Ulta Beauty Gears Up for Holiday Season, Q3 Comps Expected to Trail Q4

Ulta Beauty, Inc. shares moved lower in Friday's premarket trading, following the company's second-quarter results released after Wednesday's close.

The company reported earnings per share of $6.55, surpassing the market consensus of $6.16. Additionally, sales rose 8.9% year-over-year to $3.036 billion, also beating the consensus estimate of $2.955 billion. Sales growth outpaced the U.S. beauty market, with market share gains in the prestige category, while the mass category remained flat.

Ulta stated that mass cosmetics were impacted by limited new product launches and a tougher year-over-year comparison base, but expects stronger color cosmetics trends and new product launches in the second half to drive a business recovery.

Earnings Snapshot

Comparable sales grew 3.8%, driven by higher average transaction value. Loyalty membership increased 3%, and average member spending also rose during the quarter.

Gross margin was 39.1%, compared to 39.2% in the same period last year. Operating profit increased 10.1% year-over-year to $380 million, with operating margin expanding to 12.5% from 12.4% in the prior-year period.

Ulta held $213 million in cash and short-term investments at quarter-end, along with $340 million in short-term debt.

Inventory remained flat at $2.4 billion, while per-store inventory declined 4.1%.

Expanded Share Buybacks

The company repurchased $236 million worth of shares during the quarter, bringing year-to-date buybacks to $791 million.

As of August 1, 2026, Ulta Beauty had $1 billion remaining under its $3 billion repurchase program announced in October 2024. The company expects to exhaust the remaining authorization by the end of fiscal 2026.

Ulta also raised its fiscal 2026 share repurchase plan from $1.5 billion to $1.8 billion.

Business Performance

The fragrance category delivered high-double-digit comparable sales growth, haircare grew high-single digits, and cosmetics were roughly flat. Skincare and wellness categories saw slight declines, while the wellness category posted double-digit growth.

Services grew mid-single digits, while K-beauty sales achieved double-digit growth, with nearly half coming from exclusive brands or products. Ulta added five K-beauty brands, and 15 brands overall, including Bath & Body Works, Frenchie, and Junoco.

Ulta opened 13 net new U.S. stores and delivered its sixth consecutive quarter of double-digit e-commerce growth, with second-quarter online sales posting high-double-digit growth.

During the quarter, over 50% of online orders were fulfilled through its more than 1,500 stores. TikTok generated over 100 million impressions, while the company hosted more than 40,000 in-store events.

Outlook

The company raised its fiscal 2026 EPS guidance from $28.36-$28.80 to $28.70-$29.00, and lifted its sales guidance from $13.136 billion-$13.260 billion to $13.223 billion-$13.285 billion.

The company raised its full-year net sales growth outlook to 6.7%-7.2% and comparable sales growth outlook to 3.2%-3.7%.

For the second half of fiscal 2026, Ulta expects sales growth of 4%-5%, with comparable sales growth of 2%-3% and two-year stacked comparable sales growth exceeding 8%. Operating profit growth of 6%-8% and diluted EPS growth of 9%-12% are expected in the second half.

Due to seasonal factors and planned investments ahead of the holiday season, the company expects third-quarter comparable sales to be lower than the fourth quarter.

ULTA Price Action: Ulta Beauty shares fell 2.11% to $528.70 in Friday's premarket trading session, following