidence, look no further than the latest earnings reports from mall staples Ulta Beauty and Victoria’s Secret.

Ulta raised its full-year outlook, now anticipating net sales for the year to total $12.3 billion, a climb from its previous forecast of $12 to $12.1 billion. The beauty behemoth expects comparable sales, excluding new store openings, to climb in the 4.4% to 4.7% range, up considerably from its former outlook of 2.5% to 3.5%. This marks the second straight quarter that Ulta raised its sales and profit guidance, per CNBC.

“Despite a softening in overall consumer confidence in Q3, beauty engagement remained healthy,” CEO Kecia Steelman said on the company’s December 4 earnings call.

“Our insights suggest beauty consumers’ budgets are tight and they are focused on value,” Steelman said on the call. “Despite this, beauty enthusiasts tell us that they intend to spend on beauty for seasonal needs, affordable splurges, and gifts for loved ones. They are focused on replenishing their essentials and strategically making smart purchases around strong value.”

Value was seemingly less important at Victoria’s Secret, where Q3 sales climbed 9.2% YoY, even as the company offered fewer discounts and raised prices on some items, per the Wall Street Journal.

The lingerie and clothing retailer posted its highest quarterly sales growth in over four years, according to the Journal. Notably, given chatter about the K-shaped economy, sales growth spanned all income groups.

“We’re seeing growth across all cohorts, maybe a slight uptick in higher income customers on the growth side,” Victoria’s Secret CEO Hillary Super said on the company’s December 5 earnings call. “We are seeing consistent positive performance across all income cohorts, and we’re really pleased with that and feel like that’s a real proof point as we move forward.”

Analysts feel similarly. “Overall, there is a lot to like about Victoria’s Secret and there is a lot of potential for the company to regain market share in the quarters and years ahead,” Neil Saunders, managing director of GlobalData, told CFO Brew over email. “The creation of a more aspirational brand with a clearer lifestyle position should be something that locks in loyalty and growth.”