Ulta shares fall as CEO warns beauty demand is slowing

Ulta Beauty shares tumbled about 13% on Wednesday as CEO Dave Kimbell warned of cooling demand for beauty products.

Other stocks in the segment, including E.L.F. Beauty, Estee Lauder and Coty, also fell on Wednesday morning.

"We have seen a slowdown in the total category," Kimbell said at an investor conference hosted by JPMorgan Chase. "We came into the year — and we talked about this on our [earnings] call a few weeks ago — expecting the category to moderate. It has [had], as I said, several years of strong growth. We did not anticipate it would continue at the rate that it's been growing."

He said Ulta expected sales to grow in the mid single-digits for the year.

But Kimbell added that slowdown has been "a bit earlier and bit bigger than we thought." He said that trend has cut across price points and different beauty categories, but has been more significant in prestige makeup and haircare.

Beauty has stood out as one of the hottest categories in retail. Even as U.S. consumers watch their spending on discretionary items like clothing, they have continued to spring for makeup, skincare items and other beauty products. The strength of the category has inspired many retailers to make bigger bets on beauty.

Target has opened a growing number of Ulta Beauty shops in its stores. Kohl's plans to open Sephora shops in all of its locations. Macy's is expanding its beauty chain Bluemercury.

In his remarks on Wednesday, however, Kimbell said beauty shoppers aren't immune to feeling economic pressures, even in a category that's been red hot. He referred to dynamics that may cause them to pull back on spending, including rising credit card debt, geopolitical conflicts and the upcoming presidential election.

"It just creates this soup of