Ulta Beauty Q1 Earnings Call Highlights

Key Points

• Ulta Beauty posted strong Q1 results, with net sales up 11.1% to $3.2 billion and diluted EPS rising 15.5% to $7.74. Comparable sales increased 5.3%, helped by both higher ticket and more transactions.
• Growth was broad-based across channels and categories, led by strength in fragrance, haircare, makeup, skincare, wellness and services. Management said e-commerce grew in the mid-teens, while stores also contributed, and the company continues to gain share in prestige beauty.
• Margins and guidance improved as lower shrink boosted gross margin by 100 basis points to 40.1%, prompting Ulta to raise full-year EPS and operating profit outlooks. The company kept its sales guidance unchanged and plans to lift share repurchases to $1.5 billion.

Ulta Beauty NASDAQ: ULTA reported double-digit sales and earnings growth in the first quarter of fiscal 2026, with management citing broad-based gains across channels and major merchandise categories, stronger gross margin and continued traction from strategic initiatives including international expansion, marketplace, wellness and retail media.

Chief Executive Officer Kecia Steelman said the company entered the year focused on continuing progress after meeting its fiscal 2025 goals while optimizing the business “with financial discipline to deliver profitable growth.” She said Ulta Beauty’s core U.S. business remains “fundamentally strong,” and that newer growth initiatives are contributing to results.

For the quarter, net sales rose 11.1% to $3.2 billion from $2.8 billion a year earlier. Comparable sales increased 5.3%, driven by a 3.7% increase in average ticket and a 1.6% rise in transactions. Diluted earnings per share increased 15.5% to $7.74.

Chief Financial Officer Chris DelOrefice said total sales growth, excluding the impact of Space NK, was in the high single-digit range. Ulta Beauty opened 16 net new Ulta Beauty stores and one new Space NK store during the quarter. Other revenue rose $6 million to $62 million, primarily due to higher income from the company’s credit card program and commissions from UB Marketplace, partially offset by lower royalty income from its partnership with Target Corporation.

Comparable Sales Lifted by Stores and Digital

Steelman said performance was broad-based, with all channels and major categories contributing positively. She said Ulta Beauty gained share in prestige beauty and was roughly flat in mass beauty.

DelOrefice said February delivered low double-digit comparable sales growth as the company lapped its weakest comparable performance from fiscal 2025, while March and April were in the low single-digit range. Both stores and digital contributed to comparable sales growth, with e-commerce delivering mid-teen sales growth and comparable stores posting low single-digit sales growth.

Steelman highlighted continued momentum in e-commerce, supported by infrastructure investments and newer offerings such as expanded same-day delivery through Uber Eats and buy now, pay later options through Klarna. She also pointed to the launch of Ulta Beauty’s TikTok Shop, which is focused on “only at Ulta” exclusive brands. The company hosted its first TikTok shoppable livestream at its Ulta Beauty World event, which Steelman said generated more than 5 million impressions and “strong GMV.”

In response to an analyst question, Steelman said TikTok Shop is still in its early phases and is being used primarily for guest acquisition and marketing rather than as a main driver of e-commerce revenue. “We do see that it’s not just an e-com play,” she said, adding that the company also sees a halo impact for stores.

Fragrance Leads Category Growth

DelOrefice said fragrance was Ulta Beauty’s strongest category again in the quarter, delivering high-teen comparable growth and increasing from 11% to 12% of total revenue. Growth was driven by newness from luxury brands including YSL, Carolina Herrera and Valentino, as well as innovation from exclusive brand NOYZ.

Haircare delivered high-single-digit comparable growth, led by prestige haircare. DelOrefice cited strong performance from amika and Moroccanoil, while hair treatments and scalp regimens outperformed. Hair tools declined as the company lapped prior-year launches and saw softness in traditional tools.

Makeup comparable sales increased in the low-single-digit range, driven primarily by prestige makeup. DelOrefice pointed to guest engagement with Rare Beauty and newness from MAC, Kylie Cosmetics and Estée Lauder. Mass makeup was relatively flat. Skincare and wellness also delivered low-single-digit comparable growth, with strength in prestige skincare, mass skincare and wellness supplements partially offset by pressure in body care.

Services posted mid-single-digit comparable growth, supported by salon and specialty services, including ear piercing and makeup services.

Margins Improve as Shrink Declines

Gross margin increased 100 basis points to 40.1% of sales, primarily due to lower inventory shrink and higher merchandise margin. DelOrefice said the company’s efforts to reduce shrink delivered benefits across every category and region during the quarter. Merchandise margin increased primarily due to improving inventory turns and favorable category mix from Space NK.

SG&A expense increased 14.6% to $850 million, as planned, driven mainly by Space NK and investments supporting the Ulta Beauty Unleashed strategy. Operating profit rose 11.6% to $448 million, or 14.2% of sales. Net income increased 11.6% to $340 million.

The company ended the quarter with $221 million in cash and short-term investments and $145 million in short-term debt. Inventory increased 12.5% to $2.4 billion, reflecting new brands, the Space NK acquisition and 70 net new Ulta Beauty stores. On a per-store basis, inventory increased 1.4%.

Guidance Maintained for Sales, Raised for Earnings

Ulta Beauty maintained its fiscal 2026 net sales growth outlook of 6% to 7% and its comparable sales growth outlook of 2.5% to 3.5%. DelOrefice said the company expects net sales growth to be stronger in the first half, reflecting first-quarter performance and the benefit from Space NK.

The company raised its operating profit growth outlook and now expects operating profit to increase 6.5% to 9% for the year. DelOrefice said gross margin is expected to be roughly flat for the year, with higher inventory productivity, supply chain productivity and modest shrink improvement offsetting higher fuel costs and targeted investments.

Ulta Beauty also increased its diluted EPS guidance to a range of $28.36 to $28.80, representing growth of 10.6% to 12.3%. The updated guidance assumes a weighted average share count of about 43 million shares and a tax rate of approximately 24.5%. The company also reiterated its plan to increase fiscal 2026 share repurchases from $1 billion to $1.5 billion.

Strategic Initiatives Expand

Steelman said Ulta Beauty expanded its loyalty program to nearly 47 million members, up 4% year over year, and is using first-party data and technology improvements to enhance personalization. She said the company is using loyalty data to understand behavior, predict replenishment purchases and drive cart conversion.

The company’s international efforts included new stores in Mexico and the Middle East. Steelman said Space NK continues to deliver “healthy, well-balanced growth” in the U.K. and Ireland. In Mexico, Ulta Beauty opened two stores, including a location in Mexico City, while franchise partner Alshaya opened a third Middle East store at the Dubai Mall.

Ulta Beauty’s marketplace ended the quarter with more than 325 brands and over 8,000 SKUs. The company also continued to expand wellness offerings and UB Media capabilities, including a new YouTube enhanced measurement product.

Steelman also announced that the company is beginning work on a highly experiential Ulta Beauty location in Times Square, New York, expected to open in late 2027. She said the flagship store will combine technology, entertainment, convenience and brand activations to create immersive guest experiences.

About Ulta Beauty NASDAQ: ULTA

Ulta Beauty, Inc NASDAQ: ULTA is a U.S.-based specialty retailer and beauty services provider focused on cosmetics, fragrance, skin care, hair care, bath and body, and beauty tools. The company operates a dual-format business that combines brick-and-mortar retail stores with an e-commerce platform, offering a broad assortment of national, prestige and mass-market brands alongside its own private-label products. In many locations Ulta also provides full-service salon treatments, positioning the company as a one-stop destination for product discovery and in-store services.

The retailer's product mix spans color cosmetics, haircare and styling products, skin and body care, fragrance, and accessories, catering to a wide range of consumer preferences and price points.

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