Ulta Beauty has partnered with two members of Kardashian family, Kylie Jenner and Kim Kardashian, to sell their cosmetic lines.
Ulta Beauty is counting on the Kardashians to boost its holiday sales.
"We're excited to be participating in the rapid rise of influencer and celebrity-driven brands," said CEO Mary Dillon during an earnings call after Thursday's closing bell.
On November 17, the beauty chain kicked off a partnership with the reality star Kylie Jenner to sell her cosmetic brand Kylie Cosmetics in Ulta Beauty channels. And on November 25, Kim Kardashian, Jenner's half-sister, launched four Kim Kardashian West fragrances in Ulta Beauty stores across the country.
Kylie and Kim, who each have 120 million Instagram followers, have generated a lot of excitement about the launch when they announced the news on social media and appeared at Ulta Beauty stores.
"Our existing guests have responded very favorably to it," CMO David Kimbell told investors on Thursday. "It also has done a nice job driving in some new guests, in particular younger and diverse consumers. So we're really pleased with the effort overall."
The ever-present cycle of Kardashian and Jenner content and their wildly popular cosmetics lines have propelled the half sisters to eye-popping net worths. Kylie has an estimated net worth of $900 million and Kim's is about $350 million.
Wall Street has been waiting to see how the partnerships can drive traffic into Ulta stores and has lofty expectations for the holiday season, with analysts surveyed by Bloomberg expecting adjusted earnings of $3.59 a share — up more than 29% versus a year ago. However, the company said Thursday it only expects to earn between $3.50 and 3.55 a share, sending its stock down as much as 9.3% early Friday to $265.59 a share.
And Rupesh Parikh, an analyst at Oppenheimer, said he would take advantage of the pullback and keep Ulta Beauty as his top pick.
"Kylie Cosmetics is off to a strong start, and the company saw a modest improvement in the prestige cosmetics category, which bodes well for Q4 and beyond," Parikh said in a note out on Thursday.
"However, Gross Margins were below Street expectations driven primarily by a bigger than expected clearance headwind. At Q2 end, we observed a significant amount of clearance merchandise in-store, but we thought Q3 guidance had fully captured this headwind. We view this as a transitory headwind and not reflective of a lower margin profile for the company."
Parikh has an "outperform" rating and price target of $375 — 40% above where shares were trading.
Ulta Beauty was up 17% this year.