Ulta Beauty (ULTA) delivered a standout second quarter, reporting earnings and sales that surpassed Wall Street expectations.
Earnings per share came in at $5.78, roughly 15% higher than consensus forecasts, while net sales rose 9.3% year-over-year to $2.79 billion. Comparable sales climbed 6.7%, marking the retailer’s highest growth rate in over a year, fueled by a 3.7% increase in customer traffic and a 2.9% rise in average ticket size.
Strength was broad-based across categories, with fragrance leading the way in double-digit growth, while skincare, wellness, makeup, and haircare also posted solid gains. Gross margin expanded to 39.2%, up nearly a full percentage point, reflecting stronger merchandise profitability and lower shrink. Ulta also highlighted the success of its loyalty program, which reached a record 45.8 million members, and the launch of 24 new brands, many exclusive to the chain.
Guidance Raised, But Headwinds Linger
Management lifted its full-year outlook, now expecting sales between $12.0 billion and $12.1 billion, compared with its prior $11.5 billion to $11.7 billion range. Profit guidance was also raised to $23.85–$24.30 per share, modestly above earlier projections. Operating margin is forecast to remain near 12%.
Despite the upbeat numbers, the company struck a cautious tone on the second half of the year. Comparable sales growth is projected at 2.5% to 3.5%, signaling a slowdown from the first half’s pace. Executives pointed to higher payroll costs, incentive compensation, and transaction-related expenses from its recent Space NK acquisition as factors that could pressure margins. Macroeconomic uncertainty and shifting consumer spending patterns also add a layer of risk.
Management lifted its full-year outlook, now expecting sales between $12.0 billion and $12.1 billion, compared with its prior $11.5 billion to $11.7 billion range. Profit guidance was also raised to $23.85–$24.30 per share, modestly above earlier projections. Operating margin is forecast to remain near 12%.
Despite the upbeat numbers, the company struck a cautious tone on the second half of the year. Comparable sales growth is projected at 2.5% to 3.5%, signaling a slowdown from the first half’s pace. Executives pointed to higher payroll costs, incentive compensation, and transaction-related expenses from its recent Space NK acquisition as factors that could pressure margins. Macroeconomic uncertainty and shifting consumer spending patterns also add a layer of risk.
Expansion and Investor Sentiment
Ulta is pushing ahead with expansion, adding 62 net new stores and completing the acquisition of UK-based Space NK, which provides a cost-efficient entry into international markets. The company also repurchased nearly 245,000 shares in the quarter as part of its ongoing buyback program.
Yet despite the strong earnings beat and raised guidance, shares fell more than 5% in the immediate aftermath of the report. The stock’s pullback reflects investor caution after a strong run-up to new 52-week highs, coupled with management’s tempered view on second-half growth.
Ulta is pushing ahead with expansion, adding 62 net new stores and completing the acquisition of UK-based Space NK, which provides a cost-efficient entry into international markets. The company also repurchased nearly 245,000 shares in the quarter as part of its ongoing buyback program.
Yet despite the strong earnings beat and raised guidance, shares fell more than 5% in the immediate aftermath of the report. The stock’s pullback reflects investor caution after a strong run-up to new 52-week highs, coupled with management’s tempered view on second-half growth.
Bottom Line
Ulta Beauty’s second quarter underscored the resilience of the beauty category, with robust sales momentum, margin expansion, and an upbeat full-year outlook. However, the tempered guidance for the second half and rising costs may keep investors on the sidelines in the near term. For long-term holders, Ulta’s growing brand portfolio, loyalty strength, and international foothold via Space NK could provide a durable runway for growth.
Ulta Beauty’s second quarter underscored the resilience of the beauty category, with robust sales momentum, margin expansion, and an upbeat full-year outlook. However, the tempered guidance for the second half and rising costs may keep investors on the sidelines in the near term. For long-term holders, Ulta’s growing brand portfolio, loyalty strength, and international foothold via Space NK could provide a durable runway for growth.
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