Despite a reported earnings beat, our Retail team’s “Best Idea” Short Ulta Beauty (ULTA) is down over 4% today.

In this clip from The Call @ Hedgeye, Retail analyst Arianna Petillo explains the beauty chain benefited from the additional “53rd week” in the retail calendar, while also calling out discounting and excessive store growth as red flags.

“This year, they’ve increased the number of brands that are participating in their sale, as well as the breadth of those brands,” she said. “In the past, they’ve said, ‘Here are three products from this one brand on sale today,’ now everything from this brand on sale. So, bigger, broader discounts to maintain that market share.”

“In the past year, they opened about 30 stores, this year they’re doubling that,” she added. “We don’t need to do this. The unit economics aren’t going to be there going forward, especially with these big stores they continue to want to open.”

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