Let's start with the moral of the Ulta story: Those risks of what can go wrong, including the old "priced for perfection" mantra—matter.
I've been raising red flags over this beauty retailer's stock for a long time.
A quarter ago, as I noted on TheStreet.com on Friday, new CEO Mary Dillion was saying how "solid" the company's long-term growth strategy is.
Now, Ulta's stock price plunged 20 percent on Friday, a day after Ulta posted disappointing results, and the company is undertaking a strategic review of its long-term growth strategy.
(Read more: Carnage in sales spreads past retailers)
Perhaps for good reason: The balance sheet has been flashing red at Ulta for quarters with various issues depending on the quarter, including high inventories, rising receivables and in the most recent quarter payable growth well below inventory growth—a sign that what's on the shelf isn't selling.
Or, put another way, it would appear the company didn't need to load up on new inventory last quarter after having stuffed its shelves with more than it could sell. In the prior quarter, among the concerns was that inventory growth outstripped revenue growth.
No wonder Ulta was forced to resort to more "promotional" activity during the most recent quarter, forcing it to suspect prior management's "mid-teen" margin forecast.
(Read more: Cramer: 'Throwing up my hands')
And talk about puzzling: Ulta projected fourth-quarter same-store sales of 7 percent to 9 percent versus earlier expectations for 6 percent, while forecasting sales below consensus. Disconnects like that warrant concern, and one analyst asked about it. In response, CFO Scott Settersten said, in effect, that while "stores are continuing to perform at the levels that we expect them to," they're not outperforming, either.
Reality: All in all, a situation where it looks like even lipstick won't help this, uh, company look better.
—CNBC Contributor Herb Greenberg is a commentator at TheStreet.com and editor of Herb Greenberg's Reality Check. Follow him on Twitter:@herbgreenberg and Google.
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