Emily Kech

Emily Kech from Goldman Sachs asked about any notable changes in consumer behavior during the third quarter compared to the first half of the year, and whether the increased use of credit and Buy Now, Pay Later (BNPL) continued.

Answer

CEO Steve Lawrence identified a new trend of 'trade down,' with the company gaining market share among customers earning over $100,000. He also noted the continuation of 'episodic shopping,' where consumers buy heavily during key events. CFO Carl Ford confirmed that the use of credit cards and BNPL continued to increase year-over-year, particularly online, where it drove a higher average order value.

Emily Kech, on for Kate McShane, asked about the UB Media network, inquiring about its potential as a competitive moat, its role in strengthening vendor relationships, and its expected contribution to the long-term operating margin outlook.

Answer

CEO Dave Kimbell expressed strong optimism for UB Media, stating its competitive moat is built on Ulta's scale and unmatched data on beauty enthusiasts, which delivers strong ROI for brand partners. CFO Paula Oyibo added that UB Media is already contributing positively to gross margin and is expected to play an important role in offsetting merchandise margin pressures from strategic investments in 2025 and beyond.

Emily Kech, on for Kate McShane, inquired about the UB Media network, asking how significant its competitive moat could be and how much it is expected to contribute to the long-term operating margin outlook.

Answer

CEO Dave Kimbell expressed high optimism, calling UB Media a 'real competitive opportunity' due to Ulta's scale and unmatched customer data. CFO Paula Oyibo added that UB Media already contributes positively to gross margin and will be an important lever to help offset future merchandise margin pressures from strategic investments.