Ulta Beauty Q4 2025 Earnings Report

Ulta Beauty EPS Results

• Actual EPS: $8.46
• Consensus EPS: $7.13
• Beat/Miss: Beat by +$1.33
• One Year Ago EPS: $8.08

Ulta Beauty Revenue Results

• Actual Revenue: $3.49 billion
• Expected Revenue: $3.47 billion
• Beat/Miss: Beat by +$19.57 million
• YoY Revenue Growth: -1.90%

Ulta Beauty Announcement Details

• Quarter: Q4 2025
• Date: 3/13/2025
• Time: After Market Closes
• Conference Call Date: Thursday, March 13, 2025
• Conference Call Time: 4:30PM ET

Ulta Beauty (NASDAQ:ULTA), Inc. is a specialty beauty retailer operating under the Ulta Beauty brand. The company sells a broad selection of cosmetics, skincare, haircare, fragrance, bath and body products, and beauty tools across a range of price points. Its merchandise includes both established brands and private-label products, as well as prestige, mass-market and professional beauty offerings.

In addition to retail sales, Ulta Beauty provides services through salon locations within many of its stores, including hair, skin and brow services. The company also operates an e-commerce platform and offers a loyalty program, Ultamate Rewards, designed to support customer engagement across its stores and digital channels. Its operations primarily serve customers in the United States.

Ulta Beauty was founded in 1990 and opened its first store in Illinois. The company has since developed a nationwide store network and expanded its digital retail capabilities. Kecia Steelman serves as Ulta Beauty’s president and chief executive officer.

Ulta Beauty Q4 2025 Earnings Call Transcript

Key Takeaways

• Ulta delivered Q4 comps +1.5% and EPS rose 4.7% to $8.46, despite net sales decreasing 1.9% as inventory shrink improved and merchandise margins held firm.
• Fiscal 2025 outlook: net sales of $11.5–11.6 billion with flat to +1% comps, operating margin of 11.7–11.8% and EPS $22.50–$22.90, reflecting low-double digit operating profit decline due to strategic investments and inflationary cost pressures.
• The new “Ulta Beauty Unleashed” plan focuses on three priorities—driving core growth (brand building, personalization, digital acceleration), scaling accretive businesses (wellness, marketplace, international and media), and realigning the cost structure with $200–250 million in targeted savings over three years.
• Ulta is launching a closed marketplace in H2 2025 to expand its e-commerce assortment with exclusive beauty and wellness brands, integrated returns and loyalty point earning, aiming to diversify revenue streams with minimal inventory risk.
• The company expanded its store footprint with 60 net new stores and 100 Ulta Beauty at Target locations in 2024 and plans up to 200 net new openings over the next three years, with new stores continuing to deliver strong profitability.

Presentation

[Operator]

Good afternoon and welcome to Ulta Beauty's conference call to discuss results for the Ulta Beauty fourth quarter 2024 earnings results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. We ask that you limit yourself to one question and then re-enter Q for any additional questions. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kiley Rawlins, Vice President of investor relations. Ms. Rawlins, please proceed.

[Kiley Rawlins, VP of Investor Relations at Ulta Beauty]

Thank you, Alicia. Good afternoon, everyone. Thank you for joining us for a discussion of Ulta Beauty's fourth quarter and fiscal 2024 results. Hosting our call today are Kecia Steelman, Chief Executive Officer, and Paula Oyibo, Chief Financial Officer. Before we begin, I'd like to remind you of the company's safe harbor language. Many of our remarks today will contain forward-looking statements and will speak only as of today, March 13th, 2025. We refer you to our earnings release and SEC filings, where you will find a number of factors which could cause actual results to differ materially from those forward-looking statements. Kecia will begin our call with key highlights from our fiscal 2024 results and share our priorities for fiscal 2025. Paula will review our fourth quarter results in more detail and discuss our outlook for fiscal 2025.

[Kiley Rawlins, VP of Investor Relations at Ulta Beauty]

Following our prepared remarks, we will open the call for questions. Our call will be a little longer than usual this time, and to allow us to accommodate as many questions as possible during the hour scheduled for this call, we respectfully ask that you limit your time to one question. If you have additional questions, please re-queue. As always, the IR team will be available for any follow-up questions after the call. Before I turn the call over to Kecia, I want to share that both Paula and Kecia are fighting seasonal colds, and you may notice that their voices are a bit raspy this afternoon. With that, I'll turn the call over to Kecia. Kecia?

[Kecia Steelman, CEO at Ulta Beauty]

Thank you, Kiley, and good afternoon, everyone. I've had the pleasure of participating in these calls over the last few years as COO, and I'm excited to host my first call as CEO today. I appreciate your continued interest in Ulta Beauty and look forward to engaging with each of you. Today, I'll provide my perspective on the strength of our business, highlight where I focused my first 60 days as CEO, and share some of our 2024 achievements, and discuss how I'm thinking about our long-term growth opportunities and prioritizing our actions. It all starts with our mission. Simply put, there's magic in our mission. Every day, we seek to use the power of beauty to bring to life the possibilities that lie within each of us.

[Kecia Steelman, CEO at Ulta Beauty]

We have a unique opportunity to serve beauty enthusiasts at nearly every stage of life and in so many milestone moments, from their first date to their first job interview to their wedding day and so many moments in between. It is a mission uniquely suited for Ulta Beauty, one I feel very privileged to steward, and I know that no one can bring this mission to life the way we can. While I have been at Ulta Beauty for more than a decade, in my first 60 days as CEO, I made it a priority to spend meaningful time with our brand partners, guests, leadership team, and store associates to assess the state of our business, including where we are winning and where we have opportunities.

[Kecia Steelman, CEO at Ulta Beauty]

I've made organizational changes to streamline decision-making and align our teams around guest-centric goals, and I've leaned in where we have immediate opportunities to improve our execution, all through the lens of protecting and nurturing the culture that we believe makes us so special. I step into this role with incredible optimism because it's evident to me that the foundational advantages of our business model are strong and more relevant than ever. We have an unmatched breadth of assortment. We provide convenient and engaging omnichannel accessibility. We've built meaningful brand equity and a leading loyalty program. We have a strong financial foundation with stable operating cash flow, and we have more than 58,000 talented associates who are the heart of our company and represent our brand to our guests every day. The beauty landscape has fundamentally changed. Guest expectations continue to rise, and the pace of change is accelerating.

[Kecia Steelman, CEO at Ulta Beauty]

The competitive environment in beauty has never been more intense. For the first time, we lost market share in the beauty category in 2024. I am aware of the challenges that we face. Some of them are external, while others we own. Our business is bigger, and we've managed unprecedented category growth, and it is more complex as we've expanded our assortment and added new fulfillment choices like Buy Online, Pick Up In Store, Ship from Store, and same-day delivery. These capabilities are driving guest engagement and enhanced accessibility but have also resulted in execution challenges, particularly in product transitions and launches as we leverage new tools and processes. As a result, our in-store presentation and guest experience today are not as strong as we would like. These are opportunities well within our control.

[Kecia Steelman, CEO at Ulta Beauty]

We've identified specific gaps and we're working quickly to address, and I'm leaning in with our teams and brand partners to improve in-store presentation and inventory levels to deliver a better guest experience. It's clear to me that how we've operated must change to ensure that we capture the opportunities in front of us. We are focusing to ensure the guest is at the center of everything we do, and we intend to move faster, invest strategically, and optimize our business to achieve our long-term goals to drive profitable growth and market share. I'll dive into our long-term plan to achieve these objectives shortly. First, let's review the progress made in 2024. We're proud to have finished the year ahead of our expectations.

[Kecia Steelman, CEO at Ulta Beauty]

Paula will share more about our financial performance in a few minutes, but I want to highlight just a few of our key 2024 achievements, including enhancing our assortment through the relaunch of our Ulta Beauty Collection and the launch of 40 new brands, including exclusive brands like Exo Chloé, Noyz, WYN BEAUTY, and guest favorites like Charlotte Tilbury, ILIA, and Tatcha. Expanding accessibility through the opening of 60 net new stores, 100 new Ulta Beauty at Target shop-in-shop locations, and improved digital functionality. We also initiated plans to launch in Mexico and most recently announced our expansion into the Middle East in 2025.

[Kecia Steelman, CEO at Ulta Beauty]

Relaunching and growing our loyalty program 3% to a record high of 44.6 million members, driving significant gains in brand love and social engagement through compelling marketing and advertising efforts, and completing several transformational infrastructure investments, including the upgrade of our ERP system, digital store, and data ecosystem. Looking forward, we remain optimistic about the strength and resilience of the beauty category. We are mindful that consumers are navigating a dynamic macro environment, but we continue to expect healthy consumer engagement in beauty. While the category has normalized, we believe in the positive dynamics within the category, including a strong and growing connection between beauty and wellness, increased digital usage, a strong innovation pipeline, and consumer engagement. We expect these dynamics will support continued category growth in the low to mid-single-digit range over the next few years.

[Kecia Steelman, CEO at Ulta Beauty]

Now, I want to share how we're prioritizing our actions as we look to deliver a stronger guest experience and value to our stakeholders. The long-term strategies and financial targets that we outlined in our October Investor Day will continue to guide our path forward. To bring further focus to our efforts, we've aligned our plan around three main priorities. First, drive core business growth. Second, scale new accretive businesses. Third, realign our foundation for the future. We're calling our plan Ulta Beauty Unleashed. We recognize the need to move quickly, and we will be deliberate about pacing and prioritization to ensure that we can execute well and manage the short-term financial impact. Turning to our first priority, driving core business growth. We have a strong model and have identified significant opportunities to unlock further advantages.

[Kecia Steelman, CEO at Ulta Beauty]

This means continuing to push for excellence in all areas of our operations and strengthening our go-to-market approach, with the guest always at the center of everything we do. As I shared earlier, our teams are focused on opportunities to sharpen our execution and get back to the basics of running excellent stores that are easy to navigate, fully stocked, appropriately staffed, clean, and inviting. Beyond a return-to-best-in-class execution, in 2025, we will focus primarily on three initiatives to drive core growth: brand building, personalization, and digital acceleration. We will enhance our assortment through further investments in brand building, with a particular focus on exclusive emerging and established brands. We've kicked off 2025 with an exciting start with the announcement of several notable brand launches. These include fan-favorite Milk Makeup and the innovative K-beauty skincare brand Anua, exclusive to Ulta Beauty.

[Kecia Steelman, CEO at Ulta Beauty]

We are thrilled about the upcoming retail debut of Beyoncé's haircare brand Cécred, also exclusive to Ulta Beauty, which we will bring to life in unique ways through our salons. We will continue to build this momentum throughout the year and into 2026. We will deepen guest engagement through accelerated personalization, increasing automation and real-time content across digital channels. We will accelerate our digital efforts, delivering new enhanced features on our app and website aimed at elevating the guest experience. Second, we intend to scale new and accretive businesses to capitalize on key growth opportunities and ensure that we remain resilient in a rapidly changing world.

[Kecia Steelman, CEO at Ulta Beauty]

In 2025, we'll focus on four initiatives: accelerating our focus on wellness, launching a new marketplace, which will expand our e-commerce presence and allow us to offer a broader array of beauty and wellness products to our guests, build upon our international presence, and we also plan to introduce several key enhancements to our Ulta Beauty media offering, including new product innovation that provides brands with new ways to reach consumers, along with enhanced closed-loop measurements. Finally, turning to our third objective, realigning our foundation for the future. To successfully achieve our long-term growth ambitions, reassert our leadership position, and deliver value to our stakeholders, we must optimize ways of working and streamline our cost structure. It starts by focusing on the heart of our company, our teams, and our culture.

[Kecia Steelman, CEO at Ulta Beauty]

At our core, I believe that we have the very best talent and culture in retail, and we're taking steps to reenergize this critical competitive advantage by optimizing the ways of working and positioning our leadership team to meet the needs of our evolving business. We've made several organizational changes to accelerate decision-making, remove friction, and align teams and resources around guest-centric goals. This includes taking steps to optimize our corporate and field support staff, reducing management layers, and shifting resources to higher growth-driving areas. Additionally, I've made several changes to our executive leadership team to better focus on our key priorities. To support a stronger guest experience in stores, we've centralized all store functions under Amiee Bayer-Thomas, an Ulta Beauty veteran who will serve in the newly created role of Chief Retail Officer.

[Kecia Steelman, CEO at Ulta Beauty]

With this change, Amiee will add real estate and store design to our existing scope, which includes leadership of our store teams and the loss prevention organization. To align our transformation efforts with our cost optimization initiatives, Mike Maresca, who joined our team in 2023, will add enterprise-wide responsibilities to his scope and will now serve as Chief Technology and Transformation Officer. Amiee and Mike are transformational leaders who are guest and associate-centric and results-driven, and they will continue to impact our organization with broader scope that results in our strategic focus and vision for the future. To facilitate a stronger omnichannel assortment of all things beauty and wellness, we've brought our digital and e-commerce teams together with our merchandising and planning teams under Monica Arnaudo, who now serves as Chief Merchandising and Digital Officer. As you may know, Monica announced her plans to retire later this spring.

[Kecia Steelman, CEO at Ulta Beauty]

Monica has been a great partner to me, and her vision has elevated our assortment, enhanced our brand partnerships, and driven meaningful market share growth. I look forward to sharing an update on her successor very soon. We have also promoted Kelly Mahoney to Chief Marketing Officer to advance our brand, personalization, and loyalty efforts. Kelly is uniquely qualified for this role. Her understanding of the beauty enthusiast is unmatched, and in her 10 years with Ulta Beauty, she has played a pivotal role in evolving and expanding the Ulta Beauty Rewards loyalty program to more than 44 million members. Additionally, Jodi Caro, our General Counsel, Chief Risk and Compliance Officer, has shared her intention to retire later this spring after more than 10 years of service to Ulta Beauty. An energetic and passionate leader, Jodi has been a true business partner, and I want to thank her for her contributions.

[Kecia Steelman, CEO at Ulta Beauty]

After conducting a nationwide search, I'm pleased to announce that Rene Cazares, previously Chief Legal Officer from Academy Sports + Outdoors, will be joining our team next month as Chief Legal Officer. Rene and Jodi will work together to ensure a seamless transition. Today, I've shared our plan to make important guest-facing investments, which are necessary to improve our competitiveness and re-accelerate long-term share growth. These investments will pressure profitability in 2025, but we believe they are critical to driving long-term sustainable growth in a competitive, innovative category. However, we cannot sustain this level of annual expense growth and achieve our long-term profitability goals. Discipline management of our cost structure is an ongoing area of focus. As we've shared at our investor day in October, we are targeting cost optimization of $200 million-$250 million over the next three years.

[Kecia Steelman, CEO at Ulta Beauty]

Since 2019, we've delivered $550 million in cost savings from optimization efforts across merchandising, real estate, and operational process improvements. I am confident that we can deliver our future cost saving targets. We are in the early stages of these efforts and will provide regular updates on our progress. Our Ulta Beauty Unleashed plan positions us to reassert our leadership position, building on our strengths by fueling growth of our core business, scaling new accretive businesses that further our differentiation, and realigning our foundation for the future. While sales growth is the ultimate performance indicator, we are closely tracking a series of KPIs for each of our focus areas, including in-store conversion, member growth and retention, and app engagement. Over the coming quarters, we will provide more details of our plan and updates on our progress. In closing, I am incredibly optimistic of the future of Ulta Beauty.

[Kecia Steelman, CEO at Ulta Beauty]

2025 will be an important year as we improve our execution and lay the groundwork to deliver on our long-term financial targets, including net revenue growth of 4-6%, mid-single-digit operating profit growth, and low double-digit EPS growth. It will take time for us to fully see the impact of our efforts, but with our exceptionally talented team leading the charge, I believe we are taking the right steps to drive profitable growth and market share, leadership, and beauty and wellness over the long term. I will turn it over to Paula for some specific quarter results and our financial outlook before we take some questions. Paula?

[Paula Oyibo, CFO at Ulta Beauty]

Thanks, Kecia, and good afternoon, everyone. Today, I will start with a discussion of our fourth quarter and full-year financial results and then provide color on our expectations for fiscal 2025.

[Paula Oyibo, CFO at Ulta Beauty]

Starting with the fourth quarter, we deliver better-than-expected performance across the P&L, reflecting stronger revenue growth, lower inventory shrink, better merchandise margin, and continued financial discipline and expense management. Net sales for the 13-week quarter decreased 1.9% to $3.5 billion compared to $3.6 billion in the 14-week period last year. During the quarter, we opened nine new stores, closed one store, and remodeled five stores. Comparable net sales for the 13-week period increased 1.5%, driven by a 3% increase in average ticket, partially offset by a 1.4% decrease in transactions. Other revenue declined $6 million to $71 million, primarily due to lower income from our credit card program. Now, looking at the cadence of sales through the quarter, comp sales decreased in November and accelerated in December, reflecting the shift of Thanksgiving and a compressed holiday season. Growth moderated in January, primarily reflecting adverse winter weather.

[Paula Oyibo, CFO at Ulta Beauty]

Sharing more detail on our holiday performance, comp sales for the combined November and December period increased in the low single-digit range, reflecting the cross-functional efforts of our team to deliver for our guests this holiday season. Our marketing and social strategies drove strong omnichannel traffic. Our enhanced fulfillment options provided increased convenience and accessibility for guests. Our curated assortment of new and exclusive core products, balanced with value-focused holiday kits, drove strong engagement. With additional staffing, new tools, and unique events, our store teams delivered great guest experiences, and our DC teams flexed up to ensure our stores recovered quickly post-holiday. From a channel perspective, we saw growth across both store and digital channels. E-commerce sales for the quarter increased in the mid-single-digit range, and comp store sales were modestly positive, an improvement from the third quarter trend.

[Paula Oyibo, CFO at Ulta Beauty]

Turning to sales performance by category, fragrance was our strongest category, delivering double-digit comp growth primarily driven by newness, men's fragrance, and multi-branded gift sets. Comp sales in the skincare category increased in the mid-single-digit range, as strong growth in body care was partially offset by decreases in prestige and mass skincare. New brands, including Sol de Janeiro, Naturium, and Tatcha, delivered strong growth for the quarter, but this strength was partially offset by lower sales from brands which have experienced increased distribution or lacked strong social engagement last year. Comp sales in the hair category increased in the low single-digit range, primarily due to newness and product exclusives in hair tools, as well as healthy guest engagement with key promotional events. The makeup category experienced a mid-single-digit decrease, largely driven by mass makeup, reflecting softness in brands which lacked strong newness and social engagement last year.

[Paula Oyibo, CFO at Ulta Beauty]

Finally, services delivered low single-digit comp growth, driven by increases in salon and specialty services, including ear piercing and makeup services. For the quarter, gross margin increased 50 basis points to 38.2%, primarily due to lower inventory shrink. Our investments in protective fixtures, training, and labor, combined with enhanced inventory management processes, are delivering results. For the full year, shrink as a percentage of sales was 20 basis points lower than fiscal 2023. Additionally, gross margin in the quarter benefited from favorable channel mix due to lower e-commerce shipping costs and higher merchandise margin, mostly offset by higher supply chain costs, lower other revenue, and deleverage of store fixed. Moving to expenses, SG&A was $816 million, $5 million lower than last year, largely due to lower corporate overhead, partially offset by higher store payroll and benefits.

[Paula Oyibo, CFO at Ulta Beauty]

Corporate overhead was lower for the quarter, driven primarily by lower consulting expense, as we anniversaried implementation costs associated with key infrastructure investments. The increase in store payroll and benefits was driven by higher healthcare costs, increased payroll hours per store to support the guest experience during holiday, and higher average wage rates. As a percentage of sales, SG&A increased 30 basis points to 23.4%. Depreciation increased 12% to $70 million for the quarter, compared to $63 million last year, primarily reflecting new store and supply chain investments. Operating profit was $516 million, approximately flat with last year. As a percentage of sales, operating margin increased 30 basis points to 14.8% of sales, and diluted earnings per share increased 4.7% to $8.46. I am proud of how our teams persevered in quarter and Q4 to deliver these results, positioning us to close out the year better than expected.

[Paula Oyibo, CFO at Ulta Beauty]

I want to express my sincere appreciation to all our Ulta Beauty associates for their continued commitment and focus on serving our guests while continuing to manage our business thoughtfully. To recap the full year, net sales increased 0.8% to $11.3 billion. Comp sales increased 0.7%, driven by a 1.1% increase in average tickets and a 0.4% decrease in transactions. We opened 60 net new stores, relocated two stores, and remodeled 41 stores. Gross margin deleveraged 30 basis points to 38.8%. SG&A expense increased 4.2% to $2.8 billion. Operating profit was 13.9% of sales, compared to 15% of sales in fiscal 2023, and diluted EPS decreased 2.7% to $25.34 per share. Moving to the balance sheet and our capital allocation priorities. We ended the quarter with $703 million in cash and cash equivalents.

[Paula Oyibo, CFO at Ulta Beauty]

Total inventory increased 13% to $2 billion, primarily reflecting additional inventory to support new brand launches, the impact of 60 net new stores, and investments to improve merchandise and stocks post-holiday. From a category perspective, most of the inventory growth is attributable to investments made to support fragrance and body care, which are key growth categories. Turning to capital allocation, our healthy business model generated more than $1.3 billion in cash from operations, enabling us to reinvest $374 million to support future growth and return $1 billion in capital to shareholders through our stock buyback program. Since launching our share repurchase program in 2014, we've effectively returned $6.8 billion to shareholders while continuing to invest in strategic growth drivers. Turning now to our outlook for 2025.

[Paula Oyibo, CFO at Ulta Beauty]

The operating environment continues to be dynamic, and as we navigate ongoing consumer uncertainty, we believe it is prudent to take a cautious approach to our guidance for fiscal 2025. Additionally, as we shared at our investor meeting in October, we are planning fiscal 2025 to be a transition year, and our view has not changed. For the year, we expect net sales will be between $11.5 billion and $11.6 billion, with comp sales growth in a range of flat to up 1%. We expect operating profit will decrease in the low double-digit range as we begin to implement our Ulta Beauty Unleashed plan and continue to manage inflationary headwinds and lap one-time expense benefits in 2024. Reflecting our expectation for revenue growth, we expect operating margin will be between 11.7%-11.8% of net sales.

[Paula Oyibo, CFO at Ulta Beauty]

To share more color into the primary drivers of the expected operating margin pressure, the largest driver of the deleverage is expected inflationary pressure on wages, healthcare, and transportation rates, as well as the impact of investments we've made over the last few years, including greater utilization of software as a service and higher depreciation. The second largest driver is pressure from the investments Kecia discussed earlier, including brand building, personalization, digital acceleration, wellness, and marketplace. Incentive comp will also be a headwind as we lap lower incentive compensation in 2024. We expect these pressures will be partially mitigated by lower inventory shrink, supply chain optimization, benefits from UB Media, and targeted cost savings. We are confident the investments we plan to make this year are critical to strengthening our long-term market position, and we are tracking our spend and returns closely to ensure we deliver expected benefits.

[Paula Oyibo, CFO at Ulta Beauty]

We also recognize the operating environment will evolve, and we will continue to be thoughtful about pacing and prioritization. For modeling purposes, we expect gross margin for the year will deleverage, primarily driven by store occupancy costs and supply chain costs, partially offset by lower shrink. We expect SG&A will increase approximately 10% for the year, driven primarily by our strategic investments and advertising, as well as increased store payroll and benefits. Reflecting these assumptions, we anticipate diluted EPS for the year will be between $22.50 and $22.90 per share. Finally, we plan to spend between $425 million and $500 million in CapEx, including approximately $250 million to $275 million for new stores, remodels, and merchandise fixtures, $125 million to $165 million for supply chain and IT, and $50 million to $60 million for store maintenance and other. We expect depreciation for the year will be between $290 million and $300 million.

[Paula Oyibo, CFO at Ulta Beauty]

In closing, we operate in an innovative and expanding category. We intend to continue to invest to strengthen our competitive position and drive growth while simultaneously looking for opportunities to reduce costs and increase efficiency. While we view 2025 as a transitional year, we are confident the actions we are taking will enable us to deliver our long-term financial goals and drive value creation. I will now turn the call over to our operator to moderate the Q&A session.

[Operator]

Thank you. We will now be conducting a question-and-answer session. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tool will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

[Operator]

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first call comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed.

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

Good afternoon, everyone. Congratulations, Kecia, on your new role. With the unleashed plan that you discussed today, with almost, it seems like, a greater sense of urgency to address and re-excite the core store base, how are you thinking about the in-store experience and guest presentation and what needs to change? As that target of 4-6% sales growth that's out there on the long term, how do you think about getting back there? Is the investor day targets, which is a transitional year in 2025, given the unleashed plan and what you need to do, should we expect a transitional year in 2026?

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

How do you frame it? Paula, is there any cadence or shaping to 2025 that we should be mindful of? Thank you.

[Kecia Steelman, CEO at Ulta Beauty]

Thank you, Dana, for the question. Yeah, we're very excited about the Ulta Beauty Unleashed plan. What we did was we took the long-term strategies from our financial targets that we outlined at our investor day, and we developed this plan to really simplify our focus for our internal team so we can help them really prioritize and drive around the three areas of our business: driving core business growth, building new accretive businesses, and realigning the foundation. It's not necessarily new information since we had our investor day. It's really how we're approaching it internally. What we found is when the teams clearly understand their objectives and their mission, the execution level continues to raise.

[Kecia Steelman, CEO at Ulta Beauty]

I would say the other nuance is the change that we've made with the transformation office, now reporting into Mike Maresca, having full visibility end-to-end and stage-gating our investments so we can see and track how the investments are performing and also holding our teams internally accountable gives us great confidence in that we can continue to drive the execution in 2025 and continue to move the business forward. Paula, go ahead.

[Paula Oyibo, CFO at Ulta Beauty]

Sure. Hi, Dana. What I would say is we continue to expect, as I said, 2025 to be the transition year. We are not anticipating anything beyond that to be considered a transitional period. Regarding your questions regarding comp, so expecting comp from flat to up one, what I would say is we're not planning any wide variation in comp quarter to quarter.

[Paula Oyibo, CFO at Ulta Beauty]

The environment continues to be dynamic with ongoing kind of consumer uncertainty and such. We have set this level at a comp level that we are confident we will be able to achieve. We do recognize, though, that given Q1 and Q4 were our strongest quarters in 2024, Q2 and Q3 likely have the greatest opportunity from a comp perspective. Hope that helps.

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed.

[Lorraine Hutchinson, Analyst at Bank of America]

Thank you. I was just hoping for an update on how you are thinking about the fleet. I saw the 60 new openings this year. I know you have a goal for 200 over the next three. Can you talk about the locations of these stores, the sizes, and then expectations for performance of those new stores that you roll out?

[Kecia Steelman, CEO at Ulta Beauty]

I would say that we have a very robust process around our real estate site selections. The rich member data that we have, we can see opportunities where there's infill opportunities, and there's also opportunities where we can continue to expand in the areas that we already have stores because there's additional market share opportunities. We see these being a mix of formats going forward, very balanced in our approach. We don't really see that we're leaning one way or another on any of the formats in terms of size. I'd say it's more of our traditional plan of new store launches and rollouts for the future.

[Paula Oyibo, CFO at Ulta Beauty]

The additional point to add is that we continue to see strong new store performance in our 2024 class, and so anticipating similar results with our 2025 class.

[Lorraine Hutchinson, Analyst at Bank of America]

Thank you.

[Operator]

Thank you.

[Operator]

Our next question comes from the line of Michael Binetti with Evercore ISI. Please proceed.

[Michael Binetti, Analyst at Evercore ISI]

Hey, guys. Thanks for taking our question. Kecia, you've been at Ulta Beauty a long time, and you've developed a unique knowledge of what's made it successful in the past, but the industry dynamics that led to a lot of those successes have obviously changed. You take over at a point in time with a lot of cross currents in what's a very resilient category historically. I guess Ulta Beauty's experience through that period has been slower sales and perhaps some share losses that you mentioned earlier on. You've been a part of the early innings of resetting the strategy with the analyst day plan that you referenced, and the company has reset the near-term margins lower to allow for some investment.

[Michael Binetti, Analyst at Evercore ISI]

What do you see as the most important things to rebuild your moat around the business given the competitive dynamics today? Is it through assessment or, sorry, through assortment, or do you need to make meaningful changes to loyalty, serious changes to the supply chain? What are the critical pieces to get right today that are different than the past?

[Kecia Steelman, CEO at Ulta Beauty]

Thank you, Michael, for the question. I would say that the retail environment, especially in beauty, has always been competitive, but the competitive intensity is continuing to accelerate. There is not just one area, I believe, of the business that you can lean on.

[Kecia Steelman, CEO at Ulta Beauty]

You have to really be balanced in your approach, which is why we've called our Ulta Beauty Unleashed plan really focusing on all of the parts of the business that make us not only uniquely special at Ulta Beauty, but are also the drivers of leveraging our strengths and supercharging them. For example, brand building. We know how to build brands, but leaning into building brands in a different and unique way in a 360 approach in partnership with those brands. Marketplace, allowing us to have an even broader assortment in a lower-risk way to offer broader assortments to our guests. Personalization, I could go on and on because they all really matter. The beauty of this business is when we hit on all cylinders, it's like magic. You're right. When I go back to my early days, we were hitting on all of those cylinders.

[Kecia Steelman, CEO at Ulta Beauty]

I do truly believe that by focusing on these parts of the business, along with getting back to basics and the everyday running of the business in an exceptional way, is what's going to really take us to the next level. I mentioned in my comments too of really keeping the guest at the center of everything we do. That is really what this Ulta Beauty Unleashed plan is. It's about keeping the guest at the center of everything we do, along with closely aligning our associates at the same time because our associates are the best representation of our brand because they're the ones that are interacting every single day with the guests that are coming

[Michael Binetti, Analyst at Evercore ISI]

in our stores. Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Adrienne Yih with Barclays. Please proceed.

[Adrienne Yih, Analyst at Barclays]

Good afternoon. Congratulations, Kecia.

[Adrienne Yih, Analyst at Barclays]

I wanted to go to my one question is going to be on the new categories that you talked about, kind of to spur growth over the long haul. Can you talk about where you're underpenetrated? I think when we were at the analyst day, you and I talked about kind of health and wellness as an emerging secular trend on top of beauty. If you could talk about some of the opportunities you see in the near term and then over the longer-term horizon. Thank you very much.

[Kecia Steelman, CEO at Ulta Beauty]

You cut out a little bit on the beginning, but I think you were asking about wellness. Wellness is a category that's large and growing, and we see consumer engagement and product innovation just continuing to expand. Today, we have dedicated space, but it's limited in our stores. It's about 8 feet in most of our store locations.

[Kecia Steelman, CEO at Ulta Beauty]

are new categories that we really feel like we can lean into, like nutrition, mindfulness, everyday care, and sleep. It's all really, really important. In 2025, where we're going to be looking at leaning into is really it starts with our leadership. We've created a new dedicated commercial leader and team that are committed to just driving wellness at Ulta Beauty. We're also looking at expanding our wellness assortment to at least 20 new brands in short order. We are looking at designing and implementing an expanded in-store presentation in select stores. We're continuing to lean in on this. We do think that there's just this mergence between beauty and wellness, and we'll be able to share more in the coming months. We've got the plan and the team, and we're ready to now start moving in the right direction to bring this to life.

[Kecia Steelman, CEO at Ulta Beauty]

I appreciate the question.

[Adrienne Yih, Analyst at Barclays]

Great. Thank you very much. Best of luck.

[Operator]

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed.

[Simeon Gutman, Analyst at Morgan Stanley]

Hi, Kecia. It's Simeon. How are you doing? My question is, back at analyst day, I was a little surprised that there was more focus on new store growth as opposed to looking back at the fleet and enhancing the current fleet. I wanted to get your take on it. What can you do with the fleet? I'm surprised there isn't more of a refresh. Do you agree with that perspective? Can the focus of the business tilt in 2025 or 2026 to focus more on remodels? Thanks.

[Kecia Steelman, CEO at Ulta Beauty]

Yeah. I'm going to take the start of it, and I'll ask Paula to weigh in on some remodels.

[Kecia Steelman, CEO at Ulta Beauty]

What I shared earlier is that we do have such great data around where there's opportunities for us to continue to take share in the United States. That is where we're leaning in and putting additional new stores. We don't want to overbuild our store fleet. We've seen that before in retail. I don't want to be a part of that by any means at Ulta Beauty. When we're looking at new stores, we're very confident that we can continue to take share and open those new stores in a very profitable way. In fact, one of the largest assets that we have are our stores in and of itself. I appreciate your question around, can you make the stores that you have currently in place even more profitable? I would say yes.

[Kecia Steelman, CEO at Ulta Beauty]

We're continuing to lean in and look at ways in which we can continue to drive even more profitability out of our existing store fleet. Wellness is one of those areas that we're leaning into where you look at, can we trade out categories that are less productive and give this space to a new and emerging type category? Also looking at assortment, are there opportunities for us to continue to refine assortment to make sure we're looking at the tail? It's something that is really, really important. Keeping the guest experience front and center. Our stores are just so important for us to be able to continue to refresh our brands and the brands that we're bringing in.

[Kecia Steelman, CEO at Ulta Beauty]

The one thing that's changed, even in my 10 years here at Ulta Beauty, is that beauty is becoming a little bit more fashionable and in and out, and you've got to be on the cutting edge and the trend, and you've got to be really flexible with the space that you have dedicated to brands in the store. That's one of the things that we've really been leaning into with our renovations is having more universal-type fixtures so we aren't locked into bigger boutiques, etc. It gives us a lot of flexibility to bring brands in and out. Paula, did you want to add anything about renovations?

[Paula Oyibo, CFO at Ulta Beauty]

The only thing that I would add is just a reminder. We're expecting to remodel 40-45 stores this year.

[Paula Oyibo, CFO at Ulta Beauty]

The other thing to keep in mind is that we actually touch our fleet quite often with our merch as we are bringing in newness into our stores and launching brands and lifting certain categories. We do a really good job of keeping our fleet up and updated and fresh. Also, as we shared at our analyst day, I mean, our fleet profitability is very, very high, and we watch it very closely to continue to maintain that level of profitability.

[Simeon Gutman, Analyst at Morgan Stanley]

Thank you. Good luck.

[Operator]

Thank you. Our next question comes from the line of Steven Forbes with Guggenheim Securities. Please proceed.

[Steven Forbes, Senior Managing Director Equity Research at Guggenheim Securities]

Good evening, Kecia and Paula.

[Steven Forbes, Senior Managing Director Equity Research at Guggenheim Securities]

I wanted to follow up on market share and certainly appreciate the optimism around the unleashed plan, but curious if you could maybe frame or reframe how you guys are thinking about planning for some of the factors that may be out of your control, right? Cannibalization and distribution point expansion. Then specific to cannibalization impacts, now that we've sort of had more time past here, can you maybe give us your renewed thoughts around how long it takes a cannibalized store to recover and return to sort of company average comp profiles?

[Paula Oyibo, CFO at Ulta Beauty]

Maybe, Steve, I'll start, and Kecia, if there's more you add. As we've talked about, this has been an unprecedented period over the last several years with the increased points of distribution, particularly for Prestige Beauty.

[Paula Oyibo, CFO at Ulta Beauty]

We expect competitive pressure will continue to impact our fleet, but we expect the impact will be lower than what we experienced in 2024. At the end of 2024, more than 90% of our stores have been impacted by one or more competitive openings in recent years, and two-thirds of them impacted by multiple competitive openings. The good news is that we are seeing an improving trend in the performance of the stores that were impacted by physical points of distribution the last several years. We believe both the lapping of the new openings and the impact of our operational efforts are contributing to the improving trend. Layer on top of that, the actions we're taking as a part of the Ulta Beauty Unleashed plan, we feel confident that it will still take some time, but things are moving in the right direction.

[Steven Forbes, Senior Managing Director Equity Research at Guggenheim Securities]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Mark Altschwager with Baird. Please proceed.

[Mark Altschwager, Analyst at Baird]

Good evening. Thanks for taking my question. Kecia, congratulations. With respect to the revenue guidance up 2-3%, how does that compare to your underlying assumptions for the beauty category in 2025? Ulta did lose a bit of share in 2024. In the prepared remarks, you talked about spending more on marketing. What is baked into the margin guidance in terms of promotions and other actions to defend or recapture market share in 2025? Thank you.

[Kecia Steelman, CEO at Ulta Beauty]

All right. I will start with talking a little bit about the category trends. Yes, the consumers are navigating a dynamic macro environment, but we continue to expect the healthy consumer engagement with beauty. While the category did slow in 2024, it continued to grow in the low to mid-single digit range.

[Kecia Steelman, CEO at Ulta Beauty]

Part of that growth was driven by the growing connection between beauty and wellness, which is where we're leaning into. There was a healthy innovation pipeline, and we feel good about our innovation pipeline also for 2025, and also just having strong overall engagement within the category. While others have commented, and there's a lot going on clearly out there in the world today, January and February were impacted by a combination of some weather and fires in Los Angeles and heightened economic and geopolitical volatility. I would say it's too early for us to know if this is really structural or a reflection of some of the weather disruptions or some of the things that were happening because we were lapping some strong growth also from last year. Paula, do you want to lean into the second part of the question?

[Paula Oyibo, CFO at Ulta Beauty]

Sure.

[Paula Oyibo, CFO at Ulta Beauty]

Specific to promotions and how we're thinking about promotions as it relates to our sales and our comp guide, what I would say is that underpinning our expectation is that the promotional environment will continue to be rational. What we saw last year in 2024 is that the promotional environment increased. It still, in our opinion, was rational. We are planning 2025 to be rational as well. We do understand that things could change. If the consumer demand deteriorates, requiring or needing having others to be more leaning in more heavily with promotions, that is something that we would contend to, but we'll continue to evolve based on the environment and consumer demands. One thing that I will say is that we continue to lean into our capabilities to optimize both the timing and execution of our promotional offers.

[Paula Oyibo, CFO at Ulta Beauty]

We will, of course, balance discounts with value messaging and quality and leverage our member insights to really focus on executing productive targeted offers and continue to optimize our promotional effectiveness. I would just maybe add, in this environment, we're really focused on controlling what we can control.

[Mark Altschwager, Analyst at Baird]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Michael Lasser with UBS. Please proceed.

[Michael Lasser, Analyst at UBS]

Good evening. Thank you so much for taking my question. Kecia, in your remarks, you noted that the competitive intensity of the category continues to increase. Was that in reference to both online as well as offline competitors? Does that mean that the cost of doing business within the beauty category increases, which should diminish the potential that Ulta will be able to scale its margins over time as it goes through this transition period this year? Thank you very much.

[Kecia Steelman, CEO at Ulta Beauty]

Thank you for the question, Michael. I will say, as I mentioned earlier, it's always been a competitive category. There are more players that are continuing to lean in. I do believe that our Ulta Beauty Unleashed plan is really designed to accelerate and amplify our differentiation and what makes us unique. We are really refocusing to ensure that the guest is at the center of all of our decisions. We intend to move faster and invest with purpose, and we are really looking to optimize our business. It is really in those go-to-market areas. It is about brand building, digital acceleration, personalization, marketplace, and wellness. This is what we do. A lot of players are playing in the world of beauty, but this is what Ulta Beauty does.

[Kecia Steelman, CEO at Ulta Beauty]

The fact that we have everything from mass to prestige to luxury and everything in between, and we just need to continue to focus on our strengths and lean into them, it will help us continue to build that moat. Paula, if you want to talk about the margin.

[Paula Oyibo, CFO at Ulta Beauty]

Yes. Michael, as we think about some of the commentary we shared in October with Investor Day, we talked about that this continues to be a competitive category. In order to be a market share, have growth, and be a market share gainer in this competitive and innovative category, we think it's important to continue to reinvest in the business to fuel growth. That is why we shared the guidance that we gave: 4-6% top-line growth, and that we expected from a margin perspective to be able to maintain margins around 12%.

[Paula Oyibo, CFO at Ulta Beauty]

That reflects the current environment from our lens.

[Michael Lasser, Analyst at UBS]

Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Michael Baker with D.A. Davidson.

[Operator]

Please proceed.

[Michael Baker, Managing Director and Senior Research Analyst at D.A. Davidson]

Thanks. I guess I'll ask about tariffs. Remind us your exposure now to Europe, potentially seeing 200% tariffs, and presumably that they'll retaliate. If you could sort of break down your exposure by different parts of the world. There were definitely some price increases, as I recall, in 2017 and 2018, but the timing was a little skewed. I think you took price before you even saw the margin, so it was before you saw the price increases, so it was a margin enhancer early on. Can you remind us how that price versus cost dynamic played out last time and what you expect this time? Thank you.

[Kecia Steelman, CEO at Ulta Beauty]

Yep. Thank you, Michael, for the question.

[Kecia Steelman, CEO at Ulta Beauty]

What I would say, like everyone, we are monitoring the ever-changing landscape as it relates to tariffs. We do not believe the exposure—well, we do not know the exact exposure our brand partners have upstream. Only about 1% of our shipments over the last 12 months were direct imports. Our exposure is relatively limited. I would say beyond merchandise, we have some exposures with areas like fixtures and lighting and supplies from a store perspective. Largely from a merchandising perspective is our Ulta Beauty Collection brand. Again, like I said, relatively limited. Similar to how we successfully navigated in the 2018, 2019 period, our teams are staying very close to the evolving situations, and we are continuing to navigate it and scenario plan both for our business as well as with our brand partners.

[Michael Baker, Managing Director and Senior Research Analyst at D.A. Davidson]

Thank you.

[Operator]

Thank you.

[Operator]

Our next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed.

[Ike Boruchow, Analyst at Wells Fargo]

Hey, good afternoon. Thanks for taking the question. I think, Paula, can I have two clarifications? First, on the promo, or I'll call it the merch margin line for this year, you said rational similar to 2024, but the merch margin trend in the first—sorry, in the first half of last year was very different than the back half. You were much more stable. I think you were flat to up. You were down decently in the first half. Just to compare it to 2024 is tough. Would you compare it to the back half of 2024? Just some clarity on how to think about merch for the year would be helpful. I'm sorry, just a clarification on the comp outlook: zero to one.

[Ike Boruchow, Analyst at Wells Fargo]

I think you said similar every quarter, but Q4 and Q1, I guess the low end of the zero to one. Just trying to make sure I understand how to think about the first quarter comp relative to your commentary. Thanks.

[Paula Oyibo, CFO at Ulta Beauty]

Okay. I'm going to answer the last question around the comps, and then I might need you to give me what you're asking for on promo and merch margin if you were speaking of 2024 or 2025. On the comp for 2025, what I shared is, yes, flat to one for the year, and we are not planning a wide variation in comp quarter to quarter. An additional color I was given is that because Q1 and Q4 were our strongest quarters in 2024, I would expect Q2 and Q3 to have the greatest opportunity from a comp perspective.

[Ike Boruchow, Analyst at Wells Fargo]

Got it.

[Ike Boruchow, Analyst at Wells Fargo]

Just to go back—yeah, thank you. Basically what I was asking on the merch margin for 2025, you said similar rational promo pricing in 2025, which is what you said you saw in 2024. I was just saying your merch margins were down in the first half and flat to up in the back half. Are you saying similar to what you saw in the back half of 2024? Just because it was very volatile through the year, which is a similar way to ask is just, are your merchandise margins planned flat to up, or should they decline again based on what you're saying?

[Paula Oyibo, CFO at Ulta Beauty]

No, I appreciate the question, Ike.

[Paula Oyibo, CFO at Ulta Beauty]

I'm probably not going to get into specific expectations around merch margin for the year, but the point that I was making about promotionality is that we expect promotions to be rational this year, and that is assumed within our guidance. If I go back to gross margin for 2025, we expect gross margin will deleverage primarily driven by store occupancy costs and supply chain costs, partially offset by lower shrink. Obviously, gross margin is impacted by the comp of zero to one, which is causing us to deleverage on many of our fixed costs.

[Ike Boruchow, Analyst at Wells Fargo]

Got it. Thank you.

[Paula Oyibo, CFO at Ulta Beauty]

I think, Alicia, we have time for one more question.

[Operator]

You got it. Our last question comes from the line of Ashley Helgans with Jefferies. Please proceed.

[Ashley Helgans, Senior VP at Jefferies]

Hi. Thanks so much for squeezing me in.

[Ashley Helgans, Senior VP at Jefferies]

Any more color you can share on the new marketplace and just how it differs from your current online platform? And then, Paula, you called out that the brands that have increased distribution have been drags. Just curious how you're planning to combat that headwind. Thanks.

[Kecia Steelman, CEO at Ulta Beauty]

Thanks, Ashley, for the question. I'll start. Yes, what we're seeing is that our beauty guest needs, they are continuing to evolve, and we want to be able to expand our offerings in a lower-risk way. This really enables us to do that with marketplace. We have thousands of brands that want to come work with us. What we're doing is we're opening a closed marketplace. It is invitation-only to enable a curation site. That actually went up live today. Brands can actually start signing up officially today.

[Kecia Steelman, CEO at Ulta Beauty]

We're expecting a mix of new and established and emerging brands that are really focused around beauty and wellness. One of the other things that we're really focused on is that our members will be able to earn points on their marketplace purchases and that the guests will be able to return their marketplace purchases to our stores. We are trying to make this as seamless as possible for our guests. The plan is to launch this in the back half of 2025. We have a dedicated team that we're building around selling and operations to operate this model. We do not expect it to be material in 2025, and we are going to continue to share more details as they become available. Paula?

[Paula Oyibo, CFO at Ulta Beauty]

Sure. Hi, Ashley.

[Paula Oyibo, CFO at Ulta Beauty]

On your question about what we're doing to combat potentially some specific brands, the declines, generally, I guess I would zoom out and say, really, when we think about where there's opportunity for us from a business, newness, we continue to work with our existing brands and new brands to bring newness into our assortment. Even for brands who've had expanded distribution, our merchant teams do a wonderful job with finding and launching specific and exclusive newness that's unique to Ulta. That helps. One of the key priorities within our Ulta Beauty Unleashed plan is brand building, which is focused on building and growing brands and increasing the level of brands that are exclusive in our assortment. Those are the key strategies that we have that would help with that.

[Ashley Helgans, Senior VP at Jefferies]

Great. Thanks, Paula.

[Kecia Steelman, CEO at Ulta Beauty]

I would just like to thank everyone for joining us today. To wrap up, I'd also like to thank our loyal guests, our trusted brand partners, and dedicated associates for their engagement and support. I'm confident in the team's ability to reignite our momentum while making wise investments to set the business up for long-term performance. Thanks to you all for your interest in Ulta Beauty, and I look forward to meeting and connecting with you in person in the coming months. Thank you, and have a good evening.

Participants

Executives

• Kiley Rawlins, VP of Investor Relations
• Kecia Steelman, CEO
• Paula Oyibo, CFO

Analysts

• Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group
• Lorraine Hutchinson, Analyst at Bank of America
• Michael Binetti, Analyst at Evercore ISI
• Adrienne Yih, Analyst at Barclays
• Simeon Gutman, Analyst at Morgan Stanley
• Steven Forbes, Senior Managing Director Equity Research at Guggenheim Securities
• Mark Altschwager, Analyst at Baird
• Michael Lasser, Analyst at UBS
• Michael Baker, Managing Director and Senior Research Analyst at D.A. Davidson
• Ike Boruchow, Analyst at Wells Fargo
• Ashley Helgans, Senior VP at Jefferies