These days, consumer discretionary retailers fall into two categories -- those that beat inflation and those that lag. Ulta Beauty belongs in the first category.

This week, the beauty stores company reported solid third-quarter financial results. Net income came at $274.6 million or $5.34 per share. In addition, net sales came in at $2 billion, up from $2.0 billion a year earlier, with comparable sales up 14.6%.

Moreover, Ulta raised the outlook for the fiscal year 2022, shaking off concerns over a challenging macroeconomic environment. As a result, it sees an EPS between $22.60 and $22.90, up from the previous outlook of $20.70 and $21.20.

"Our third quarter results reflect the sustained resilience of the beauty category and the strong emotional connection and loyalty we have cultivated with our guests," Ulta CEO Dave Kimbell said in a statement accompanying the release of the third-quarter financial results.

"I am confident our business model, which offers unmatched breadth, value, and convenience, is even more relevant today and unlocks opportunities to further delight guests as we continue to lead the beauty category."

One of these opportunities is partnering up with other retailers by opening stores in stores, as it did in the last couple of years with Target.

Wall Street liked what it saw in Ulta's numbers, sending its shares sharply higher in after-hours trading on Thursday. Thus far this year, Ulta's shares are up 14.5%, compared to a 15% decline in the overall market shares (S&P500).

John Zolidis of Quo Vadis Capital, a long-term follower of the company, thinks Ulta is an excellent retailer riding favorable trends for its product categories. Nonetheless, he observes that some of these trends are cyclical, raising doubts about whether they will continue in a challenging macroeconomic environment.

"We believe the question from here is whether the resurgence in makeup is sustainable and, secondly, whether self-care (running +70% per average store vs. pre-pandemic levels) will revert," he told IBT in an email. "In a review of loyalty program metrics (which we view as a leading indicator), we see modestly slowing growth in program members per store with still-rising spending per average member."

Kunal Sawhney, CEO of Kalkine Group, expressed similar skepticism. He sees downside risks ahead in the current inflationary situation and the Fed's steep interest rate hikes to tame inflation.

"Given the job cuts announced by top tech companies and more such moves expected by other companies, consumer spending on beauty products may take a hit in the near term," he told IBT. "So, the company may find it difficult to sustain the momentum in revenue growth for the next two-three quarters."

Moreover, Zolidis is concerned about valuation.

"From a valuation perspective, ULTA shares are currently trading at an EV / FY23 EBITDA multiple of 13x, consistent with the stock's 10-year average," he said. "The company is beating numbers, and this should continue, which supports multiple expansion.

"On the other hand, square footage growth is lower than in the past, comparisons will be difficult in FY23, and ULTA again suggests EBIT contraction, with growth deceleration likely next year. "