Ulta Beauty Shares Rise on Strong Q2 Earnings and Raised Outlook
The beauty retailer surpassed revenue and profit forecasts, driven by strong consumer demand and strategic growth in skincare and fragrance.
Ulta Beauty reported strong second-quarter results that exceeded Wall Street's expectations, sending its shares up in after-hours trading. The company announced revenue of $2.79 billion and earnings per share of $5.78, prompting it to raise its full-year financial guidance.
The retailer's net sales saw a 9.3% increase from the same period last year, with comparable sales growing by 6.7%. This growth was fueled by a 3.7% rise in transactions and a 2.9% increase in the average amount spent per customer. The company's loyalty program also saw a 4% year-over-year increase, reaching a record 45.8 million members.
In a call with analysts, CEO Keisha Steelman credited the strong performance to the company's "Ulta Beauty Unleashed" strategy, which includes new brand launches, international expansion, and a focus on the growing wellness market. "We believe in the long term that wellness can be a billion-dollar business over time," Steelman stated, highlighting the company's strategic focus on this expanding category.
By category, fragrance was a top performer with double-digit growth, while skincare and wellness saw high single-digit growth. The makeup and haircare categories also posted mid-single-digit gains. The company's gross margin improved by 90 basis points to 39.2%, attributed to lower inventory shrinkage and more effective promotional strategies.
Looking ahead, Ulta Beauty raised its full-year guidance, now projecting net sales between $12.0 billion and $12.1 billion, with comparable sales growth of 2.5% to 3.5%. However, the company also noted that its partnership with Target will end in August 2026 and acknowledged potential risks from market saturation and broader macroeconomic factors.
The company's strategic initiatives also include the recent acquisition of UK-based beauty retailer Space NK and plans to open its first stores in Mexico and the Middle East. Additionally, Ulta plans to launch a new online marketplace in the third quarter to broaden its product offerings.