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Niche retailer Ulta Beauty (NASDAQ: ULTA) delivered a first-quarter profit beat and raised guidance last week, so don't ask Motley Fool Money host Chris Hill or Fool senior analysts Ron Gross and Jason Moser why investors didn't give its stock more applause.
In this segment of the podcast, they discuss what's going right at the company in terms of comps and revenue growth, its expansion plans, the strength of its loyalty program, and its surprising investments in artificial intelligence and augmented reality.
Then they pivot to a stock that's a falling knife: Gap (NYSE: GPS), which is trading near seven-year lows after a quarter of declining comp sales at all three of its chains -- yes, even Old Navy, which usually provides a bright spot for the long-suffering company. And as the Fools note, the CEO's excuses for Q1's poor performance only highlight some of the company's biggest strategic weaknesses.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
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This video was recorded on May 31, 2019.
Chris Hill: Ulta Beauty shares falling a bit on Friday despite first quarter profits coming in higher than expected. Jason, they also raised guidance for the full fiscal year. Are we not impressed?
Jason Moser: I'm very impressed! I mean, I remain impressed with this business. It's been one of the great investing stories of the past several years. I think that really is primarily due to CEO Mary Dillon, what she has been able to do in executing her vision since 2013. Shares have better than tripled under her watch. I don't think there's any reason why we shouldn't expect that to continue. We look at the comps growth, top line growth, all very strong thanks to a healthy mix of traffic and increasing average tickets. The plan is to open around 80 new stores this year. They are steering away from quarterly guidance, which I'm refreshed to see. I think they're focused a little bit more, we're just going to tell you what our strategy is for the year, we're not going to sit there and worry about the quarter to quarter, understanding that retail is a bit more difficult to predict on that granular a level, so to speak. They've really done a good job executing, I think, on the loyalty customer. They have now 33 million loyalty members. 90% of their store count is essentially off-mall, so they don't have to worry about mall traffic. And Chris, what if I told you -- Ron, too -- what if I told you Ulta is a tech company? Would you believe me?