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Ulta Beauty, Inc. (ULTA)·Q1 2026 Earnings Summary

Executive Summary

  • Ulta Beauty delivered a stronger-than-expected quarter: net sales $2.85B (+4.5% YoY), comps +2.9%, gross margin 39.1%, operating margin 14.1%, and diluted EPS $6.70; management cited improved execution, targeted promotions, and brand newness as drivers .
  • Results beat Wall Street consensus: revenue $2.85B vs $2.79B*, EPS $6.70 vs $5.83*, and EBITDA ~$474M vs ~$423M*; magnitude of beats reflects lower promo impact and favorable shrink in Q1 2026 (S&P Global) .
  • Guidance raised: FY25 net sales increased to $11.5–$11.7B (from $11.5–$11.6B) and EPS to $22.65–$23.20 (from $22.50–$22.90), with comps now 0%–1.5% (from 0%–1%) .
  • Stock reaction catalyst: category strength in fragrance and wellness plus high-profile partnerships (e.g., Beyoncé’s COWBOY CARTER tour and Cécred launch) support brand engagement and share gains, while tariff uncertainty tempers second-half outlook .

What Went Well and What Went Wrong

What Went Well

  • Fragrance delivered double-digit growth, driven by newness across women’s, gender-neutral, and men’s brands; spring sets and launches (e.g., Valentino, Billie Eilish) contributed to strength .
  • E-commerce grew ~10% with >60% of digital sales via the app; new features (Split Cart, Shop My Store) and real-time promotional agility boosted conversion .
  • Execution improvements (staffing, in-stocks) and promo optimization (fewer overlapping offers, targeted member offers) lowered promo impact on gross margin vs last year and supported comps .
  • “Ulta Beauty Unleashed” initiatives are resonating; management highlighted market share gains and record 45M active loyalty members (+3% YoY) .

What Went Wrong

  • Gross margin eased 10 bps YoY to 39.1% on deleverage of store/supply chain fixed costs and lower other revenue (partly offset by lower shrink) .
  • SG&A deleveraged 50 bps to 24.9% on higher store payroll/benefits and store expenses, partially offset by corporate overhead leverage .
  • Makeup softness persisted (mass makeup down low single digits; prestige flat), with certain brands lapping strong prior-year social/newness; hair tools and mass hair care softness offset gains elsewhere .
  • Other revenue fell by $4M to $56M on lower loyalty point redemptions and credit card income; management maintained cautious second-half comps outlook (down low-single-digit to up modestly) amid tariff uncertainty .

Financial Results

MetricQ3 2025Q4 2025Q1 2026
Net Sales ($USD Billions)$2.53 $3.49 $2.85
Diluted EPS ($)$5.14 $8.46 $6.70
Gross Margin %39.7% 38.2% 39.1%
Operating Margin %12.6% 14.8% 14.1%
Comparable Sales %+0.6% +1.5% +2.9%

Estimates vs Actual (Q1 2026)

MetricConsensusActualSurprise
Revenue ($USD Billions)$2.79*$2.85 +$0.06B (~+2.0%)*
EPS ($)$5.83*$6.70 +$0.87 (+15%)*
EBITDA ($USD Millions)$422.5*~$473.8 +$51.3M (+12%)*

Values marked with * retrieved from S&P Global.

Category Mix

Category (% of Net Sales)Q1 2025Q1 2026
Cosmetics42% 40%
Skincare & wellness23% 25%
Haircare19% 18%
Fragrance10% 11%
Services4% 4%
Other2% 2%

Key KPIs (Q1 2026)

KPIQ1 2026
Transactions growth+0.6%
Average ticket growth+2.3%
E-commerce sales growth~+10%
Active loyalty members45M
Store count (end of quarter)1,451

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net salesFY 2025$11.5B–$11.6B $11.5B–$11.7B Raised top end
Comparable salesFY 20250%–1% 0%–1.5% Raised
Operating marginFY 202511.7%–11.8% 11.7%–11.8% Maintained
Diluted EPSFY 2025$22.50–$22.90 $22.65–$23.20 Raised
New stores (net)FY 2025~60 ~60 Maintained
Remodel/relocationsFY 202540–45 40–45 Maintained
Share repurchasesFY 2025~$900M ~$900M Maintained
Interest incomeFY 2025~$6M ~$6M Maintained
Effective tax rateFY 2025~24.5% ~24.5% Maintained
CapexFY 2025$425M–$500M $425M–$500M Maintained
D&A expenseFY 2025$290M–$300M $290M–$300M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2025, Q4 2025)Current Period (Q1 2026)Trend
AI/technology & personalizationGLAMlab 2.0; app 2/3 of e-comm; UB Media expansion Adobe-powered tailored offers; expanded automation; AI/ML for supply chain efficiency Accelerating capabilities
Supply chain/ERPQ3: optimizing new ERP; recovering inventories Lower shrink from fixtures/training/process; fixed cost deleverage persists Operational improvement; cost pressure remains
Tariffs/macroQ4: limited direct import exposure (~1%); scenario planning Guidance caution; second-half comps could be down; working with brands to mitigate Elevated uncertainty
Product performanceQ3: fragrance, body care strong; prestige makeup flat Fragrance strongest; skincare/wellness high-single-digit; makeup mass softness; prestige flat Fragrance/wellness momentum
Digital & appQ3: app ~2/3 of e-comm; SEO guides; community launched App >60% e-comm; real-time promo agility; subscribe & save coming Continued engagement growth
International/marketplaceQ3: planning; UB Media growth Mexico, Kuwait, Dubai openings targeted; marketplace launching H2’25 Expansion progressing

Management Commentary

  • “Fiscal 2025 is off to an encouraging start... guests responded positively to improved execution, new and exclusive brand launches, evolved promotional plans, and relevant marketing... resulted in market share gains” — Kecia Steelman, CEO .
  • “We are accelerating our capabilities to deepen guest connection... expanded automation and real-time content... rolled out split cart and Shop My Store app functionality” .
  • “E-commerce sales increased about 10%... impact to gross margin from promotional offers was lower than last year” — Paula Oyibo, CFO .
  • “We now expect net sales $11.5B–$11.7B... comps flat to up 1.5%... diluted EPS $22.65–$23.20... operating margin 11.7%–11.8%” .

Q&A Highlights

  • Promotions/pricing: Promotional environment expected to remain rational; optimization (clarity, timing, targeted offers) key to profitable growth .
  • Second-half caution: Comps could range from down low-single-digit to up modestly; margins more pressured in H2 given investment flow and macro/tariffs .
  • Competition/distribution: Cycling past prestige distribution expansion; differentiation via exclusive newness, “beautytainment” events, and omnichannel personalization .
  • Ticket vs transactions: Q1 average ticket up (higher ASP, mix), fewer units per transaction; management does not provide detailed forecast by component .
  • Digital acceleration: App now >60% of e-comm; subscribe-and-save launch imminent; e-comm profitability improved via diversified fulfillment .

Estimates Context

  • Q1 2026 beat: Revenue $2.85B vs $2.79B* and EPS $6.70 vs $5.83*; EBITDA ~$474M vs ~$423M* (S&P Global). Execution improvements and lower promo impact supported outperformance .
  • Forward estimates: Q2 2026 consensus revenue $2.67B*, EPS $5.10*; actual later printed above for Q2 2026 ($2.79B, $5.78) indicating continued outperformance; Q3 2026 consensus revenue $2.70B*, EPS $4.53* (S&P Global).
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Beat and raise: Solid beat on revenue/EPS and higher FY25 sales/EPS/comp guidance; near-term sentiment supportive, but management maintains prudent second-half stance .
  • Mix shift tailwinds: Fragrance and wellness strength plus exclusive launches (e.g., Cécred) and eventing drive traffic and margins; continue to monitor mass makeup softness .
  • Cost/efficiency: Shrink improving via fixtures/training; fixed cost deleverage persists — watch comp trajectory for operating leverage recovery .
  • Digital moat expanding: App-led commerce, personalization via Adobe, and AI/ML in supply chain enhance engagement and efficiency; subscribe-and-save can bolster replenishment .
  • Strategic growth levers: Marketplace (H2’25) and international openings (Mexico, Kuwait, Dubai) add optionality; execution and curation quality will be key .
  • Macro/tariffs risk: Limited direct import exposure (~1%), but brand partner pricing and consumer wallet pressures could impact H2 comps/margins; promotional discipline remains critical .
  • Capital returns intact: Repurchases ongoing ($358.7M in Q1; $2.3B authorization remaining), with capex focused on stores, fixtures, and supply chain .