Friday was a relatively uneventful day on Wall Street, with the major benchmarks showing mixed results but never straying far from where they started the session. Without any big market-moving news, investors focused on the hurricane threatening the U.S. Gulf Coast, while earnings reports seemed to take on greater significance. Despite the generally quiet mood, some companies suffered bad news that sent their share prices down sharply. Ulta Beauty, Inc. (NASDAQ: ULTA), Big Lots, Inc. (NYSE: BIG), and Veeva Systems Inc. (NYSE: VEEV) were among the worst performers on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.
Ulta's beauty is fading
Despite producing strong revenue and earnings growth, shares of Ulta Beauty fell 9.1% after the company released its second-quarter financial report. The beauty specialist said that net sales jumped 20.6% to nearly $1.3 billion, while online purchases and sales from stores open at least 14 months increased by 11.7% compared to the prior-year quarter. E-commerce sales rocketed an incredible 72.3%. The company also increased its full-year guidance, now expecting same-store sales to grow by 10% to 11%, e-commerce sales growth of 50% to 60%, and earnings per share to increase "in the high twenties percentage range."
Despite what appeared to be a strong quarter, Ulta failed to meet investors' desire for even better results. The deceleration of comps versus the prior year may have dampened enthusiasm, and recent analyst concerns about slowing in the overall beauty market amid rising competition may have caused investors' mass exit.
Big Lots falls on tepid results
Big Lots stock tumbled nearly 6% before recovering and settling for a 1% decline after the company released its second-quarter earnings, even though it reported results that topped analysts' expectations. The discount retailer said sales grew 1.5% as the result of comparable-store sales that increased by 1.8%. Improvement in gross margins over the first half of the year and cost-cutting measures helped the company produce record profits of $0.67 per share that increased by nearly a third from year-ago levels.
In reflecting on the quarter, President and CEO David Campisi stated, "I'm very pleased with our second quarter results. In a challenging retail environment with the pressures of online competitors and changing consumer shopping behaviors, our ownable and winnable merchandise categories are resonating with [our core customer]". Investors seem particularly wary of the current retail environment and are not rewarding companies for lukewarm results.
Investors expect too much from Veeva
Shares of Veeva Systems plummeted 13.6% after the company reported results for its fiscal 2018 second quarter. The move seemed inconsistent with the apparently impressive financial report. The provider of cloud computing services to the healthcare industry announced that revenue increased 27%, resulting in net income that nearly tripled, though adjusting for one-time tax changes, profits increased by 61% compared to the same quarter last year.
Regarding the results, CFO Tim Cabral stated, "Our focus on customer success and consistent execution across the business drove another solid quarter of financial results above our guidance. We are investing aggressively in product innovation, sales, and services to fuel long-term growth."
With such impressive results, why the sell-off? Veeva still has a relatively high valuation, trading at 56 times its expected earnings, so investors may simply believe that the stock price has gotten ahead of its results.
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