Ulta’s Strong Quarter Meets a More Measured Second-Half Growth Outlook

Strong beauty demand and digital growth fail to overcome a cautious back-half setup

Ulta Beauty (ULTA) delivered stronger-than-expected fiscal second-quarter results, with revenue rising 8.9% to $3.04 billion and earnings reaching $6.55 per share. Comparable sales increased 3.8%, comfortably ahead of the 2.3% gain analysts had expected.

The beauty retailer also raised its full-year forecasts for sales, comparable sales, operating income and earnings. Yet ULTA stock fell about 4% Friday after initially rising following the report, as attention shifted toward management's more measured second-half expectations.

Key Points

• Ulta's Q2 revenue rose 8.9% to $3.04 billion, EPS increased 13.3% to $6.55, and comparable sales grew 3.8%, with all three results exceeding expectations.
• Digital remained a major growth driver, with e-commerce sales increasing in the high teens for a sixth consecutive quarter of double-digit growth, while fragrance led product categories.
• Ulta raised its full-year outlook but expects second-half sales growth of 4%–5% and comparable-sales growth of 2%–3%, putting the focus on whether momentum can hold against tougher comparisons.

Ulta’s Beauty Business Delivers Broad Q2 Growth

Ulta's second-quarter performance showed continued growth across sales, earnings and operating income.

Net sales increased 8.9% from a year earlier to approximately $3.04 billion, above the $2.99 billion consensus estimate cited in the source material. Net income increased to $282 million from $260.9 million, while diluted EPS climbed 13.3% to $6.55 from $5.78 and exceeded expectations of roughly $6.20.

Comparable sales increased 3.8%, outperforming expectations for 2.3% growth despite facing a 6.7% increase in the year-earlier period. Higher average ticket drove the improvement, while transactions were roughly flat. Management said sales strengthened as the quarter progressed and reported no notable change in consumer behavior or trade-down.

Performance varied across Ulta's categories. Fragrance led with high-teen comparable-sales growth, while haircare increased at a high-single-digit rate. K-Beauty sales grew at a double-digit pace.

Makeup sales were approximately flat as prestige gains offset softer mass-market makeup. Skincare and wellness declined modestly as weakness in body care offset growth elsewhere.

Ulta's core business also maintained profitability despite changes in its sales mix. Gross margin declined slightly to 39.1% from 39.2%, primarily reflecting the lower-margin contribution from Space NK. Within the core Ulta Beauty business, lower shrink, supply-chain productivity and merchandise-margin preservation supported modest gross-margin improvement.

Operating income increased 10.1% to $379.6 million, while operating margin edged up to 12.5% from 12.4%.

Why Did Ulta Stock Fall Despite Raising Guidance?

The earnings reaction highlights the difference between Ulta's strong reported quarter and the more measured growth expected during the remainder of the fiscal year.

Management raised its full-year net sales growth forecast to 6.7%–7.2% from 6%–7%. Comparable-sales guidance increased to 3.2%–3.7% from 2.5%–3.5%, while operating income growth is now projected at 8.3%–9.3%, compared with 6.5%–9% previously.

EPS guidance also moved higher to $28.70–$29.00 from $28.36–$28.80.

The updated forecasts, however, imply slower growth during the second half. Ulta expects second-half net sales to increase 4%–5%, comparable sales to rise 2%–3%, operating profit to grow 6%–8%, and EPS to increase 9%–12%.

Management is maintaining a prudent approach because of macroeconomic uncertainty and tougher comparisons, while expecting the two-year comparable-sales growth stack to remain above 8%.

That outlook followed a strong first half and a recent run in the shares. ULTA initially gained after the earnings release before reversing and falling Friday, even as the company reported better-than-expected results and raised its annual forecasts.

Digital Growth and Capital Returns Add to Ulta’s Expansion Strategy

Digital commerce continues to outpace Ulta's overall growth.

E-commerce sales increased at a high-teen rate during Q2, marking the company's sixth consecutive quarter of double-digit digital growth. More than half of e-commerce orders were fulfilled through Ulta's store network, while its mobile app generated more than 60% of online sales.

Ulta's loyalty ecosystem also expanded. The company ended the quarter with approximately 47 million active loyalty members, up 3% year over year, while average spending per member increased.

The retailer continues to broaden its physical and international presence as well. Ulta opened 13 net new domestic stores and one net new Space NK location during the quarter. In Mexico, the company ended Q2 with 12 stores, while Space NK continues to operate in the U.K. and Ireland.

Capital returns are increasing alongside that expansion. Ulta repurchased $791.1 million of stock during the first six months of fiscal 2026 and raised its full-year repurchase target to $1.8 billion from $1.5 billion. The company expects to use the remaining $1 billion under its current authorization by fiscal year-end.

Full-year capital expenditure guidance remains unchanged at $400 million–$450 million.

What It Means for Investors

Ulta's Q2 results show that the underlying business entered the second half with positive sales growth, expanding earnings and continued digital momentum.

Comparable sales exceeded expectations despite a difficult year-over-year comparison, while management reported no notable consumer trade-down. Fragrance and haircare remained strong, and e-commerce continued growing considerably faster than the overall business.

Profitability also held up. Space NK created some gross-margin pressure, but improvement within the core Ulta business helped limit the consolidated decline to 10 basis points, while operating margin increased slightly.

The stock's negative earnings reaction instead puts greater attention on the pace of second-half growth. Management's outlook calls for 4%–5% sales growth and 2%–3% comparable-sales growth, below the rates reported during Q2.

For investors following ULTA stock news, comparable sales, transaction growth, digital momentum, gross margins and the performance of the company's expanding international operations provide the main measures for evaluating whether Ulta can sustain its current earnings growth as comparisons become more difficult.

Conclusion

Ulta Beauty delivered a solid second quarter across most of its major financial measures. Revenue and earnings exceeded expectations, comparable sales grew faster than anticipated, operating income increased 10.1%, and management raised its full-year outlook.

Digital commerce remained particularly strong, while fragrance, haircare and K-Beauty supported category growth. Ulta also increased its planned share repurchases to $1.8 billion for the year.

The market reaction shows that strong reported results were not the only consideration. With management expecting slower sales and comparable-sales growth during the second half, attention has shifted from the Q2 beat toward how Ulta performs against tougher comparisons through the remainder of the year.

FAQs

How did Ulta Beauty perform in the second quarter?

Ulta Beauty reported revenue of $3.04 billion, up 8.9% year over year, while diluted earnings increased 13.3% to $6.55 per share. Comparable sales grew 3.8%, exceeding the 2.3% increase analysts had expected.

Why did Ulta stock fall after strong earnings?

Ulta shares fell after initially rising following the report. The company beat quarterly expectations and raised its full-year guidance, but management expects more measured second-half growth, including sales growth of 4%–5% and comparable-sales growth of 2%–3%.

What is Ulta Beauty's updated full-year guidance?

Ulta expects net sales growth of 6.7%–7.2%, comparable-sales growth of 3.2%–3.7%, operating income growth of 8.3%–9.3%, and diluted earnings of $28.70–$29.00 per share.

How fast is Ulta's e-commerce business growing?

Ulta's e-commerce sales increased at a high-teen rate during the second quarter, marking the sixth consecutive quarter of double-digit digital growth. More than 50% of e-commerce orders were fulfilled through stores.

How much stock does Ulta plan to repurchase?

Ulta increased its fiscal 2026 share-repurchase target to $1.8 billion from $1.5 billion. The company repurchased $791.1 million of shares during the first six months of the fiscal year.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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