Ulta’s Beautiful Q1 Earnings Report Points to More Gains Ahead

Key Points

• ULTA Beauty reported strong Q1 earnings after the close Thursday, sending the stock up 11% in Friday's session.
• The top- and bottom-line beat was driven by impressive comparable sales growth that far exceeded analysts' projections.
• While the current rally may be overbought, ULTA's guidance raise shows the company can manage an unpredictable macroeconomic landscape in the second half of 2025.

Customers weren't the only ones getting blowouts from Ulta Beauty Inc. NASDAQ: ULTA last week, as the company blew away expectations in its Q1 2025 earnings report, released Thursday after the final bell.

The top and bottom lines beat expectations, wowing analysts and investors alike, and shares soared more than 11% to close out the month of May. 

The stock is now up more than 30% since closing under $310 per share on March 13, but how much upside remains for the high-end beauty chain? Despite murky technicals and the constant threat of new tariffs, Ulta’s comparable sales growth and strategic initiatives should position the stock for a solid second half in 2025.

A Blowout Quarter Driven by Impressive Comp Sales Growth 

It's been a rocky few months for Ulta, and even Warren Buffett tapped out on his holdings a few months ago. However, a turnaround has been underway since March, and peeling back the earnings onion shows why investors pushed Ulta shares so much higher on Friday. The company reported $2.85 billion in net sales for the quarter ending May 3, a 4.5% year-over-year (YOY) increase that exceeded the analyst consensus of $2.79 billion. The $6.70 EPS number also smashed expectations by $0.97, but the real driver was surprisingly strong comparable sales growth.

Comparable sales include revenue from stores that have been open for at least 14 months, as well as online sales. Analysts had been expecting tepid comparable sales growth in Q1, as the company had stocked up on inventory for new initiatives, and sentiment surveys showed an increase in cost-conscious consumers. However, Ulta’s high-end clientele didn’t receive that memo, as comparable sales growth surged past expectations. 

Wall Street had projected comp sales growth of 0.2%, but the company reported a 2.9% YOY increase, driven by larger ticket sizes and a 0.6% increase in transaction volume. The impressive sales growth enabled the company to comfortably beat expectations despite actually seeing a slight margin decrease (39.1% gross versus 39.2% the previous year).

CEO Kecia Steelman reported fragrances were the best-performing category with double-digit sales growth, followed by single-digit growth from skincare. Services also saw single-digit sales growth, which is one area where Ulta has an advantage over competing retailers like Sephora, which don’t offer in-store services. While comp sales growth and a massive EPS beat were at the heart of the rally Friday, it’s the guidance update that could fuel the stock even higher.

A Strategic Guidance Raise Amidst Tariff Uncertainty

Like many consumer-facing companies, tariffs and uncertainty were hot topics during the call. CFO Paula Oyibo mentioned that while uncertainty continues to make guidance projections difficult, only 1% of the company’s merchandise comes from direct imports. While ULTA stock isn’t expected to face much margin pressure from tariffs, continuing economic uncertainty is likely to weigh on consumers, and executives sought to express an attitude of cautious optimism about the rest of the year.

CEO Steelman was quick to note that one quarter doesn’t equal a trend, but the 2025 FY guidance raise was strategic in tempering expectations while still raising estimates. The company increased the upper bound of its sales, comps, and EPS projections while keeping the lower bound range unchanged.

• Net Sales: $11.5 billion to $11.7 billion, up from $11.5 billion to $11.6 billion
• Comp Sales: 0% to 1.5%, up from 0% to 1%
• Diluted EPS: $22.65 to $23.20, up from $22.50 to $22.90

The expanding ranges give the company wiggle room should the economy deteriorate in the second half of the year, but also space for upside surprises if macro conditions improve. The Ulta Beauty Unleashed plan also will continue to be implemented throughout the year, which now includes a loyalty program with 45 million members and a marketing strategy riding the successes of a Super Bowl campaign, a partnership with Beyoncé, and the release of 19 new brands exclusive to Ulta stores.

Soaring Price Targets Covering Complicated Technicals

Analysts were out in force following Ulta’s earnings report, with no less than 10 firms boosting price targets following the impressive beat. Notable price target hikes came from Morgan Stanley, Robert Baird, and JPMorgan Chase, all of whom now project upside of 11% to 17% from the stock’s closing price on Friday.

Even firms with Neutral ratings like Piper Sandler and Citigroup boosted price targets, but the stock chart shows that some profit taking should be expected over the next few sessions.

The stock has retraced more than 50% of its decline from the all-time high close of $567 back in March 2024, and a Golden Cross is forming as the 50-day moving average breaches the 200-day moving average for the first time since January.

But the Relative Strength Index (RSI) has now popped over 78, hinting that the rally is overbought and investors may look to take profits following the blowout earnings report. If upward momentum wanes over the next few sessions, better entry points present themselves in the days or weeks ahead.