Company Reports

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with more than 47 million active members—an enhanced loyalty program. Annual revenue increased to more than $12 billion in 2025 from $912 million in 2007 as Ulta grew its US store base to more than 1,500 stores from fewer than 300, its shops became more productive, and online selling became a major part of its business. Ulta's success has made it a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Ulta Beauty's second-quarter comparable and total sales rose 3.8% and 8.9%, respectively. Operating margin improved to 12.5% from 12.4%, and EPS increased to $6.55 from $5.78. Full-year guidance includes 3.2%-3.7% comparable sales growth, up from 2.5%-3.5% previously.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with more than 46 million active members—an enhanced loyalty program. Annual revenue has increased to more than $12 billion from $912 million in 2007 as Ulta has opened more than 1,200 US stores, its shops have become more productive, and its digital selling has greatly expanded. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Ulta Beauty achieved 5.3% same-store sales growth in 2026's first quarter. Its gross margin rose 100 basis points to 40.1% on a higher merchandise margin and lower theft, but its operating margin increased just 10 basis points to 14.2% due to planned investments. EPS rose to $7.74 from $6.70.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with more than 46 million active members—an enhanced loyalty program. Annual revenue has increased to more than $12 billion from $912 million in 2007 as Ulta has opened more than 1,200 US stores, its shops have become more productive, and its digital selling has greatly expanded. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Ulta Beauty posted a 5.8% comparable sales increase in the fourth quarter of 2025. Its operating margin declined 260 basis points to 12.2% due to higher costs from the SpaceNK acquisition, incentive compensation, and strategic investments, such as marketing. EPS was $8.01, down from $8.46.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with more than 45 million active members—an enhanced loyalty program. Annual revenue has increased to more than $12 billion from $912 million in 2007 as Ulta has opened more than 1,000 stores, its shops have become more productive, and its digital selling has greatly expanded. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Ulta Beauty's third-quarter comparable sales rose 6.3%. Its gross margin increased 70 basis points to 40.4% due to lower shrink and higher merchandise margins, but its operating margin fell to 10.8% from 12.6% on higher payroll and store expenses. EPS of $5.14 matched 2024's third-quarter result.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with more than 45 million active members—an enhanced loyalty program. Annual sales increased to $11.3 billion in 2024 from $912 million in 2007 as Ulta opened more than 1,000 stores, its shops became more productive, and its e-commerce matured. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Ulta Beauty posted 6.7% comparable sales growth in 2025's second quarter. Its gross margin increased 90 basis points to 39.2% on higher merchandise margin and reduced theft, but its operating margin fell 50 basis points to 12.4% on greater compensation and other costs.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with 45 million active members—an enhanced loyalty program. Annual sales increased to $11.3 billion in 2024 from $912 million in 2007 as Ulta opened more than 1,000 stores, its shops became more productive, and its e-commerce matured. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Ulta Beauty achieved 2.9% comparable sales growth, a 39.1% gross margin (down 10 basis points), and a 14.1% operating margin (down 60 basis points) in 2025's first quarter. It was Ulta's first full quarter under CEO Kecia Steelman.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with about 45 million active members—an enhanced loyalty program. Annual sales increased to $11.3 billion in 2024 from $912 million in 2007 as Ulta has opened more than 1,000 stores, its shops have become more productive, and its e-commerce has matured. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Ulta Beauty’s fourth-quarter margins outperformed the estimates that we had revised upwards after its Jan. 6 announcement regarding a CEO change and updated guidance (see our note). On the downside, the firm continues to be pressured by the rapid rise in competition from the likes of wide-moat Amazon, TikTok Shop, and the Sephora partnership with no-moat Kohl’s. Indeed, Ulta posted a comparable sales increase of just 0.7% in 2024, and its 2025 guidance is slightly short of the expectations that we had already lowered after its October analyst event. Specifically, the firm guided to comparable sales growth of 0%-1%, an 11.7%-11.8% operating margin, and $22.50-$22.90 in earnings per share in 2025 versus our respective estimates of 1.5%, 11.9%, and $23.46.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with about 44 million active members—an enhanced loyalty program. Annual sales have increased to about $11.3 billion from $912 million in 2007 as Ulta has opened more than 1,000 stores, its shops have become more productive, and its e-commerce has matured. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

Narrow-moat Ulta announced that effective immediately, Dave Kimbell has retired as CEO and board member and has been replaced by Kecia Steelman. Although there was no prior indication that Kimbell was planning to move on, the change should be smooth as Steelman has been with Ulta for over 10 years and has served as president and chief operating officer since 2023. Indeed, she was one of the featured speakers at Ulta’s analyst event in October. Moreover, Kimbell, who had also been company president before succeeding Mary Dillon as CEO in 2021, will remain an advisor through June. We think Kimbell was an effective CEO, but Ulta’s results over the past year have been rocky due partly to heightened competition in prestige beauty. We are maintaining our Exemplary Capital Allocation Rating, which is based on Ulta’s debt-free balance sheet and history of high internal investment returns.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with about 44 million active members—an enhanced loyalty program. Sales increased to $11.2 billion in 2023 from $912 million in 2007 as Ulta opened more than 1,000 stores, its shops became more productive, and its e-commerce developed. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.

After offering disappointing guidance in August and at its analyst event in October, narrow-moat Ulta Beauty posted third-quarter results above our forecast. Although its comparable sales growth was muted (0.6%), it bettered our estimate of a 2% decline and the prior quarter’s 1.2% drop. Even so, competition from Sephora and others remains fierce, and expectations are not particularly high for either this holiday season or 2025. We expect to lift our $360 fair value estimate by a low-single-digit percentage but regard Ulta’s shares, up 12% in after-hours trading on Dec. 5, as overpriced.

We attended Ulta Beauty’s first investor day in three years and visited its new fulfillment center in suburban Chicago. We were impressed by Ulta’s store, marketing, merchandising, and expansion plans and believe that it has growth opportunities in the beauty and wellness markets. However, its outlook for 2025 and long-term financial targets were disappointing relative to our assumptions and guidance provided at the 2021 event. Specifically, Ulta targeted long-term annual sales growth and operating margins of 4%-6% and 12%, respectively, versus goals of 5%-7% and 13%-14% from 2021. Consequently, we have lowered our projections, and our fair value estimate declines to $360 per share from $390. We rate Ulta’s shares as fully valued.

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with about 44 million active members—an enhanced loyalty program. Sales increased to $11.2 billion in 2023 from $912 million in 2007 as Ulta opened more than 1,000 stores, its shops became more productive, and its e-commerce developed. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against Amazon and other e-commerce. We believe that teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.