Retail exchange traded funds that have been hit hard by worries over a slowing economy were looking for a boost Wednesday from solid earnings from Ulta Salon, Cosmetics & Fragrance (NasdaqGS: ULTA).

The company late Tuesday said first-quarter net sales rose nearly 21% from the year-ago period.

“Ulta continues to defy gravity, posting strong results quarter after quarter, thus justifying its rich valuation,” said Jefferies analysts, who have a hold rating on the stock. “Management is doing a great job re-engaging the customer, taking market shares and growing square feet prudently.”

The stock represents nearly 3% of PowerShares Dynamic Retail (NYSEArca: PMR). Ulta shares climbed 12% before Wednesday’s bell.

Separately, Gap (NYSE: GPS) shares fell 2% in premarket trading Wednesday following a downgrade at Barclays.

Weak manufacturing and jobs reports are raising concerns about the health of the economic recovery. Retail ETFs have fallen nearly 10% from their mid-May peak.

“One of the groups that we believe is most vulnerable to the slowdown is the consumer discretionary sector, and more specifically U.S. retailers,” said Russ Koesterich, iShares global chief investment strategist.

“With the possible exception of very high end consumers, consumption is likely to continue to slow with the economy. Retail stocks are not priced for this slowdown, and if anything appear expensive relative to the broader market,” he wrote in a recent blog.


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