3 Beauty Stocks Outperforming in a Tough Market

StockNews

Sally Beauty Holdings

-2.88%

Beauty stocks have shown remarkable resilience in a challenging market, outperforming many of their peers despite economic headwinds. Through innovation, strong brand loyalty, and targeted marketing, luxury and prestige brands in the beauty sector continue to capture market share.

Therefore, investors might consider adding three fundamentally stable beauty stocks, The Estée Lauder Companies Inc. , Ulta Beauty, Inc. , and Sally Beauty Holdings, Inc. , to their watchlists.

Emerging trends such as clean beauty, anti-aging solutions, and sustainable formulations are where beauty companies are mostly tapping in. The growing demand for sustainable, personalized, and scientifically-backed solutions drives brands to invest in advanced research and technology. This relentless focus on innovation attracts new customers and drives revenue.

Additionally, with the rise of smartphones and internet access, AI technology is emerging as a promising solution for diagnosing skin conditions. Advancements in AI technology focus on utilizing new techniques and incorporating more variables to detect fine lines, wrinkles, hydration levels, and sun damage and monitor skin conditions. The AI in the beauty and cosmetics market is set to be worth $4.4 billion in 2025. Also, the global cosmetics market is anticipated to reach $445.98 billion by 2030, growing at a CAGR of 6.1%.

Considering these conducive trends, let’s examine the fundamentals of the above-mentioned retail stocks in detail:

The Estée Lauder Companies Inc. (EL)

EL is a manufacturer, marketer, and seller of skincare, makeup, fragrance, and hair care products worldwide. It offers its products under the Estée Lauder, Clinique, Origins, M·A·C, Bobbi Brown Cosmetics, La Mer, Aveda, Jo Malone London, TOM FORD, Too Faced, Dr.Jart+, and The Ordinary brands.

On February 26, EL announced a collaboration with biotechnology company Serpin Pharma to deliver significant skincare ingredients to advance longevity benefits for consumers around the world. The collaboration will focus on how Serpin’s anti-inflammatory research will accelerate EL’s transformative product innovation. This partnership will bring novel technology and advance EL’s Transformative innovation agenda.

On January 29, EL collaborated with the Massachusetts Institute of Technology (MIT) and its laboratory, led by the renowned Dr. Robert Langer, to fuel ingredient innovation in the development of biodegradable materials for cosmetic applications and explore new solutions to combat the effects of visible light from the sun. This partnership aims further to forge EL’s leadership in green chemistry and innovation.

The stock’s trailing-12-month gross profit margin of 73.15% is 103.9% higher than the industry average of 35.87%. Similarly, its 12.49% trailing-12-month levered FCF margin is 99.8% above the industry average of 6.25%.

In the fiscal second quarter that ended on December 31, 2024, EL’s net sales amounted to $4.00 billion. Its adjusted operating income for the quarter came in at $462 million, while its adjusted earnings per share stood at $0.62.

Analysts expect EL’s revenue for the fiscal year (ending June 2025) to be $14.44 billion and its EPS to $1.38. For the fiscal year 2026, its revenue is expected to increase 2.6% year-over-year to $14.82 billion, while its EPS is forecasted to settle at $2.35, indicating a 70.7% improvement over the prior year.

Over the past three months, the stock has surged marginally, closing the last trading session at $73.28.

EL’s stance is apparent in its POWR Ratings. The stock has a B grade for Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Among the 59 stocks in the B-rated Fashion & Luxury industry, it is ranked #52. Click here to see the additional EL ratings (Growth, Value, Momentum, Stability, and Sentiment).

Ulta Beauty, Inc. (ULTA)

ULTA operates as a specialty beauty retailer offering branded and private label beauty products, including cosmetics, fragrance, haircare, skincare, bath, and body products, through its Ulta Beauty stores, shop-in-shops, website, and mobile applications.

In terms of the trailing-12-month net income margin, ULTA’s 10.58% is 151.2% higher than the 4.21% industry average. Similarly, its 20.18% trailing-12-month ROTA is 425.7% higher than the industry average of 3.84%. Also, its trailing-12-month ROCE of 55.18% compares to the industry average of 11.48%.

ULTA’s net sales for the fiscal third quarter that ended on November 2, 2024, increased marginally year-over-year, amounting to $2.53 billion. Its gross profit amounted to $1.01 million, increasing 1.4% year-over-year. In addition, the company’s net income amounted to $242.18 million. Also, its net income per share came in at $5.14, representing a marginal increase from the last year.

Street expects ULTA’s EPS for the fiscal first quarter (ending April 2025) to decline marginally year-over-year to $6.22. Its revenue for the same period is expected to register a 3.2% growth from the prior year, settling at $2.81 billion. In addition, it surpassed the consensus revenue and EPS estimates in three of the trailing four quarters, which is promising.

ULTA shares have surged marginally over the past three months to close the last trading session at $366.73.

ULTA’s fundamentals are reflected in its POWR Ratings. It is ranked #29 out of 37 stocks in the B-rated Specialty Retailers industry.

Beyond what is stated above, we’ve also rated ULTA for Growth, Value, Momentum, Stability, Sentiment, and Quality. Get all ULTA’s ratings here.

Sally Beauty Holdings, Inc. (SBH)

SBH operates as an international specialty retailer and distributor of professional beauty supplies. The company operates through two segments: Sally Beauty Supply and Beauty Systems Group.

On February 6, SBH’s segment Beauty Systems Group signed a distribution agreement with K18, one of the most admired hair care brands in the professional channel. The partnership will launch on April 1, 2025, in all Beauty Systems Group stores in the United States and Canada, including the e-commerce channel. This partnership with a high-efficacy brand should boost sales and customer growth.

SBH's trailing-12-month ROCE and ROTA of 29.39% and 6.49% are 156.1% and 69.2% higher than their respective industry averages of 11.48% and 3.84%. Likewise, its trailing-12-month asset turnover ratio of 1.37x is 37% above the industry average of 1.00x.

During the fiscal first quarter that ended on December 31, 2024, SBH’s net sales increased marginally year-over-year, amounting to $937.89 million. Its gross profit amounted to $476.84 million, increasing 2.1% year-over-year.

Its operating earnings improved by 45.1% from the prior year’s value to $100.32 million. In addition, the company’s non-GAAP net earnings rose 6.9% from the year-ago value to $44.85 million, while its EPS stood at $0.43, up 10.3% year-over-year.

The consensus revenue estimate of $3.72 billion for the fiscal year 2025 (ending September 2025) remains stagnant year-over-year. The consensus EPS estimate of $1.83 for the ongoing quarter indicates an 8.1% improvement year-over-year.

The stock has declined 4.2% intraday to close the last trading session at $9.18.

SBH’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has an A grade for Value and a B for Growth and Quality. Within the same Specialty Retailers industry, it is ranked #8 out of 37 stocks. Click here to see SBH’s ratings for Momentum, Stability, and Sentiment.

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EL shares were trading at $73.32 per share on Thursday afternoon, up $0.04 (+0.05%). Year-to-date, EL has declined -2.21%, versus a 0.03% rise in the benchmark S&P 500 index during the same period.

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Ross Stores Shows Strength Before Q4 Earnings: Is a Surprise in Store?

Zacks

Abercrombie & Fitch

-6.10%

Dick's Sporting Goods

Ross Stores, Inc. ROST is expected to register a decline in its top and bottom lines when it reports fourth-quarter fiscal 2024 earnings on March 4, after market close. The Zacks Consensus Estimate for earnings is pegged at $1.65 per share, suggesting a 9.3% drop from $1.82 reported in the year-earlier period. The consensus mark has been unchanged in the past 30 days.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Ross Stores, Inc. Price, Consensus and EPS Surprise

Ross Stores, Inc. price-consensus-eps-surprise-chart | Ross Stores, Inc. Quote

The consensus estimate for quarterly revenues is pegged at $5.95 billion, indicating a decline of 1.2% from the year-ago quarter’s reported figure.

ROST has a trailing four-quarter earnings surprise of 8.5%, on average. In the last reported quarter, the company posted an earnings surprise of 6.5%.

Earnings Whispers for ROST Stock

Our proven model conclusively predicts an earnings beat for Ross Stores this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Ross Stores currently has an Earnings ESP of +2.26% and a Zacks Rank of 3.

Key Factors to Influence ROST’s Q4 Results

Ross Stores’ quarterly performance is expected to have been bolstered by strong growth across its merchandise categories, driven by positive customer responses across both banners. The company’s ability to offer value-driven bargains continues to resonate with price-conscious consumers, particularly in an environment where discretionary spending remains cautious.

Ross Stores is expected to benefit from its off-price retail model to attract value-focused shoppers. Additionally, its micro-merchandising strategy optimizes product allocation, ensuring inventory aligns with regional consumer preferences and supports margins. The company’s proven business model is likely to drive higher traffic, robust same-store sales growth and improved profitability.

Consistent execution of store expansion plans is also expected to have supported top-line growth. These efforts have focused on expanding penetration in existing and new markets, with contributions from new stores anticipated to be reflected in the to-be-reported quarter’s results.

However, Ross Stores has been cautious regarding the ongoing macroeconomic and geopolitical uncertainties and persistent inflation, which have been impacting consumer spending on essentials like housing, food and gasoline.

On its last reported quarter’s earnings call, management emphasized that ROST’s core customer base, primarily low-to-moderate-income shoppers, has been burdened by high costs for necessities. These inflationary pressures have been limiting discretionary spending and reducing the demand for the company’s brands.

As a result, Ross Stores expects total sales to drop 1-3% year over year in the fiscal fourth quarter. It forecasts an operating margin of 11.2-11.5%, down from the 12.4% recorded last year. This view reflects a soft merchandise margin as the company has been increasing the penetration of premium branded merchandise, somewhat offset by lower incentive and freight costs.

Our model expects a year-over-year sales decline of 1.7% and a comps rise of 2.4% for the fiscal fourth quarter.

ROST’s Stock Price Performance & Valuation Picture

From a valuation perspective, Ross Stores is trading at a discount relative to industry benchmarks. The company has a forward 12-month price-to-earnings of 20.66x, which is below the five-year high of 79.52x and lower than the Retail-Discount Stores industry’s average of 32.53x.

The recent market movements show that ROST’s shares have declined 10.4% in the past three months against the industry's 2.7% growth.

ROST Stock Performance in the Past Three Months

Stocks With Favorable Combination

Abercrombie & Fitch ANF currently has an Earnings ESP of +0.59% and a Zacks Rank of 3. The company is likely to register growth in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.6 billion, which indicates an increase of 7.8% from the figure reported in the prior-year quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ANF’s EPS is pegged at $3.49, suggesting an increase of 17.5% from the year-ago quarter’s reported figure. The consensus mark for earnings has moved down 0.6% in the past seven days. ANF has delivered a trailing four-quarter earnings surprise of 14.8%, on average.

DICK'S Sporting Goods, Inc. DKS currently has an Earnings ESP of +0.98% and a Zacks Rank of 2. DKS is expected to have reported a decline in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.75 billion, which indicates a 3.3% decrease from the figure reported in the year-ago quarter.

The consensus estimate for DICK'S fiscal fourth-quarter earnings is pegged at $3.47 per share, down 9.9% from the year-ago quarter. The consensus mark for earnings has moved up 0.6% in the past 30 days. DKS has delivered a trailing four-quarter earnings surprise of 11.4%, on average.

Ulta Beauty, Inc. ULTA has an Earnings ESP of +1.62% and a Zacks Rank of 2 at present. ULTA is likely to have registered a decline in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.46 billion, which indicates a 2.6% decline from the figure reported in the year-ago quarter.

The consensus estimate for Ulta Beauty’s fourth-quarter earnings is pegged at $7.06 per share, indicating a 12.6% decline from the figure reported in the year-ago quarter. The consensus mark for earnings has moved down by a penny in the past 30 days. ULTA has delivered an earnings beat of 6.2%, on average, in the trailing four quarters.

This article originally published on Zacks Investment Research (zacks.com).

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Nordstrom Gears Up for Q4 Earnings: Will Investors See a Surprise?

Zacks

Dick's Sporting Goods

-4.73%

Ulta Beauty

-4.78%

Nordstrom, Inc. JWN is expected to report a decline in both top and bottom lines when it reports its fourth-quarter fiscal 2024 results on March 4, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $4.29 billion, which indicates a decline of 2.9% from the prior-year reported figure.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Nordstrom, Inc. Price, Consensus and EPS Surprise

Nordstrom, Inc. price-consensus-eps-surprise-chart | Nordstrom, Inc. Quote

The consensus mark for earnings has decreased by a penny in the past seven days to 90 cents per share, indicating a decline of 6.3% from 96 cents reported in the year-ago period.

In the last reported quarter, the company surpassed earnings estimates by 43.5%. Nordstrom has delivered a trailing four-quarter negative earnings surprise of 30.03%, on average.

Earnings Whispers for JWN Stock

Our proven model conclusively predicts an earnings beat for Nordstrom this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Nordstrom has an Earnings ESP of +14.99% and a Zacks Rank of 2 at present.

Factors to Consider Ahead of JWN’s Upcoming Results

Nordstrom has been enhancing its digital capabilities to drive growth and improve customer engagement. The company continues to leverage technology to optimize operations, refine inventory management and create seamless shopping experiences. These initiatives are expected to aid performance in the to-be-reported quarter.

Additionally, Nordstrom’s fourth-quarter results are expected to reflect gains from its digital-first approach to better serve customers, expand market share and achieve profitable growth.

The holiday season is a crucial selling period for retailers across the world. In January 2025, Nordstrom reported strong results for the holiday season, reflecting a total company net sales increase of 4.9% and a comparable sales increase of 5.8% for the nine-week holiday period ending Jan. 4, 2025. The robust holiday results exceeded the company's cautious expectations, driven by increased consumer engagement and successful sales strategies during the holiday season.

Based on the stronger-than-anticipated holiday shopping performance across its stores and online platforms, JWN has raised its fiscal 2024 sales outlook. The revised fiscal 2024 also suggests stronger revenue performance in the fourth quarter, driven by better-than-expected holiday sales and momentum across its store banners and digital platforms.

The company expects revenue growth of 1.5% to 2.5% for fiscal 2024, including retail sales and credit card revenues. Revenues for the Nordstrom Rack banner are projected to grow 7.6% year over year, offsetting the expected decline of 0.9% for the Nordstrom banners. However, the company expects the absence of the 53rd week this year to hurt the top line by 135 basis points.

Our model predicts revenues to decline 5.3% year over year at Nordstrom and remain flat year over year at Nordstrom Rack in the fourth quarter. For fiscal 2024, revenues are expected to decline 0.9% at Nordstrom and improve 7.6% at Nordstrom Rack.

For fiscal 2024, the company expects comparable sales growth of 2.5-3.5% versus the 52 weeks in fiscal 2023, compared with its prior outlook of 1% to 2% growth.

Nordstrom has been making efforts to enhance customer experience through faster delivery. Hence, the company remains focused on operational optimization. JWN continues seeking additional efficiencies in flow and improved productivity through inventory management initiatives. These upsides are likely to have aided fourth quarter results.

However, Nordstrom has been facing ongoing challenges such as competitive pressures, high operating costs, inflation and evolving consumer spending trends. The company has been experiencing elevated selling, general and administrative (SG&A) expenses in recent quarters, primarily driven by higher labor costs and a charge related to accelerated technology depreciation. The elevated SG&A expenses are expected to have slightly weighed on margins in the to-be-reported quarter.

JWN’s Price Performance & Valuation

JWN shares have exhibited an uptrend, increasing as much as 10.5% in the past six months. The stock has outperformed the broader industry’s growth of 4%.

From a valuation standpoint, JWN offers an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings of 12.05x, the industry’s average of 18.32x, the stock offers compelling value for investors seeking exposure to the sector.

JWN Stock's Performance in the Past Six Month