Ulta Beauty, Inc. Common Stock 2027 Q2 Earnings Call

Good afternoon, everyone, and thank you for joining us for a discussion of Ulta Beauty's results for the second quarter of fiscal 2026. Hosting our call today are Kecia Steelman, Chief Executive Officer, and Chris DelOrefice, Chief Financial Officer. During today's webcast, a presentation is being displayed live and has been posted to our website, ulta.com/investor. As a reminder, today's earnings release and the comments made by management during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, factors identified in this earnings release and in our most recent 10-K. The company undertakes no obligation to revise any forward-looking statements.

To allow us to accommodate as many questions as possible during the hour scheduled for this call, we respectfully ask that you limit your time to one question with no more than one follow-up question. As always, the IR team will be available for any follow-up questions after the call. Now I would like to turn the call over to Kecia.

Kecia? Thank you, Kiley, and good afternoon, everyone.

The Ulta Beauty team delivered another quarter of impressive results, including 8.9% net sales growth, 10.1% operating profit growth, and 13.3% diluted earnings per share growth. Our results reflect consistent operational execution and disciplined financial management. We stayed close to our guests, managed the fundamentals with rigor, and continued to invest in capabilities that will drive long-term growth. Our differentiated model continues to resonate with guests. This quarter, we saw strength across a number of key performance metrics. We delivered 3.8% comparable sales growth, expanded the number of active members in our loyalty program by 3%, drove an increase in average spend per member, launched 15 new brands, and increased earned media value and unaided awareness to record levels.

At the same time, we strategically leveraged promotions to drive traffic and sales, fueled incremental sales through personalization, and increased app engagement, with the app now accounting for more than 60% of online sales. Importantly, our sales outpaced the U.S. beauty market in a dynamic environment. We increased our share of prestige beauty while holding mass share flat, according to Circana. Quarter after quarter, we continue to translate strategy into results, delivering on our commitments, strengthening our business, and reinforcing the durability of our model and what our teams can achieve together. As a result of our first half performance, we have raised our sales and earnings guidance for the year, which Chris will cover more in detail shortly. Let me now share more details on our second quarter performance and the progress we are making across our Ulta Beauty Unleashed pillars.

Beginning with our core business growth pillar, our U.S. business continues to power the company's overall performance, supported by our focus on delighting guests at every interaction, advancing our go-to-market approach, delivering compelling merchandising innovation, and strengthening our marketing leadership. Starting with the heart of our omni-channel ecosystem, our stores. We fueled growth with the addition of 13 net new Ulta Beauty stores during the quarter and drove modest comp growth in stores as we lapped our strongest quarter from last year. Performance was driven by effective execution of key promotions and events, along with the impact of compelling newness. Our store associates maximized key selling opportunities and drove guest excitement and sales during key events like the Big Summer Beauty Sale, Mother's Day, and Father's Day. During the quarter, we held more than 40,000 in-store events to support significant brand launches and brand activations.

These high-energy events featured brand education and drove in-store traffic, strong guest engagement, and sales. E-commerce momentum continued in Q2 as we delivered our sixth consecutive quarter of double-digit sales growth, driven by ongoing investments in our guest experience, omni-channel capabilities, and emerging channels. Sales were fueled by planned merchandise and marketing promotions that resonated with guests, along with the enhanced convenience of our buy anywhere, fill anywhere capabilities. During Q2, we fulfilled more than 50% of our e-commerce orders through our vast network of more than 1,500 convenience store locations. Ulta Beauty's TikTok Shop continued to gain traction during the quarter, supported by the official grand opening campaign and the addition of several new brands to the shop, including TikTok's first live celebrity fragrance launch by rapper Ice Spice.

We also used our new Chelsea, New York store as a TikTok Shop live shopping studio, driving in-store guest excitement and online impressions. Since the launch, our TikTok initiative has driven over 100 million impressions. Notably, we are attracting significant attention from brand partners who are interested in joining our TikTok Shop assortment and from creators who are interested in collaborating with the Ulta Beauty brand. We are pleased with the ongoing success of TikTok, the initiative, and the competitive differentiation that is enabling for Ulta Beauty. From a merchandising perspective, we are focused on creating a continuous sense of discovery, bringing guests products, brands, trends, and experiences to give them reasons to keep coming back to Ulta Beauty. Our merchants are curating innovation across established brands, emerging brands, exclusive offerings, and fresh beauty trends, effectively translating what is culturally relevant into a guest experience that feels accessible and exciting.

This starts with our focus on brand building. First, let me highlight some of the exciting go-to-market and brand-building efforts underway to advance our ambition to win in fragrance. Fragrance continues to be an important growth driver for Ulta Beauty, supported by a strong pipeline of newness and culturally relevant brand launches that are bringing excitement and discovery to the category. During the second quarter, we launched several new and exclusive fragrances, including Cloudar by Drake's Better World Fragrance House, XO Blue by Khloé Kardashian, Hot Girl Summer by Megan Thee Stallion, and Viktor&Rolf's Bonbon collection, among several others. Bringing compelling newness to our assortment, our marketing team reinforced Ulta Beauty as a destination for fragrance through a number of high-impact campaigns. Our store and e-commerce teams brought these launches to life through prominent, engaging experiences, both in store and online.

Together, these efforts help drive meaningful market share expansion in fragrance. Beyond fragrance, K-beauty momentum continued. We expanded our leading assortment with the addition of five new K-beauty brands, including Dr. Leo, numbuzin, Dr. Leo, Beardia, and Centellian24. A robust double-digit growth in K-beauty sales compared to the same period last year gives us confidence in our K-beauty assortment. Importantly, nearly half of our K-beauty sales during the quarter came from exclusive brands or products. Our efforts contributed to continued share gains and reinforced our optimism in the longevity of the K-beauty brands over time. From a broader newness perspective, newly launched brands like Rare Beauty, Amika, and Moroccanoil contributed nicely to performance. During the quarter, we launched 15 new brands, including Bath & Body Works, Frenchi, JUNOCO, and others.

In addition to new brand launches, our merchants are collaborating in close partnership with existing brands to fuel the innovation pipeline and address key white space opportunities. During the quarter, we launched exclusive newness from our existing brand partners, including L'Oréal's Infallible Cushion Foundation, Charlotte Tilbury's Exagger-Eyes Waterproof Eyeshadow Stick, and Saltair's Shimmering Body Oil. We continue to advance our marketing strategy, strengthening Ulta Beauty's position at the intersection of beauty, culture, and community. Our Rewrite the Rules summer campaign champions self-expression, amplified through our partnership with Supergirl and Millie Alcock across high-impact theater, store, and social experiences that invited every beauty lover to rock your look and find your power. We showed up at the center of culture with activations at BottleRock and Lollapalooza, bringing beauty and music together with Ulta Beauty at the center.

We amplified our reach through a powerful creator ecosystem, spanning influential voices across social platforms, the UB Collective, our own Ulta Beauty's brand partners, and celebrity founders. We also expanded social commerce through TikTok Shop and TikTok Live, creating new pathways from inspiration and discovery to engagement and purchase. Together, these efforts drove strong growth in brand awareness and consideration, with earned media value and impressions reaching record levels. Our robust loyalty program, which now encompasses about 47 million active members, remains central to inspiring members through personalized experiences, meaningful rewards, and exclusive benefits that deepen engagement and build lasting relationships with Ulta Beauty. We are advancing our personalization capabilities, turning the strength of our first-party data and technology investments into even more relevant and impactful guest experiences.

Our teams are increasingly focused on anticipating guest needs across key moments in their journey, using customer insights to identify behaviors and intent. From predicting replenishment needs to improving cart conversion, we are creating more opportunities to drive engagement and incremental sales while delivering greater relevance for every guest. Moving to our second pillar, scaling new businesses. Our international operations continue to scale. We recently celebrated the one-year anniversary of our acquisition of Space NK, which operates stores in the U.K. and Ireland. Performance continues to be strong, and during the quarter, the Space NK team drove robust sales growth and continued market share expansion. In Mexico, we continue to expand our footprint with the opening of a new store in Chiapas, bringing total stores to 12 at the end of the quarter.