Citi analysts increased their price target for ULTA Beauty (NASDAQ:ULTA) from $345 to $390, maintaining a Neutral rating ahead of the company’s upcoming third-quarter earnings report.

The analysts projected third-quarter earnings per share (EPS) of $4.69, outperforming the Street consensus estimate of $4.49. This anticipated beat was attributed to slightly better-than-expected comparable sales at -1.2%, compared to the consensus of -2%, and improved gross margin performance.

Despite these positives, the company faced challenges from softer category trends and heightened competition from Sephora in Kohl’s stores, Amazon, and ULTA’s own presence in Target locations. These pressures made it difficult for the company to drive significant traffic growth during the year. However, with trends appearing stable in the third quarter compared to the second, the analysts expected management to narrow its fiscal 2024 EPS guidance range, removing the worst-case scenario. Fourth-quarter EPS guidance was forecast to align with consensus estimates.

ULTA had already provided preliminary fiscal 2025 guidance, projecting comparable sales below its 3-4% historical growth algorithm but still positive, with an EBIT margin between 11% and 12%. Stabilizing sales trends in the third quarter were viewed as a modest positive, signaling greater confidence in meeting fiscal 2025 targets.