ULTA · Q2 2025 Earnings

Q: Asked about sustainability of 6.7% comp growth from Beauty Unleashed plan, differences between Q3/Q4 guidance given higher back-half comps, and pathway to increased operating margins with shrink improvements.

Management emphasized momentum from Beauty Unleashed plan execution, noted prudent guidance reflecting macro uncertainty and higher back-half comps. On margins: identified deleverage from low single-digit comp growth, healthcare cost inflation, infrastructure investments, moderating shrink benefits from prior-year lapping, and timing of go-to-market investments shifted to H2.

Q: Asked for assumptions underlying flat to positive low-single comp guidance given business momentum, and whether there's a breakpoint in the margin model relative to 2026 guidance with SG&A and overhead deleverage scenarios.

Management clarified 2025 has had significant unplanned events (SpaceNK acquisition, Target exit) not in original long-term plan, and it's premature to change long-term goals. Modest upward revision to back-half comp guidance reflecting less macro uncertainty vs. May. Q2 SG&A included $7M one-time SpaceNK costs and higher incentive comp.

Q: Asked about promotional environment normalization and restraint in Q2, and wellness category strategy including curation approach, brand selection criteria, and long-term opportunity sizing.

Management noted lower promotional impact on gross margin in Q2 vs. prior year, eliminated unproductive events, and expects rational promotional environment barring economic event. On wellness: expanded from select stores to 370 additional stores with 50 more coming, curating around self-care/supplements/ingestibles with 150 brands and 700 SKUs. Market sized at $410B (2024), growing faster than beauty. Long-term target: wellness as billion-dollar business. Launched 7 new brands/lines in quarter, focusing on four-wall productivity.

Q: Asked about recovery of stores impacted by prior-year competitive cannibalization, natural recovery rate vs. company-specific initiatives, and sustainability of recaptured sales.

Competitive distribution expansion has slowed; steady improvement in comp trends for impacted stores in Q1 and Q2. Company-wide comp growth across all store types. Expect lower competitive pressure impact in 2025 vs. 2024. Leveraging loyalty program, personalization investments, and engagement to recapture guests. Noted large upside opportunity from Target exit in late 2026 to recapture those guests into Ulta ecosystem.

Q: Asked about outperformance drivers between Mass and Prestige categories, differentiation initiatives in Mass segment facing competition, and pipeline visibility for exclusive brand launches including Rihanna.

Pleased with performance across all categories. Notably, makeup grew in both Mass and Prestige in Q2 (rare occurrence), driven by newness attracting new guests with halo effect. Some benefit from cycling past Ulta Beauty collection exit. On prestige pipeline: launches balanced across portfolio (not concentrated in one category), keeping in-store engagement active. Excited about next-year launches already in progress. Sacred performing well.

Cautious

Ulta Beauty

Reported August 28, 2025

30-second summary

Ulta delivered Q2 net sales of $2.79B (+9.3% YoY) on a +6.7% comp — more than double the Q1 print — and used the upside to raise FY2025 sales by $400–500M, comps by 250bps at the midpoint, and GAAP EPS by ~$1.15 at the midpoint. The catch: management explicitly guided H2 comps to "flat to up low single digits" and H2 operating margin to 10.7–10.9%, below H1's 13.2% reflecting normal seasonality plus shrink-benefit lapping, healthcare inflation, and H2-weighted go-to-market spend. The story is no longer "is the Unleashed plan working" — it's whether the H2 caution is genuine conservatism or a real read on consumer demand the rest of the market hasn't priced.

Headline numbers

EPS

Q2 FY2025

$5.78

Revenue

Q2 FY2025

$2.79B

+9.3% YoY

Gross margin

Q2 FY2025

39.2%

Operating margin

Q2 FY2025

12.4%

Key financials

Q2 FY2025

Metric	Q2 FY2025	YoY	Q1 FY2025	QoQ
Revenue	$2.79B	+9.3%	$2.85B	-2.1%
EPS	$5.78	—	$6.70	-13.7%
Gross margin	39.2%	—	39.1%	+10bps
Operating margin	12.4%	—	14.1%	-170bps

Guidance

Company raised FY2025 revenue to $12.0–12.1B (+3.4–4.3%) and EPS to $23.85–24.30 (+5.0–5.2%) on strong Q2 comp sales of 6.7%, but cautiously guided H2 comp sales to flat-to-low-single-digits, signaling expectation of consumer deceleration.

Guidance is issued for both next quarter and the full year. Both may appear below.

New guidance

Metric	Period	Guide	YoY
Operating margin	Q3-Q4 FY 2025	10.7% to 10.9%	—
SG&A growth	FY 2025	13% to 14%	—
Comparable sales growth	Q3-Q4 FY 2025	flat to up low single digits	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY 2025	$11.5B to $11.7B	$12.0B to $12.1B	+$0.4B to $0.5B at midpoint (+3.4% to +4.3%)	Raised
EPS	FY 2025	$22.65 to $23.20	$23.85 to $24.30	+$1.15 to $1.20 at midpoint (+5.0% to +5.2%)	Raised
Comparable sales growth	FY 2025	0% to 1.5%	2.5% to 3.5%	+1.0 to +2.0 percentage points	Raised
Operating margin	FY 2025	11.7% to 11.8%	11.9% to 12.0%	+0.1 to +0.2 percentage points	Raised

Platform metrics

Q2 FY2025

Segment	Q2 FY2025
Comparable sales growth	6.7%
Transaction count growth	3.7%
Average ticket growth	2.9%
Total stores (U.S.)	1,473
Net new stores opened (Q2)	24

Profitability

Q2 FY2025

Segment	Q2 FY2025
Gross margin expansion	90 bps YoY

Management tone

Narrative arc: Q1 "green shoots, stay prudent" → Q2 "significantly better than planned, but stay cautious."

Three quarters into the Unleashed plan, management's framing of execution has hardened from tentative to confident, but their framing of the consumer has hardened in the opposite direction. In Q1, Steelman called Q1 strength "encouraging" and described market share gains as the first in a while. In Q2, the language escalated to "significantly better than planned sales performance" — a direct admission of internal-plan beat — yet was paired with "we remain cautious in our approach to planning our business, given the rapidly evolving macro landscape and ongoing wallet pressures." This is a deliberate decoupling: execution narrative up, demand narrative flat-to-down.

The H2 guide makes the tone shift quantifiable in a way Q1's didn't. Q1 baked H2 to "down low single digits to up modestly"; Q2 baked H2 to "flat to up low single digits." That is technically a slight upward revision to the H2 outlook, but coming off a +6.7% Q2 print it implies a comp step-down of 300–600bps in the back half. Per Q&A, Bonetti pushed on exactly this and Interim CFO Chris Lelaglio confirmed the back-half raise was "modest" relative to May, with the bulk of the FY raise coming from H1 outperformance — i.e., the guide is not signaling that current momentum carries through Christmas.

International and channel posture continues to widen. Q1 introduced the UK entry; Q2 confirmed Mexico soft-opening complete with grand opening imminent, Middle East on track for later this year, and a curated invitation-only Marketplace launching in Q3 to bring third-party beauty/wellness/lifestyle SKUs onto Ulta.com. Combined with the previously-announced wind-down of the Target shop-in-shop partnership in August 2026 (royalty was <1% of FY24 sales — immaterial), the channel mix is being deliberately reshaped: less third-party-on-someone-else's-floor, more Ulta-owned international plus marketplace.

The wellness pivot crystallized in Q2. In Q&A, Steelman sized the U.S. wellness market at $410B (growing faster than beauty), confirmed expansion from a select-store pilot to 370 additional stores (with 50 more coming), and set a long-term aspiration of wellness as a "billion-dollar business" for Ulta — the first time that number has been used publicly. This is a deliberate TAM expansion narrative for a year where the core category guide is decelerating.

What Steelman did not do is raise the long-term margin framework. Per Bonetti's question, the 12% long-term op margin target is unchanged despite Q2 printing 12.4%; 2026 guidance comes in March. Management is preserving optionality, not committing.

Recurring themes management leaned on this quarter:

Back-to-basics operational excellence and in-store executionInternational expansion and market entry strategyExclusive and emerging brand portfolio expansionPromotional effectiveness and go-to-market optimizationOmnichannel fulfillment and digital personalizationWellness category expansion and lifestyle positioning

Risks management surfaced:

Rapidly evolving macroeconomic landscape and consumer wallet pressuresTariff impacts and pricing trends affecting consumer behaviorOngoing uncertainty around consumer spending in second half of yearIntegration risks associated with SpaceNK acquisitionSupply chain cost inflation including wages and healthcare expenses

Q&A highlights

Dana Telsey · Telsey Advisory Group

Asked about sustainability of 6.7% comp growth from Beauty Unleashed plan, differences between Q3/Q4 guidance given higher back-half comps, and pathway to increased operating margins with shrink improvements.

Management emphasized momentum from Beauty Unleashed plan execution, noted prudent guidance reflecting macro uncertainty and higher back-half comps. On margins: identified deleverage from low single-digit comp growth, healthcare cost inflation, infrastructure investments, moderating shrink benefits from prior-year lapping, and timing of go-to-market investments shifted to H2.

6.7% Q2 comp growthLow single-digit comp growth expected back halfShrink benefits moderating in back half due to prior-year lappingHigher incentive comp expected due to better-than-planned performance

Michael Bonetti · Evercore

Asked for assumptions underlying flat to positive low-single comp guidance given business momentum, and whether there's a breakpoint in the margin model relative to 2026 guidance with SG&A and overhead deleverage scenarios.

Management clarified 2025 has had significant unplanned events (SpaceNK acquisition, Target exit) not in original long-term plan, and it's premature to change long-term goals. Modest upward revision to back-half comp guidance reflecting less macro uncertainty vs. May. Q2 SG&A included $7M one-time SpaceNK costs and higher incentive comp.

SpaceNK acquisition unplanned in original guidanceTarget exit unplanned in original guidance$7 million one-time SpaceNK transaction expenses in Q2Back-half guidance modestly increased vs. May guidance

Adrian Yee · Barclays

Asked about promotional environment normalization and restraint in Q2, and wellness category strategy including curation approach, brand selection criteria, and long-term opportunity sizing.

Management noted lower promotional impact on gross margin in Q2 vs. prior year, eliminated unproductive events, and expects rational promotional environment barring economic event. On wellness: expanded from select stores to 370 additional stores with 50 more coming, curating around self-care/supplements/ingestibles with 150 brands and 700 SKUs. Market sized at $410B (2024), growing faster than beauty. Long-term target: wellness as billion-dollar business. Launched 7 new brands/lines in quarter, focusing on four-wall productivity.

Wellness market $410 billion in 2024Wellness growing faster than beautyExpanded to 370 additional stores in Q2, 50 more coming150 brands and 700 SKUs in wellness assortment

Stephen Forbes · Guggenheim Securities

Asked about recovery of stores impacted by prior-year competitive cannibalization, natural recovery rate vs. company-specific initiatives, and sustainability of recaptured sales.

Competitive distribution expansion has slowed; steady improvement in comp trends for impacted stores in Q1 and Q2. Company-wide comp growth across all store types. Expect lower competitive pressure impact in 2025 vs. 2024. Leveraging loyalty program, personalization investments, and engagement to recapture guests. Noted large upside opportunity from Target exit in late 2026 to recapture those guests into Ulta ecosystem.

Competitive distribution expansion has slowedExpected lower competitive impact in 2025 vs. 2024Loyalty program is one of largest assets for recaptureTarget exit late 2026 creates recapture opportunity

Olivia Tong · Raymond James

Asked about outperformance drivers between Mass and Prestige categories, differentiation initiatives in Mass segment facing competition, and pipeline visibility for exclusive brand launches including Rihanna.

Pleased with performance across all categories. Notably, makeup grew in both Mass and Prestige in Q2 (rare occurrence), driven by newness attracting new guests with halo effect. Some benefit from cycling past Ulta Beauty collection exit. On prestige pipeline: launches balanced across portfolio (not concentrated in one category), keeping in-store engagement active. Excited about next-year launches already in progress. Sacred performing well.

Makeup grew in both Mass and Prestige in Q2Growth balanced across categories for 2025 launchesPipeline launches underway for 2026Rihanna exclusive mentioned as upcoming launch

Answers to last quarter's watch list

H1 comp delivery vs. "low single digits" framework — Q2 comp printed +6.7%, well above the "low single digits" frame, with H1 now materially ahead of the original 0–1.5% FY guide. The +2.9% in Q1 was clearly not a fluke driven by easy compares. Status: Resolved positively

Inventory growth vs. sales growth gap — Merchandise inventory ended Q2 at $2.4B (+20.5% YoY), partly reflecting Space NK and new brand launches, but the 90bps gross margin expansion and lower promotional intensity indicate the Q1 inventory build did not force markdown activity. Status: Resolved positively

Operating margin trajectory — Q2 op margin printed 12.4% (−50bps YoY), with management's H2 op margin guide of 10.7–10.9% reflecting normal seasonality plus shrink-benefit lapping and H2-weighted spend. Status: Continue monitoring

Distribution-headwind lapping confirmation — Per Forbes's exchange, competitive distribution expansion has slowed and impacted stores showed steady improvement across Q1 and Q2; all store types comped positive in Q2. Lower competitive pressure expected in 2025 vs. 2024. The share gain looks durable, not a one-quarter lap. Status: Resolved positively

Tariff pass-through risk — Tariffs remained on the FY risk list in prepared commentary, and the FY guide implicitly assumes the environment doesn't deteriorate, but no major pricing actions were announced and no tone change vs. Q1 was disclosed. Status: Continue monitoring

Loyalty member spending intensity — Loyalty membership hit a record 45.8M (+4% YoY). Q2 transactions accelerated to +3.7% (from Q1's +0.6%) versus ticket of +2.9%. This is a meaningful answer: the comp is no longer ticket-dependent, traffic is the bigger contributor in Q2, suggesting trip frequency is genuinely accelerating. Status: Resolved positively

Corporate-overhead spend timing — New disclosure of FY SG&A growth +13–14% confirms H2-weighted spend, driven by incentive comp (tied to the upside) and strategic investments. Q2 absorbed $7M of one-time SpaceNK transaction expense. SG&A deleverage in H2 is now explicitly baked. Status: Resolved negatively — confirms the H2 SG&A drag the watch flagged.

What to watch into next quarter

Q3 comp print vs. "flat to up low single digits" H2 frame — Q3 needs to print at minimum +1% to validate the H2 guide as conservative rather than predictive. A Q3 in the flat-to-+1% range would suggest the cautious guide was honest; +3%+ would mean management sandbagged and the framework needs re-rating; sub-flat would validate the consumer-deceleration thesis embedded in the guide.

Q3 operating margin vs. ~10.8% H2 midpoint — Q3 is seasonally lower than Q4 but is the cleaner test of the H2 margin guide. Watch whether margin lands in the 10.7–10.9% H2 range or holds closer to the FY raised midpoint of ~12%.

Marketplace launch traction (Q3 launch) — Ulta.com Marketplace goes live in Q3 as an invitation-only third-party platform. Watch any Q3-call disclosure on initial brand count, GMV, or commentary on cannibalization vs. incremental — this is the most material new channel disclosure since loyalty.

Wellness category attach rate — management sized the U.S. wellness TAM at $410B and committed to a billion-dollar long-term wellness aspiration. Watch whether Q3 begins quantifying wellness as a comp contributor, brand count, or SKU productivity in the 370 expanded stores.

SpaceNK contribution and integration cost run-rate — Q2 absorbed $7M of one-time SpaceNK transaction expense. Watch Q3 disclosure on revenue contribution from the UK acquisition vs. ongoing integration cost — currently SpaceNK is a net SG&A drag with no offsetting revenue line called out.

Ticket-vs-transactions composition — Q2 saw transactions outpace ticket for the first time in several quarters. Watch whether Q3 sustains transaction-led comp (durable, traffic-driven) or reverts to ticket-led (mix and AUR-dependent, less durable).

Sources

Ulta Beauty Q2 FY2025 press release, filed with SEC 2025-08-28: https://www.sec.gov/Archives/edgar/data/1403568/000155837025011803/ulta-20250828xex99d1.htm
Ulta Beauty Q1 FY2025 brief (Tapebrief, 2025-05-29) — prior guidance baselines.

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