Name: Ulta Beauty, Inc. Q2 2026 Earnings Call
Start: 2025-08-28T20:30:00.000Z

Executive Summary

Ulta Beauty’s Q2 FY2026 (quarter ended August 2, 2025) delivered net sales of $2.8B (+9.3% YoY) and diluted EPS of $5.78, with comps +6.7% and gross margin expanding to 39.2% .
Results beat Wall Street consensus: revenue beat by ~$0.12B and EPS beat by ~$0.68*, driven by broader category strength and operating execution such as improved shrink and merchandise margin .
Management raised FY2025 guidance to net sales of $12.0–$12.1B and comps of 2.5–3.5%, citing momentum and Space NK acquisition benefits while maintaining macro caution .
Strategic catalysts: Space NK acquisition (UK entry) in July and planned conclusion of Target shop-in-shop in Aug 2026; both frame international expansion and channel optimization .

What Went Well and What Went Wrong

Strong topline and comps: Net sales $2.8B (+9.3% YoY) and comps +6.7%, with transactions +3.7% and average ticket +2.9% .
Margin execution: Gross margin improved to 39.2% YoY, supported by lower inventory shrink and higher merchandise margin .
Management raised FY guide: “Our outlook…reflects both the strength of our year-to-date performance and our caution around how consumer demand may evolve in the second half of the year” — CEO Kecia Steelman .

SG&A deleverage persisted YoY given payroll, benefits, and corporate overhead associated with strategic investments (company noted deleverage in prior year and continued investment focus) .
Continued macro caution and tariffs: Management emphasized prudence as consumers watch pricing trends amid tariffs/macro uncertainty .
Prior-year baseline showed store-performance headwinds, requiring promotional calendar optimization and shrink initiatives to sustain margins (discussed across FY2024/early FY2025) .

Metric	Q2 FY2024 (Aug 3, 2024)	Q1 FY2025 (May 3, 2025)	Q2 FY2026 (Aug 2, 2025)
Net Sales ($USD Billions)	$2.55	$2.85	$2.80
Diluted EPS ($)	$5.30	$6.70	$5.78
Gross Margin (%)	38.3%	39.1%	39.2%
Operating Margin (%)	12.9%	14.1%	12.4%
Comps (%)	(1.2%)	2.9%	6.7%

Metric	Consensus (Q2 FY2026)	Actual (Q2 FY2026)	Surprise
Revenue ($USD Billions)	$2.67*	$2.79	+$0.12B*
EPS ($)	$5.10*	$5.78	+$0.68*

Values retrieved from S&P Global.*

Category	Performance (Q2 FY2026)
Fragrance	Double-digit growth
Skincare & Wellness	High single-digit growth; strength in bodycare, K-Beauty, supplements
Makeup	Mid-single-digit comparative growth (strong brands include MAC, Hourglass, NYX)

KPI	Q2 FY2024	Q1 FY2025	Q2 FY2026
Transactions YoY	(1.8%)	+0.6%	+3.7%
Average Ticket YoY	+0.6%	+2.3%	+2.9%
Merchandise Inventory (end of Q2)	$2.0B (Q2 FY2024)	$2.1B (Q1 FY2025)	$2.4B (Q2 FY2026)

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY2025	$11.5–$11.7B (May 29, 2025)	$12.0–$12.1B (Aug 28, 2025)	Raised
Comparable Sales	FY2025	0–1.5% (May 29, 2025)	2.5–3.5% (Aug 28, 2025)	Raised
Diluted EPS	FY2025	$22.65–$23.20 (May 29, 2025)	Updated qualitatively with raised sales/mix; EPS range not explicitly restated in Q2 release (see call)	N/A in release
Operating Margin	FY2025	11.7–11.8% (May 29, 2025)	Maintained directional caution; implied strong H2 performance (call commentary)	Maintained
Capex	FY2025	$425–$500M	$425–$500M (no change)	Maintained
D&A	FY2025	$290–$300M	~ $300M	Clarified
Share Repurchases	FY2025	~ $900M	Authorization balance update; continued execution (call/IR)	Maintained
Effective Tax Rate	FY2025	~24.5%	Not explicitly updated in Q2 release; Q2 tax rate was 24.5%	Maintained level

Topic	Previous Mentions (Q-2: Q2 FY2024, Q-1: Q1 FY2025)	Current Period (Q2 FY2026)	Trend
Promotional strategy	Q2 FY2024: Higher promotions pressured margin; comps -1.2%	CEO: “impact of gross margin from promotional offers was lower than 2024…optimized timing of key offers” (Q&A)	Improving margin discipline
Shrink & supply chain	Q1 FY2025: Shrink higher in some prestige; investments in fixtures/process	Q2 FY2026: Lower inventory shrink aided GM; supply chain deleverage managed	Improving shrink; supply chain monitored
Digital/Marketplace	Q1 FY2025: Tech investments in stores/IT	Launching curated Ulta Beauty Marketplace in Q3 to expand assortment	Strategic expansion
International expansion	Prior: groundwork; Space NK deal (July)	Space NK integration; Middle East and Mexico initiatives highlighted	Expanding footprint
Target partnership	N/A (older commentary minimal)	Mutually concluding in Aug 2026; minimal financial impact	Channel optimization
Macro/tariffs	Q2 FY2024: macro caution	Management remains cautious; consumers watch pricing amid tariffs	Ongoing caution

“Outstanding top line performance, fueled by growth across all major categories, drove market share growth and better-than-expected profitability” — Kecia Steelman, President & CEO .
CFO commentary: FY2025 guidance raised to net sales $12.0–$12.1B and comps 2.5–3.5% reflecting strong H1 momentum and Space NK impact; prudent stance given consumer uncertainty .
Promotional cadence: “We eliminated less productive events…optimized timing” to drive profitable growth (Q&A) .

Margin leverage thresholds and comp sensitivity: Discussion on supply chain and overhead deleverage points; management highlighted long-term algorithm and stronger-than-planned 2025 start while balancing costs .
Category dynamics: Analysts probed mass vs prestige performance; management cited category momentum and exclusive brand pipeline (e.g., Rihanna/Fenty) .
Promotional strategy: Management clarified promotional reductions and timing optimizations vs 2024 to protect margins .
Strategy updates: Marketplace launch timing, international expansion (Space NK integration), and Target conclusion impact .

Revenue and EPS exceeded S&P Global consensus by ~$0.12B and ~$0.68*, respectively, on stronger comps and improved merchandise margin execution.
Expect estimates to drift upward for H2 given raised sales guidance and category momentum, though management’s macro caution may temper EPS upward revisions.
Values retrieved from S&P Global.*

Beat and raise: Strong Q2 print with raised FY sales/comps guidance; the setup is favorable into H2 with narrative support from category breadth and Space NK integration .
Margin drivers improving: Shrink and promotional optimization enhanced GM; watch SG&A discipline as investments continue .
Category resilience: Fragrance leads; skincare/wellness robust; makeup steady—diversified category tailwinds support topline .
Strategic expansion: Space NK accelerates UK entry; Ulta Marketplace broadens assortment; Middle East/Mexico add optionality .
Channel mix shift: Target partnership conclusion in 2026 has limited financial impact and simplifies brand narrative .
Trading lens: Into H2, look for comp/margin continuity, Marketplace launch traction, and Space NK integration updates; volatility risks include macro/tariffs and promotional intensity .
Medium-term thesis: Category leadership, loyalty scale, and strengthening margin engines underpin durable growth; international expansion provides new growth vectors .