Ulta Beauty reported second-quarter earnings that exceeded Wall Street expectations, though shares fell 4% in early trading as investors focused on margin compression and integration costs tied to the Space NK acquisition.
The beauty retailer posted adjusted earnings per share of $6.55, up 6.2% from the $6.17 consensus estimate. Revenue reached $3.00 billion, beating the $2.98 billion forecast. Comparable sales rose 3.8%, outpacing the 2.3% consensus and moderating just 150 basis points from the prior quarter’s 5.3% growth. Industry data from Circana and Nielsen showed the broader beauty market decelerated by 300 basis points sequentially.
Fragrance sales led category growth with high-teen percentage gains, while haircare posted high single-digit increases, driven by brands such as amika and Moroccanoil. Makeup showed low single-digit growth, led by prestige labels Rare Beauty and MAC. The company’s revenue mix shifted slightly, with fragrance’s share expanding from 11% to 12%.
Despite the top-line beat, operating margins declined from 11.5% in fiscal 2024 to a projected 9.3% in fiscal 2026, reflecting integration costs from Space NK and investments in the company’s "Unleashed" growth initiatives. Promotional activity remained "flattish to slightly higher" compared with prior periods, according to company checks.
Ulta raised its full-year adjusted EPS guidance to a range of $28.70 to $29.00, up from the prior $28.20 to $28.60. The company also increased its share buyback authorization from $1 billion to $1.5 billion, having repurchased $555 million in the first quarter. As of the report, Ulta’s shares were trading at $518.58, with a market capitalization of $23.1 billion. The stock has declined 14.5% year-to-date, though some analysts see potential upside of 23.2%, with price targets ranging from $625 to $735.
Analysts at Jefferies noted leverage in selling, general and administrative expenses, though margin pressure remains a near-term concern. The company’s return on equity stood at 46.1%, while its price-to-earnings ratio was 18.3x. A fair-value model pegged the stock at $555.50, implying 7.1% upside from current levels.
Looking ahead, Ulta scheduled its next earnings release for November 26, 2026, with consensus estimates calling for adjusted EPS of $5.78 and revenue of $3.00 billion. The holiday makeup season and ongoing Space NK integration are expected to be key drivers in the second half of the year. The company also plans to open a flagship store in Times Square in late 2027, described as an immersive retail concept focused on brand-building.
