Ulta Beauty (ULTA) Q1 2026 Earnings Call May 29, 2025 04:30 PM ET Company Participants Kiley Rawlins - SVP - Investor RelationsKecia Steelman - President & CEOPaula Oyibo - Chief Financial OfficerOlivia Tong - Managing DirectorSimeon Siegel - Managing DirectorKate McShane - Managing DirectorSydney Wagner - Equity Research Senior Associate - Beauty & Personal Care Conference Call Participants Rupesh Parikh - Managing Director and Senior AnalystSusan Anderson - Managing Director & Senior AnalystKorinne Wolfme ...

Financial Data and Key Metrics Changes - For the first quarter, net sales increased by 4.5% to $2.8 billion, with operating profit at 14.1% of sales and diluted earnings per share at $6.70 [6][25][29] - Comparable sales rose by 2.9%, driven by a 2.3% increase in average ticket and a 0.6% increase in transactions [25] - Gross margin decreased by 10 basis points to 39.1%, primarily due to deleverage of store and supply chain fixed costs [27] - SG&A expenses increased by 6.7% to $711 million, with SG&A as a percentage of sales rising to 24.9% [28] Business Line Data and Key Metrics Changes - Fragrance was the strongest performing category, delivering double-digit growth, while skincare and wellness saw high single-digit growth [10] - Hair care was roughly flat, with growth in hair color and accessories offset by declines in hair care tools [11] - Makeup category experienced a slight decrease in comp sales, driven by mass makeup, while prestige makeup remained flat [11][12] Market Data and Key Metrics Changes - Consumer engagement with beauty remains strong, with beauty and wellness prioritized by consumers despite economic pressures [7] - The beauty category is expected to normalize growth rates, projected at 2% to 5% over the next few years [56] Company Strategy and Development Direction - The company is focused on executing the Ulta Beauty Unleashed plan to accelerate performance and maintain leadership [7][19] - Strategic priorities include scaling new businesses, enhancing digital capabilities, and optimizing cost structures [17][19] - The company plans to open stores in Mexico City, Kuwait City, and Dubai later this year, alongside launching an online marketplace [18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the operating environment, acknowledging ongoing consumer pressures and macroeconomic uncertainties [31][32] - The company updated its sales expectations for the year, projecting net sales between $11.5 billion and $11.7 billion, with comp sales growth expected to be flat to up 1.5% [31][32] Other Important Information - The company launched 19 new brands during the quarter, many of which are exclusive to Ulta Beauty [15] - The active loyalty member base reached a record 45 million, up 3% year over year [14] Q&A Session Summary Question: Insights on the Ulta Beauty Unleashed plan - Management highlighted improved in-store execution and marketing efforts as key contributors to the success of the Ulta Beauty Unleashed plan [36][40] Question: Full year outlook and promotional strategies - Management discussed expectations for comp sales growth and the rationality of promotions, emphasizing a cautious approach due to market dynamics [42][45] Question: Newness and innovation pipeline - Management expressed confidence in a balanced pipeline of new products across categories, with a focus on exclusivity [48][50] Question: Demand improvements and competitive intensity - Management noted that competitive intensity remains high, but the company is well-positioned to drive market share through its initiatives [51][54] Question: E-commerce growth drivers - Management attributed the 10% growth in e-commerce to enhancements in digital capabilities and a focus on app engagement [92][93]

Financial Performance - Net sales for the 13 weeks ended May 3, 2025, were $2,848,367, an increase of 4.5% compared to $2,725,848 for the same period in 2024[80] - Comparable sales increased by 2.9% for the 13 weeks ended May 3, 2025, compared to a 1.6% increase for the same period in 2024[80] - Gross profit for the quarter was $1,114,219, up from $1,069,780 in the prior year, reflecting a gross margin improvement[80] - Operating income for the quarter was $401,777, slightly higher than $400,948 in the same quarter last year[80] - Net income for the 13 weeks ended May 3, 2025, was $305,052, compared to $313,113 for the same period in 2024, indicating a decrease of 2.6%[80] Expenses and Costs - Selling, general and administrative expenses rose to $710,613 from $665,913, reflecting increased operational costs[80] - Selling, general and administrative (SG&A) expenses increased by $44.7 million or 6.7%, amounting to $710.6 million, with SG&A as a percentage of net sales rising to 24.9%[84] - Net income decreased to $305.1 million for the 13 weeks ended May 3, 2025, down from $313.1 million in 2024, primarily due to increased SG&A expenses and income tax expense[88] Store Operations - The number of stores at the end of the period increased to 1,451 from 1,395 year-over-year[80] - The company opened six new stores during the 13 weeks ended May 3, 2025, compared to 12 new stores opened in the same period in 2024[99] Cash and Liquidity - Cash and cash equivalents were $454.6 million as of May 3, 2025, compared to $524.6 million on May 4, 2024[89] - Net cash provided by operating activities increased to $220.0 million for the 13 weeks ended May 3, 2025, compared to $159.3 million in 2024[95] - The company had no outstanding borrowings under its credit facility as of May 3, 2025, indicating strong liquidity management[105] Market Outlook and Strategy - The company anticipates that persistent inflation and macroeconomic pressures may negatively impact sales trends throughout fiscal 2025[68] - The long-term growth strategy includes expanding omnichannel capabilities and opening new stores to drive profitable growth[66] - The beauty market is expected to continue expanding, supported by ongoing consumer engagement with beauty products[67] Inventory Management - Merchandise inventories increased by $215.5 million or 11.3%, totaling $2.1 billion as of May 3, 2025[98] Share Repurchase - The company repurchased 986,733 shares at a total cost of $362.1 million during the 13 weeks ended May 3, 2025[108]

Exhibit 99.1 ULTA BEAUTY ANNOUNCES FIRST QUARTER FISCAL 2025 RESULTS Net Sales Increased 4.5% to $2.8 Billion Comparable Sales Increased 2.9% Net Income of $305.1 Million or $6.70 Per Diluted Share Company Updates Fiscal 2025 Guidance Bolingbrook, IL – May 29, 2025 – Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the thirteen-week period ("first quarter") ended May 3, 2025. | | | 13 Weeks Ended | | | | --- | --- | --- | --- | --- | | | May 3, | | May 4, | | | (Dollars in millions, ex ...

Core Viewpoint - Analysts forecast a quarterly earnings per share (EPS) of $5.75 for Ulta Beauty, indicating an 11.1% year-over-year decline, while revenues are expected to reach $2.79 billion, reflecting a 2.2% increase compared to the same quarter last year [1]. Group 1: Earnings Estimates - The consensus EPS estimate has been revised upward by 0.3% over the past 30 days, indicating a collective reassessment by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3]. Group 2: Key Metrics Projections - Analysts estimate that the total number of stores open at the end of the quarter will be 1,458, up from 1,395 in the same quarter last year [5]. - The total gross square feet at the end of the quarter is projected to be 15,224.74 thousand square feet, compared to 14,614.76 thousand square feet a year ago [5]. - The number of stores opened during the quarter is expected to be 14, an increase from 12 in the same quarter last year [6]. - The total number of stores open at the beginning of the quarter is projected to be 1,445, compared to 1,385 a year ago [6]. Group 3: Sales by Category - Net sales by primary category for services are projected at 4.0%, consistent with the previous year's figure [7]. - Net sales by primary category for fragrance are expected to reach 11.5%, up from 10% a year ago [7]. - Net sales by primary category for haircare are projected at 19.0%, matching last year's performance [8]. - Net sales by primary category for cosmetics are expected to be 40.5%, down from 42% in the same quarter last year [8]. Group 4: Stock Performance - Over the past month, Ulta's shares have returned +6.3%, compared to a +10.7% change in the Zacks S&P 500 composite [9]. - Ulta currently holds a Zacks Rank 3 (Hold), suggesting its performance may align with the overall market in the near future [9].

Core Viewpoint - Ulta Beauty, Inc. is expected to report its first-quarter fiscal 2025 earnings on May 29, with a consensus estimate for revenues at $2.79 billion, reflecting a 2.2% increase year-over-year, while earnings per share are projected to decline by 11.1% to $5.75 [1][2]. Group 1: Earnings Predictions - The Zacks Model predicts an earnings beat for Ulta Beauty, supported by a positive Earnings ESP of +0.23% and a Zacks Rank of 3 (Hold) [3][4]. - Ulta Beauty has historically delivered a trailing four-quarter earnings surprise of nearly 9% on average [2]. Group 2: Growth Drivers - The company continues to lead the beauty retail sector by integrating mass, prestige, and luxury brands, enhanced by a strong omni-channel strategy that combines physical retail expansion with digital innovation [5]. - Investments in marketing and social platforms are increasing brand visibility, while a focus on product assortment and loyalty engagement is driving customer traffic [5]. - The skincare segment, particularly brands like Sol de Janeiro and TATCHA, is contributing to growth, positioning the company favorably for the upcoming quarter [6]. Group 3: Challenges - Ulta Beauty faces pressure from rising selling, general and administrative (SG&A) expenses, which are expected to increase by 220 basis points to 26.6% of net sales for the fiscal first quarter [7]. - Margin performance is likely to be affected by lower merchandise margins and increased supply chain expenses [7]. - The ongoing decline in the Makeup category presents a risk to the company's growth momentum [7]. Group 4: Stock Performance and Valuation - Ulta Beauty's stock has increased by 12.8% over the past three months, outperforming the Zacks Retail - Miscellaneous industry's decline of 7.1% [9]. - The stock is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 17.25, slightly above the industry average of 16.12 [9]. Group 5: Investment Outlook - Despite near-term challenges such as rising SG&A expenses and margin pressure, Ulta Beauty's long-term fundamentals remain solid, suggesting a balanced risk-reward profile for investors [10].

The market expects Ulta Beauty (ULTA) to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended April 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released o ...

Company Performance - Ulta Beauty's stock closed at $410.09, reflecting a -0.7% change compared to the previous day, underperforming the S&P 500's gain of 0.09% [1] - Over the past month, Ulta Beauty's shares have increased by 15.44%, surpassing the Retail-Wholesale sector's gain of 13.17% and the S&P 500's gain of 13.05% [1] Upcoming Earnings - The upcoming earnings report for Ulta Beauty is scheduled for May 29, 2025, with an expected EPS of $5.73, indicating an 11.44% decrease from the same quarter last year [2] - The consensus estimate projects revenue of $2.79 billion, which represents a 2.19% increase from the equivalent quarter last year [2] Full Year Projections - For the full year, the Zacks Consensus Estimates predict earnings of $23.03 per share and revenue of $11.57 billion, reflecting changes of -9.12% and +2.42% respectively from the previous year [3] Analyst Estimates and Stock Performance - Recent changes in analyst estimates for Ulta Beauty are crucial as they often indicate the latest business trends, with positive revisions suggesting a favorable outlook on the company's health and profitability [3][4] - The Zacks Rank system, which assesses estimate changes, currently ranks Ulta Beauty at 3 (Hold) [5] Valuation Metrics - Ulta Beauty has a Forward P/E ratio of 17.93, which is higher than the industry's average Forward P/E of 13.79 [6] - The company also has a PEG ratio of 2.45, compared to the Retail - Miscellaneous industry's average PEG ratio of 2.33 [6] Industry Context - The Retail - Miscellaneous industry, part of the Retail-Wholesale sector, holds a Zacks Industry Rank of 43, placing it in the top 18% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Core Insights - Ulta Beauty's stock has increased by 12.9% over the past month, while the industry and S&P 500 have grown by 16.1% and 15.4% respectively, prompting investors to consider whether to hold or take profits [1] Company Strategy and Performance - Ulta Beauty has transformed the beauty industry by combining mass, prestige, and luxury brands in an accessible shopping environment, which has driven significant profitable growth [3] - The company maintains a balanced approach between online and physical stores, with e-commerce sales growing mid-single digits in Q4 of fiscal 2024, reflecting a shift towards digital beauty shopping [4] - The skincare category has seen mid-single-digit comparable sales growth in Q4 of fiscal 2024, driven by strong demand for body care and new brands like Sol de Janeiro, Naturium, and TATCHA [5] Challenges and Concerns - The fourth-quarter results revealed a mid-single-digit decline in comparable sales for the makeup category, primarily due to softness in mass makeup, which is critical for driving traffic and sales [6] - Rising operating expenses are a concern, with SG&A expenses increasing to 23.4% of net sales in Q4 of fiscal 2024, up from 23.1% the previous year, and expected to rise approximately 10% in fiscal 2025 due to strategic investments and higher payroll costs [7][8] Valuation - Ulta Beauty is trading at a forward 12-month price-to-earnings multiple of 17.38X, which is above the industry average of 16.81X, indicating potential overvaluation relative to its fundamentals [9] Investment Outlook - The recent stock rally reflects investor optimism driven by strong skincare performance, a resilient omnichannel strategy, and ongoing innovation, but challenges in the makeup category and rising expenses suggest the stock may be pricing in near-term perfection [12]

Group 1 - Bridgewater Associates made significant adjustments to its investment portfolio in Q1 2025, focusing on technology, consumer, and financial sectors [1] - The fund increased its holdings in streaming giant Netflix by 30,500 shares, while reducing its stake in semiconductor equipment leader Lam Research by 570,000 shares to 1.96 million shares [1] - Bridgewater's adjustments reflect a "new and old" transition in tech stocks, maintaining stable positions in cloud computing while reducing traditional hardware suppliers [1] Group 2 - In the consumer sector, Bridgewater's holdings in e-commerce giant Alibaba surged from 255,000 shares to 5.66 million shares, an increase of over 21 times, while completely exiting its position in cosmetics retailer Ulta Beauty [2] - The fund exited its positions in four healthcare companies, including 3M, Amgen, Herbalife, and Teva Pharmaceuticals, contrasting with its continued investment in technology stocks [2] - Bridgewater's strategy indicates a focus on the recovery of consumption in the post-pandemic era and opportunities in technology innovation [2] Group 3 - The fund's holdings in Microsoft increased from 667,000 shares to 809,400 shares, while reducing its stake in eBay by 450,000 shares to 1.33 million shares, indicating structural adjustments within tech stocks [2] - In the financial sector, Bridgewater adopted a strategy of "increasing top-tier holdings while reducing tail-end positions," increasing its stake in Goldman Sachs while remaining cautious about regional financial institutions [2] - Overall, the portfolio adjustments reveal three key investment logics: betting on structural opportunities in tech due to accelerated digital transformation, optimism about recovery in sectors like aviation and payments, and optimizing risk-return profiles through increased industry concentration [2]