Ulta Beauty (ULTA) Q4 2025 Earnings Transcript

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DATE

Thursday, March 12, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Kecia L. Steelman
• Chief Financial Officer — Chris Del Orfus

TAKEAWAYS

• Ulta Beauty (NASDAQ:ULTA) reported its quarterly and full-year results, providing updated guidance and strategic initiatives.
• Net Sales -- $3.9 billion for the quarter, an 11.8% increase, with full-year sales reaching $12.4 billion, up 9.7%.
• Comparable Sales -- Increased 5.8% for the quarter, driven by a 4.2% rise in average ticket and a 1.6% increase in transactions.
• Store Portfolio -- Ended the year with 1,505 Ulta Beauty stores and 86 Space NK stores following 63 net new openings, 6 relocations, and 42 remodels.
• Category Performance -- Skincare and wellness grew to 24% of sales; makeup decreased to 35%, primarily due to the acquisition of Space NK.
• Fragrance Sales -- Delivered double-digit comp growth, primarily due to new and exclusive brands and strong holiday gift set performance.
• Hair Care Performance -- Achieved high single-digit comp growth led by new and exclusive brand launches.
• Digital Channel -- E-commerce posted mid-teen sales growth and mobile app active users grew 15% year over year, with 60% of online sales transacted through the app.
• Gross Margin -- Decreased 10 basis points for the quarter to 38.1% of sales due to channel mix and deleverage of store fixed costs, offset by less inventory shrink and supply chain leverage.
• SG&A Expense -- Rose 23% to $1.0 billion for the quarter, primarily from higher incentive compensation, Space NK, and investments in the Ulta Beauty unleashed strategy.
• Operating Income -- Delivered $477 million for the quarter (12.2% of sales); full-year operating profit was $1.5 billion (12.4% of sales).
• Diluted EPS -- Reported $8.01 for the quarter and $25.64 for the full year, a 1.2% increase, exceeding the previously provided guidance.
• Loyalty Program -- Grew 5% to a record 46.7 million active members, driven by reactivated and retained members.
• Inventory -- Increased 10.8% to $2.2 billion, reflecting new brands, the Space NK acquisition, and inventory for 60 net new stores.
• Cash Flow and Capital Return -- Generated $1.5 billion in operating cash, used $435 million for capital expenditures, and repurchased $890 million in shares.
• Fiscal 2026 Guidance -- Projects net sales growth of 6%-7% to $13.1-$13.2 billion, comp sales increase of 2.5%-3.5%, and diluted EPS of $28.05-$28.55 (9.4%-11.4% growth).
• Store Openings Forecast -- Plans for 50-60 net new company-operated stores and capital expenditures of $400-$450 million, prioritizing store, digital, and supply chain investments.
• Operating Profit Outlook -- Expects 6%-9% operating profit growth, with margin flat to up 20 basis points, and SG&A growth in line or slightly below net sales growth.
• Strategic Initiatives -- Will launch sales via TikTok Shop, expand internationally, and continue investments in wellness and AI-driven personalization and automation.

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RISKS

• Chief Executive Officer Steelman noted, "we are increasingly mindful of rising global conflicts that could impact economic conditions," signaling caution regarding potential macroeconomic disruption.
• Gross margin remained flat in the 2026 outlook as management expects benefits from higher merchandise margin to be offset by store fixed cost deleverage and other revenue pressures.

SUMMARY

The quarter featured double-digit net sales growth, with omni-channel strategies supporting record holiday performance and continued market share gains. Ulta Beauty highlighted progress on operational efficiencies, supply chain upgrades, and digital initiatives accompanied by expanding the store and international footprint. Growth in loyalty membership, mobile engagement, and new category initiatives contributed to positive comparable sales and earnings per share that surpassed internal guidance.

• Omnichannel upgrades such as "Replenish and Save" and loyalty-driven AI personalization contributed to higher guest engagement and growing app sales adoption.
• Acquisition of Space NK diversified revenue streams and contributed to the shift in category mix towards skincare, alongside international expansion into five countries.
• Management reaffirmed cost optimization efforts through automation investments, smaller new store formats, and disciplined SG&A management, expecting margin efficiency improvements in the second half of the fiscal year.
• Planned TikTok Shop integration and marketplace initiatives are positioned as incremental opportunities to attract younger consumers and new brand partners.
• Loyalty base expansion and a shift toward exclusive and high-growth categories were cited as continuing drivers for member retention and top-line momentum.

INDUSTRY GLOSSARY

• Space NK: A luxury beauty retailer based in the U.K. and Ireland, recently acquired by Ulta Beauty, operating as a multi-brand specialty segment within the consolidated business.
• Comp Sales (Comparable Sales): A metric indicating year-over-year sales growth for stores and digital channels open at least 14 months.
• Omnichannel: Integrated shopping experiences across physical stores, e-commerce, and mobile platforms enabling "buy-anywhere, fulfill-anywhere" capabilities.
• SG&A (Selling, General & Administrative Expense): Operating expenses not directly tied to producing goods or delivering services, including payroll, marketing, and overhead.
• Shrink: Inventory losses attributed to theft, damage, or administrative error, which management cited as an area of margin improvement.
• Marketplace: Ulta Beauty’s curated third-party online platform for supplemental beauty, wellness, and lifestyle brands outside the core in-store assortment.
• UB Media: Ulta Beauty’s in-house media network offering advertising solutions across digital and streaming channels for brand partners.

Full Conference Call Transcript

Kecia L. Steelman, Chief Executive Officer and Chris Del Orfus, Chief Financial Officer. During today's webcast, a presentation is being displayed live and will be posted to our website at ulta.com/investor shortly after the webcast concludes. 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 the earnings release and in our most recent 10-Ks and 10-Q filings. 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. I will now turn the call over to Kecia.

Kecia L. Steelman: Thank you, Kiley, and good afternoon, everyone. I am excited today to be joined by Ulta Beauty, Inc.'s new CFO, Chris Del Orfus. Welcome, Chris. We are so thrilled to have you as a part of the team. As I reflect in the past twelve months, I am incredibly proud of the Ulta Beauty, Inc. team and all we have accomplished. We closed the year strong, delivering full-year financial performance ahead of our plans while making important guest-facing investments to position our business for future growth. For the year, we grew net sales by nearly 10%, to $12.4 billion, delivered operating income of $1.5 billion or 12.4% of sales, and EPS of $25.64.

Today, I will start by briefly highlighting our fourth quarter and holiday performance and then discuss our full-year performance and the progress we made against our Ulta Beauty unleashed strategy before sharing more details on our plans and priorities for fiscal 2026. Our team stayed focused on executing and caring for our guests, delivering stronger-than-expected fourth quarter sales, and continued market share gains in mass and prestige beauty. Successful events fueled all of our performance including Black Friday and Cyber Monday, along with key post-holiday events like our fan favorite Love Your Skin and Jumbo Love promotions. Holiday served as a culmination of our efforts to advance the business throughout 2025.

We developed a thoughtful cross-functional holiday strategy supported by outstanding in-store and digital execution, bold and relevant marketing campaigns and activations, and compelling holiday assortment and gift sets. Guest engagement was high, and many guests leaned into the convenience of our omnichannel buy-anywhere, fulfill-anywhere capabilities during the busy holiday season. Our store and digital teams executed with excellence, delivering record-breaking holiday performance. We introduced a fun holiday marketing campaign focused on the Twelve Days of Giftmas featuring celebrity brand founders, which drove meaningful gains in awareness and brand love scores. We drove comp growth across all categories and made gifting easy with a curated and powerful holiday assortment, impactful newness, and a leading fragrance offering.

Our relentless commitment to operational excellence had store teams quickly restocking after high-volume holidays to serve guests and maximize selling opportunities, while our supply chain teams leveraged recent distribution center upgrades to increase our delivery speed to guests. Turning to our full-year performance, fiscal 2025 was a year of strategic investment and deliberate transformative change for Ulta Beauty, Inc. Change that challenged us to sharpen our focus, strengthen our capabilities, and position our business for sustainable, profitable growth in the rapidly evolving beauty market.

We began the year with a clear vision on how we intend to unleash the power of our model, build on our foundational advantages, and reassert our leadership position in beauty through the execution of our Ulta Beauty unleashed strategy, with a clear focus on three priorities: driving core business growth, scaling new businesses, and realigning our foundation for the future. Paired with the collective commitment and agility of our teams, we turned vision into reality and made exceptional progress across each pillar of our strategy, reigniting our growth, strengthening our core, and delivering better-than-planned financial performance. Let me briefly highlight the advancements we made during the quarter.

We elevated our execution and more consistently delivered a differentiated omnichannel guest experience, further solidifying Ulta Beauty, Inc. as the unmatched beauty destination for all guests. This came to life through a recommitment to best-in-class execution and stronger merchandise in-stock, incremental investments in payroll hours to support the guest experience, more than 100,000 in-store events which included brand launches, brand education, and celebrity appearances, and highlighted our differentiated in-store experience, ongoing digital upgrades that added guest-friendly features like Replenish and Save and Wish List, and expanded convenience through features like Split Card, and increased personalization through the power of AI in our automated marketing engine that delivered relevant, dynamic, and timely content across the customer journey.

We strengthened and modernized our assortment and merchandising strategy, accelerating pipeline momentum and delivering a powerful wave of newness that included more than 100 new brands this year, including Moroccanoil, Amika, Medicube, Isima, Drake's Better World Fragrance, and Tir among many more.

Key elements that supported our merchandising evolution included thoughtful, purposeful collaboration with our brand partners to fuel the innovation pipeline with new products like Fenty's Diamond Collection and Morphe eyeshadow palettes, a new elevated go-to-market approach that established tighter collaboration between our merchandising, marketing, and store teams and helped drive operational excellence, marketing leadership, and compelling merchandising innovation, a bold new marketing strategy with reimagined events like our Only at Ulta event, which highlighted our differentiated exclusive assortment, and powerful cultural activations like our sponsorship of the Cowboy Carter tour in conjunction with Beyoncé's Sacred Hair Care launch, and elevating our brand-building capabilities enabling us to build stronger portfolios of exclusive brands and products that drive meaningful differentiation and new member acquisition.

Noteworthy successes in 2025 include Sacred, which became our largest prestige hair care launch in history; prestige skincare K-Beauty brand Peach & Lily; influencer-founded makeup brand DIBS; and Gen Z's most loved fragrance brand NOISE. We built and expanded into new growth channels through our international expansion beyond the U.S. with nearly 100 stores in five countries. This included our acquisition of Space NK, a luxury beauty retailer operating more than 80 stores in the U.K. and Ireland, the opening of nine stores in Mexico via our joint venture partner Grupo Axo, and the opening of two stores in the Middle East through our franchise partner Alshaya.

Our newly launched marketplace, a curated online offering that allows guests to explore a complementary array of beauty, wellness, and lifestyle products on ulta.com and our app; the assortment includes more than 200 established and emerging brands and 5,000 SKUs. Our wellness initiative included the addition of nearly 30 new brands in our core wellness assortment and nearly 40 new brands in our marketplace assortment, along with an expanded store presence in more than 400 stores. And new UB Media capabilities like the addition of connected TV and streaming audio products that drove engagement and incremental ad revenue.

We made notable progress aligning our foundation to support future growth through important leadership changes to ensure our team was positioned to meet the needs of our evolving business, and ongoing cost optimization efforts, including investment in AI and automation, like testing new conversational AI capabilities for our guest services team, which streamline and increase resolution efficiency and quality, as well as the implementation of an AI-powered order management system to optimize fulfillment across our network, enabling our expansion of ship-from-store and reducing out-of-stocks and markdown risk. Finally, and perhaps most importantly, we reignited our culture and reinvigorated our brand, and our guests, associates, and brand partners took notice.

We did this through decisive organizational changes that accelerated decision-making and aligned teams and resources around guest-centric goals; adopting a winning mindset as we stacked key successes and built momentum throughout the year, we steadily reignited our collective spirit or as I like to say, we got our swagger back; and a new marketing brand equity campaign, Beauty Happens Here, and bold and fresh marketing activations which placed Ulta Beauty, Inc. at the center of exciting cultural moments like Lollapalooza and Coachella; and a renewed enthusiasm for the magic of our mission to bring the power of beauty to life for all ages and all life stages. By nearly all measures of success, our team delivered against our plans.

During fiscal 2025, we drove 5.4% comparable sales growth and positive comp growth across all categories. We strengthened conversion in stores, increased transactions, and drove improving NPS scores. We grew our loyalty program by 5% to a record 46.7 million active members, driven by strong growth in reactivated members and strong retention of existing members. We gained market share in both mass and prestige beauty. We delivered greater app engagement with approximately 60% of online sales made through the app and drove active app users up 15% year over year. And we drove significant EMV and reached record levels of unaided awareness.

While the guest-facing investments we made this year pressured profitability, the steady progress and results driven in fiscal 2025 reinforce our expectations that these investments position us to return to sustainable, profitable growth and to deliver against our long-term financial targets in fiscal 2026 and beyond. Before I turn to our plans and priorities for 2026, let me first touch on our view of the consumer, the current beauty landscape, and our expectations going forward. Throughout 2025, we closely monitored consumer behavior and observed continued resilience, a strong focus on value and affordability, and increasing discernment in spending decisions. At the same time, engagement with the beauty category remained healthy, and the landscape remained competitive.

We expect these themes to continue into fiscal 2026, though we are increasingly mindful of rising global conflicts that could impact economic conditions. Absent increased broader macro disruption for the year, our expectation for the beauty category growth is in line with the average historical growth rate with expected growth in the 2% to 4% range. As we turn to fiscal 2026, the Ulta Beauty unleashed strategy will continue to guide our priorities as we build on the successes of fiscal 2025. Chris will highlight our financial outlook, but let me touch on our priorities and plans for 2026.

First, our core business in the U.S., which now includes more than 1,500 stores and a robust digital offering, is our top priority and we continue to see significant opportunity to unlock further growth. In 2026, we will continue to enhance our brand-building efforts to further elevate and differentiate our assortment, strengthen our position as the retailer of choice to launch, build, scale, and globalize across the full low-to-luxury portfolio. We will continue to strengthen our appeal to meet guests' evolving beauty needs with innovative and relevant newness like the record-breaking launch of Rare Beauty by Selena Gomez and the exclusive launch of Balmain's new scent, Dustin de Balmain.

We will continue to invest in the heart of our experience—our stores—to extend our competitive advantage and capture key growth opportunities. We will build on our progress across our digital platforms with new capabilities and stronger guest engagement through personalization, as we leverage greater automation and real-time content to tailor the guest experience and provide even more value to our loyal members. And we are pleased to announce today an expanded strategic integration with TikTok. Next week, we will launch Ulta Beauty, Inc. on TikTok Shop where guests can purchase immediately as they engage with content from Ulta Beauty, Inc. and our brands on the platform.

We are excited about the opportunities both social and AI-enhanced commerce platforms are providing us to bring our undeniably Ulta Beauty, Inc. experience and assortment to life. We will initially launch with a thoughtfully curated assortment of only adult brands which will add another exciting tool to our brand-building playbook. Next, in order to maximize key incremental growth opportunities and remain resilient in a rapidly changing world, we will work to scale our new businesses. We intend to continue our international expansion in the U.K., in Mexico, in the Middle East, through our existing partners.

We will thoughtfully expand our wellness and marketplace assortment to drive new member acquisition and spend per member and add new UB Media capabilities to collectively fuel incremental profit growth. Finally, turning to our third area of focus, aligning our foundation for the future by optimizing our way of working and streamlining our cost structure. In 2026, we plan to continue our supply chain transformation efforts with the rollout of increased automation in existing facilities and start-up construction of a new regional distribution center in the Northwest later this year that will expand network capacity and increase fulfillment speed. We plan to invest in systems and processes to drive sales and inventory through new merchandising transformation efforts.

And we will continue to further our mission to support human possibility by expanding our AI capabilities to support the guest experience, drive associate productivity, and empower smarter decision-making. Beauty is deeply personal, and we believe leveraging new AI capabilities will enable us to deliver relevance, inspiration, and expertise seamlessly across the guest beauty journey. Powered by our loyalty ecosystem, rich first-party data, and convenient omnichannel footprint, we are engaging with industry leaders to explore how we can further leverage AI to amplify what makes Ulta Beauty, Inc. distinct. All of these efforts will support our ongoing cost optimization efforts to fuel investment and support profitable growth.

As we close out a strong fourth quarter in a transformative year, I want to thank our associates, guests, brand partners, and shareholders for their continued trust and partnership. As I reflect on my first year as CEO, I am proud of the progress that we made to deliver on our commitments, strengthen our strategic position, and invest in capabilities that will drive our next phase of growth. We are optimistic about the opportunities ahead while remaining mindful and cautious as we navigate an environment with ongoing global uncertainty and potential economic volatility.

Looking forward, we will control what we can control, put our prior strategic investments to work as we focus on strong execution, innovation that creates real value for our guests, and disciplined, returns-driven capital allocation. I am excited about what the future holds for Ulta Beauty, Inc. We have ambitious plans, and I am confident that we have the right team, the right model, the right strategy, and the swagger to continue to win in the beauty category and create value for our shareholders. I will now turn it over to Chris to cover some of the specific financial results and our 2026 outlook. Chris?

Chris Del Orfus: Thanks, Kecia, and good afternoon, everyone. Before I discuss our recent financial results and our outlook for fiscal 2026, let me first say how excited I am to join Ulta Beauty, Inc. Over the last three months, I have enjoyed getting to know the Ulta Beauty, Inc. team and gaining a deeper appreciation for the company's strategic positioning, financial strengths, and its strong people-focused culture. Ulta Beauty, Inc. is a beloved brand operating in an attractive and resilient category. Our Ulta Beauty unleashed strategy is fueling market share growth, driving guest engagement, and furthering our differentiation in a competitive category.

We have more than 60,000 talented associates who bring our brand to life and serve our guests with passion and commitment every day. We have strengthened our foundation, invested in key capabilities, and maintained a solid financial foundation with strong operating cash flow that enables value creation and also provides us with financial flexibility to pursue growth opportunities and weather dynamic macro environments. I am excited and optimistic about the future of Ulta Beauty, Inc., and I am energized to serve as a strategic partner to Kecia and the rest of the executive team to ensure we build on our momentum with a strong focus on driving long-term sustainable growth and maximizing value creation.

So with that, let us get into our results. Starting with the quarter, net sales for the quarter increased 11.8% to $3.9 billion compared to $3.5 billion last year. During the quarter, we opened five new and remodeled 18 Ulta Beauty, Inc. stores. We also opened two new and relocated one Space NK store. For the year, we opened a total of 63 net new stores, relocated six stores, and remodeled 42 stores, in line with our previously provided guidance. We ended the year with 1,505 Ulta Beauty, Inc. stores and 86 Space NK stores. Comparable sales for the period increased 5.8% driven by a 4.2% increase in average ticket and a 1.6% increase in transactions.

Looking at the cadence of sales through the quarter, comp sales were fairly consistent, reflecting both a strong holiday season and the lapping of softness in January. I would note that we did see some impact from the weather at the end of January this year. From a channel perspective, both store and digital channels contributed to comp growth, with e-commerce sales delivering mid-teen growth and comp stores increasing sales in the low single-digit range. Turning now to sales by category.

The skincare and wellness category increased to 24% of sales and the makeup category decreased to 35% of sales, primarily reflecting the impact of Space NK which has a higher mix of skincare sales than our Ulta Beauty, Inc. business. Fragrance was the strongest performing category again this quarter, delivering double-digit comp growth fueled by newness from established brands including YSL and Prada as well as exclusive brands such as NOISE, SNF, and Summer Mink by Drake, coupled with strong performance of holiday gift sets. New co-branded TV campaigns, expanded space in stores, and better in-stocks successfully positioned Ulta Beauty, Inc. as the fragrance destination this holiday season.

The hair care category delivered its best comp performance this year with comp growth for the quarter in the high single-digit range, primarily driven by strong performance from new brands including Amika and Moroccanoil and exclusive Sacred, which continued to build sales momentum after a fantastic launch in April. The skincare and wellness category delivered mid single-digit comp growth driven by prestige skincare and wellness. K-Beauty brands Medicube, Anua, and Peach & Lily and new brands, Dermatology and Personal Day, drove strong guest engagement, while highly giftable launches from Therabody, Nodpod, and Saje, which is exclusive to Ulta Beauty, Inc., delivered strong growth in wellness.

We took market share in the makeup category with low single-digit growth in total supported by positive comps in both mass and prestige makeup. Mass makeup growth was driven by compelling newness from brands like L'Oréal, Morphe, and Ulta Beauty Collection, while prestige beauty benefited from newness from Kylie Cosmetics and MAC. Finally, services delivered mid single-digit comp growth driven by increases in salon and specialty services, including ear piercing and makeup services. Gross margin for the quarter decreased 10 basis points to 38.1% of sales. The decrease was primarily due to channel mix and deleverage of store fixed costs and other revenue.

These headwinds were mostly offset by lower inventory shrink and leverage of supply chain fixed costs, reflecting efficiencies from our supply chain optimization efforts. Our team's relentless focus on reducing inventory shrink has delivered meaningful benefits every quarter this year. Our investments in fixtures and process improvements, targeted efforts in high-risk markets, and focused associate training have resulted in shrink reductions across every category. Moving to expenses, SG&A increased 23% to $1.0 billion. SG&A growth was primarily driven by higher incentive compensation, including rewarding our frontline and field associates reflecting strong financial performance versus our targets this year, compared to lower incentive comp in fiscal 2024.

The impact of Space NK and investments we made to support our Ulta Beauty unleashed strategy also contributed to SG&A growth. Excluding the impact of incentive compensation and Space NK, SG&A growth for the quarter was about 17%. As a percentage of sales, SG&A increased 230 basis points to 25.7%. Consistent with our investment strategy, expenses deleveraged across most components of SG&A with the exception of store payroll and benefits which were approximately flat as a percentage of sales. Operating profit was $477 million or 12.2% of sales, and diluted earnings per share for the quarter was $8.01 per share. Now to recap fiscal 2025, on a full-year basis, net sales increased 9.7% or $1.1 billion to $12.4 billion.

Comp sales increased 5.4% driven by a 3.3% increase in average ticket and a 2% increase in transactions. Gross margin increased 30 basis points to 39.1% of sales. The increase was primarily due to lower inventory shrink and higher merchandise margin, which were partially offset by channel mix and the deleverage of other revenue. SG&A expense increased 17.4% to $3.3 billion. The growth was primarily driven by higher incentive compensation, the impact of Space NK, and investments we made to support our Ulta Beauty unleashed strategy. Excluding the impact of incentive compensation and Space NK, SG&A growth for the year was about 13%.

Operating profit was $1.5 billion or 12.4% of sales, and diluted EPS increased 1.2% to $25.64 per share, above our previously provided guidance. Moving to the balance sheet and our capital deployment strategies, we ended the year with $494 million in cash and short-term investments and $62 million in short-term debt, primarily related to Space NK. Total inventory increased 10.8% to $2.2 billion, primarily reflecting additional inventory to support new brands, the acquisition of Space NK, and the impact of 60 net new Ulta Beauty, Inc. stores. The increase also reflects inventory investments in key categories to improve in-stock levels and support strategic growth opportunities.

Our business generated more than $1.5 billion in cash from operations for the year, which supported reinvestment of $435 million in capital expenditures and $890 million in share repurchases. To summarize our fiscal 2025 performance, the strategic investments and actions taken as part of the Ulta Beauty unleashed strategy enabled us to accelerate top-line growth, capture market share faster than expected, and ultimately exceed the commitments we made at the start of the year. I want to express my sincere gratitude to our teams for delivering this outperformance and positioning us well as we enter fiscal 2026.

As we look to fiscal 2026, we are focused on expanding our market share, driving returns from the investments we have made over the last few years, and importantly, returning to profitable growth. Our 2026 plan is aligned to our long-term targets and reflects several key financial goals anchored in our value creation principles, including disciplined cost management which helps fuel investment to support a strong growth profile. For the year, we anticipate net sales will increase between 6% to 7% with comp sales growth between 2.5% and 3.5%. We are planning on operating profit to grow in line or faster than net sales, and we expect diluted EPS will increase more than operating profit.

For modeling purposes, we expect net sales will be between $13.1 and $13.2 billion, primarily driven by comp sales growth and the impact of 50 to 60 net new company-operated stores. Overall, we are planning stronger sales growth in the first half of the year as we benefit from the acquisition of Space NK and lap easier comp growth comparisons in the first quarter. We expect gross margin will be approximately flat as benefits from higher merchandise margin driven primarily by greater inventory productivity will likely be offset by deleverage of store fixed costs and other revenue.

We will continue to invest in growth opportunities, but we are planning SG&A growth to be in line with to slightly below net sales growth and significantly lower than fiscal 2025, enabled by productivity programs and disciplined investment prioritization. Keep in mind, we expect to realize double-digit SG&A growth in 2026 as we will not lap the acquisition of Space NK and the annualization of investments until 2026. We expect operating profit will increase between 6%–9% resulting in operating margin being flat to up 20 basis points. Primarily reflecting the anticipated pace of SG&A growth, we expect operating profit growth will be stronger in the second half of the year.

We expect these plans, combined with the ongoing efforts to enhance inventory productivity, will continue to generate strong operating cash flow which will enable reinvestment to support future growth and also support our intent to return approximately $1.0 billion of capital to shareholders through our stock repurchase program. We expect capital expenditures for the year will be between $400 million and $450 million, primarily to expand and refresh our store portfolio as well as investments in digital and information technology capabilities and supply chain optimization to support the guest experience and drive further operational productivity.

Reflecting these assumptions, we anticipate diluted EPS will be between $28.05 and $28.55 per share, representing growth between 9.4%–11.4%, respectively, including the impact of share repurchases and an assumed tax rate between 24.2%–24.4%. In closing, the execution of our Beauty unleashed strategy in 2025 enabled us to accelerate top-line growth and deliver stronger performance than planned. Building on this foundation, we have developed a plan for fiscal 2026 that delivers against our long-term financial targets, including market share expansion, profitable growth, and strong cash generation which support attractive EPS growth and compelling value creation. I will now turn the call over to our operator to moderate the Q&A session.

Leila: We will now open for questions. To join the queue to ask a question, please press 5 on your telephone. Again, that is 5 on your telephone to ask a question. Please limit to one question before jumping back in the queue. Thank you. We will now pause a moment to assemble the queue. Your first question will come from Christina Kattai with Deutsche Bank.

Christina Kattai: Hi, good afternoon. Thank you for taking the question. I wanted to start by asking on the composition of the comp. Can you talk about pricing and what you are seeing from the brands? Because the 4.2% ticket was very strong. On the other hand, transactions decelerated, especially when looking on a two-year stack. Maybe can you touch on the dynamics there and just how you are thinking about it in 2026 as it unfolds? Thank you.

Kecia L. Steelman: Hi, Christina. Thanks for the question. You know, we see pricing increases every year. They typically impact about 10% to 15% of the overall assortment. And we are really planning for normalized pricing environments in fiscal 2026. You know, we will continue to work with our brand partners and navigate potential pricing increases, but we are not seeing or hearing anything that is outside of the normal territory.

Christina Kattai: Okay. And then just a question on SG&A. It came in a little bit higher. Can you maybe touch on how much of that was incremental marketing and how you are thinking about the wraparound effect of that in 2026? And then as we think about the, you know, if you could touch on the promotional backdrop in beauty across the industry. Just what are you seeing with the cost of customer acquisition? We would love to get your thoughts there. Thank you.

Kecia L. Steelman: Chris, why do you not start?

Chris Del Orfus: Yes. So regarding SG&A, obviously, we were pleased with the performance in Q4 and the ability to over-deliver both sales and EPS above the high end of our guidance. We also delivered our operating at the high end of our guidance. So if you think about it, we over-delivered sales above the high end of our guidance by about $85 million, and we had flow-through of EPS upside similar to our margin rate. So we did make some investments in SG&A in between there. A few things I would point to. One, we had to absorb higher incentive comp on the over-performance.

The second thing to note is, of course, there are some variable costs that are attributed to the increased sales, for example, increased tasking in stores. In addition to that, we did make some investments to support the outperformance and growth, most notably marketing, some media investments, not only help 2025, but position us nicely as we look into 2026. So we are definitely pleased with how we finished 2025, and we think that positions us as we move into 2026 as you can see from the guidance we provided.

Kecia L. Steelman: Yes. And then just a little bit on promotionality. We do not have any plans to accelerate promotion, but we recognize that the environment is competitive, it is dynamic, and there is an increased focus right now out there on value. But, you know, it is one of the levers that we can pull into. And, you know, with us having such a strong loyalty base, our investments that we have made in personalization, along with other ways that we have invested to really be relevant and top of mind for that guest, we currently do not have any elevated promotionality built into the current plan or in the guidance.

Christina Kattai: That is great. Best of luck.

Kecia L. Steelman: Thank you.

Leila: Your next question will come from Christopher Michael Horvers with JPMorgan.

Christopher Michael Horvers: Thanks, and good evening, everybody. I just want to jump back on your comments earlier about the backdrop, Kecia. In a 2% to 4% industry growth, is that a deceleration versus 2025? And then to what extent are you baking in the geopolitical backdrop? Obviously, a lot changed in the past two weeks. You know, did you take that into account when you were thinking about the sales outlook for the year and including your own share gains?

Kecia L. Steelman: Yes. Let me—thanks, Chris, for the question. You know, it is very close to 2025. We—you know, the comp guidance really reflects a normalization and a fact that, you know, we are going to be increasingly having some challenging comps as we move through the year. We have, you know, adjusted for dynamic operating environments. We are staying really focused on controlling what we can control. You know, just a little color on how we looked at when we were building, you know, the 2.5%–3.5%, there were really four areas that we looked at. The first was really on consumer demand.

You know, we are cautious about how the consumer demand could evolve given the macro pressures and rising conflicts, but, you know, beauty has been a resilient category to these macro pressures. So we see that beauty engagement is going to continue to be healthy in 2026. The second—I touched on this just earlier about the promotional environment. There are no plans for us to accelerate promotion, but, you know, it is going to be competitive out there. And, you know, I want to continue to focus on driving share and growth, and we are going to stay close to it, but we always want to look at market share and top-line healthy growth as a measure to our success.

And then pricing, you know, I talked on that. We do not see anything that is going to be out of the ordinary within pricing. And then, you know, the growth of the category is between that 2% to 4%.

But just as a quick reminder, you know, we are going against some easier comps in the first half versus the second half of this year, and we are just continuing to focus on controlling what we can control and making sure that we have a plan that gives us the ability to continue to take share and to build a strategy around numbers that we feel like, you know, regardless of the economic environment that we can continue to hit.

Christopher Michael Horvers: Got it. And then, I guess, you launched Rare Beauty to start the year. And so can you talk about what the early response is to Rare Beauty? How should we size it in terms of an analog? Is this something like Kylie? Is this something like when you launched Fenty? Typically, you talked about, you know, 25% to 30% of sales growth is newness. How should we think about Rare, you know, relative to that number and relative to other analogs when you launched some significant brands? Thanks so much.

Kecia L. Steelman: Absolutely. So, you know, just to maybe start with your last point, when you look at 2025, you are right. Twenty percent to 30% of our growth is coming from newness. We were a little on that higher end of the scale in 2025. So we are closer to that 30%. You know, Rare, well, it came out of the gates very strong and we are thrilled because it, you know, makeup having this halo impact in makeup is fantastic for us. It is one brand and we carry, you know, 600 brands in the assortment. What we are—what I can share about quarter-to-date trends so far is that we are pleased with February.

We are still early in the quarter and, you know, we do have easier compares as I mentioned, you know, earlier in Q&A that we are going against easier numbers in the first half comp. But, you know, we have this embedded already in our guidance of the 2.5% to 3.5%. But, yes, we were thrilled with what we saw with Rare coming out of the gate strong. You know, Lauren and team had done a great job with newness and the cadence of newness in 2025. We like what we see with the cadence of newness in 2026. But, you know, it is one brand. It does not change the entire course of our business at the same time.

Hopefully, that answered your question.

Christopher Michael Horvers: Understood. Thanks so much.

Leila: Your next question will come from Sydney Wagner with Jefferies.

Sydney Wagner: Hi. Thanks for taking our question. Can you just give us a little bit more of an update on what you are seeing in terms of the competitive environment? We have seen some pushing from mass retailers into prestige. I am just curious what you think about are the most important elements of the business to maintain your competitive moat in the category, and what helps you continue to win new brands? Thank you.

Kecia L. Steelman: Thanks for the question, Sydney. You know, beauty has always been a competitive category. But, you know, I would say that this is what we do. This is what Ulta Beauty, Inc. is about. We cover everything from low to lux and everything in between. And when you add wellness into this mix, you know, we are a trusted, you know, location with expertise that is broad in a curated assortment, with our leading loyalty program, with this omnichannel activation that we are continuing to invest in. You know, we just announced today about our TikTok, which I think is going to be another quiver for us to continue to engage with new guests.

You know, we just are leaning into what makes us different which again I do believe it is that low to lux with services and wellness all captured into it. We have been talking a little bit more about leaning into our brand-building capabilities. We are bringing, you know, an elevated focus on how do we continue to engage with newness and exclusivity which continues to, you know, separate us from everyone else. But, again, you know, a lot of people want to get into beauty because it is an attractive category because of the margins, etc. But this is what we do, and we are just going to double down on the strength and the power of this model.

The Ulta Beauty unleashed plan, I could not be more pleased with how we were performing against the plan in 2025. We are just going to continue to double down and really start to reap the reward of the investments that we made in 2025 and harvest that in 2026. And I would just say, you know, stay tuned. We are pleased with the progress we have made and I feel like we are focused on the right strategies for us to continue to be a share gainer in the future.

Leila: Next question will come from Oliver Chen with TD Cowen.

Oliver Chen: Hi, Kecia and Chris. As we think about makeup next year, what do you see happening relative to mass and prestige? And is the comp going to be pretty modest in makeup and outperform in fragrance? The related product question is K-Beauty and wellness. I know you have a lot of really good talent in wellness and you are thinking about that category more dramatically. Does that—when you put that space in, you know, how does it interplay with the categories that currently exist? And K-Beauty might be a massive megatrend, so would love your take. And Chris, a follow-up: On the comp store sales guidance, what do you need to leverage your fixed costs?

And, historically, it has been higher than mid single digits, but what should we know in terms of deleverage on the 2.5% to 3.5%? And then your promotional question on guidance, were you saying promos this year ahead will be flat to last year, or are you giving yourself some breathing room to have higher promos than last year? Although I know you are working on many efficiencies around simplified, better promotions. Thank you.

Kecia L. Steelman: Alright. Well, thanks, Oliver. I will start. Yes. You know, we are focused on everything from low to lux and everything in between. I think it gives us a strategic advantage that we do carry across all price points, especially if there could be potential pressures on the consumer's wallet in the future. In regards to K-Beauty and wellness, one of the things that I am very pleased with is that Lauren and team are working on SKU rationalization and making sure that, you know, unproductive SKUs—that we are really leveraging and bringing in both wellness and K-Beauty. One of the things that we are really focused on is this authenticity and quality of the brands.

You see a lot of K-Beauty in and out, and it is almost like fashion that you see. We are really leaning into, at Ulta Beauty, Inc., the efficacy of the products and making sure that the products really give the results. We want to do all of the research for the guests. So when they come in, they buy K-Beauty products that are known and trusted, that they actually work, and that has been working really well for us. And I would say that same philosophy is true for wellness. One of the things that I am very excited about is in regards to our marketplace.

And if you think about marketplace, you think about it as mezzanine into our existing store. So it is a complementary assortment that does not, you know, take away from what you could buy in store today, but it is, you know, another item that you could add to your basket. So we are taking that approach really from end to end with K-Beauty, with wellness, with marketplace, and everything from low to lux and everything in between.

Chris Del Orfus: Yes. On the store fixed cost and the deleverage, maybe what I would share is, one, as you heard, we are planning gross margin flat year over year. So we have multiple levers that we use to try and manage that. So we see opportunity in merchandise margin. We are continuing to drive supply chain optimization as well and we will still continue to benefit from shrink. I think the other thing I would point to is the new stores is obviously still an important component to driving growth. And what we are also doing is we are rolling out new store formats, a smaller format this past year, about 25% of our stores with that new format.

In 2026, we expect more like 15% to be the small store format. So it is not just about driving top line, it is also about how we execute putting new stores in market. And we think that will be an element that helps us. The deleverage there is really modest and manageable, and we will manage things holistically across gross margin.

Leila: Your next question will come from Susan Anderson with Canaccord Genuity.

Susan Anderson: Hi. Thanks for taking my questions. I was wondering maybe if you could talk about the timing of the new DC in the Northwest. And I guess how should we think about the cost there? And then I do not know if I missed this or not, but maybe if you could talk about too, just the drivers of the op margin being better in the back half. Is that just when the efficiencies start to roll in, I guess? And then are you guys assuming, like, gross margins pretty flattish throughout the quarters?

Kecia L. Steelman: Yes. Thanks for your question, Susan. I will start, and then I will kick it over to Chris. You know, when we talked about the new DC, it will not be up and functioning until 2027, but these things take a while to, of course, get out of the ground, especially when you are building from ground level up. We have those dollars built into our CapEx plan. So they are both in the long-term algorithm and what we are expected to spend is already in this year's guidance too with the cost to get that building started. And then, Chris, I will turn it over to you.

Chris Del Orfus: Yes. So on the progression of operating margin, the primary driver is—right—we are absorbing Space NK. So you have that impact. Really SG&A. There are two key factors. First of all, in the first half of the year all the way up until Q3. The second one is the annualization of the investments we made in the back half of 2025. Then as you move into the second half, you cycle over those. And in addition, especially with Space NK, right, the holiday season, it tends to be higher sales, and you should get the leverage from the SG&A there. So those are the key drivers. Our productivity was active in 2025 and will progress throughout the year.

I would more point to those two factors as the big factors that impact the timing of operating margin first half versus second half.

Susan Anderson: Okay. Great. Thanks for the details. Good luck with the year.

Leila: Your next question will come from Katharine Amanda McShane with Goldman Sachs.

Katharine Amanda McShane: Hi, good afternoon. Thanks for taking our question. So our question centered around SG&A as well. Totally understand the different laps that we are encountering here in 2026. But if we were just to focus on how you are spending around marketing, I know that was part of the Unleashed plan to spend more on marketing. Could you maybe talk a little bit more about plans for that, just how the dollars look maybe versus what you spent in 2025? And what that could look like going forward.

Chris Del Orfus: You know, so we would not share that level of detail, but what I could share is a couple things. One is our SG&A growth profile, right, that we outlined was either in line with sales to slightly below sales. Again, that does include us absorbing Space NK and the annualization of investments. We have been very targeted with our investment priorities. And so one of the top areas that we have continued to prioritize is personalization, which will certainly be a core part of our marketing investment. So we are still investing to grow within that plan in addition to having the carryover investment that we put into place in 2025.

I will also point to—you heard me say, in Q4, we did invest on the upside sales performance. That did include some marketing and media that we have some benefit as we rolled into 2026. So we feel really good that we actually have a very disciplined approach on SG&A. We are prioritizing growth investments in key areas and making intentional choices of where not to invest, and certainly marketing and personalization remains our high priority.

Leila: Thank you. Your next question will come from Mark R. Altschwager with Baird.

Mark R. Altschwager: Good afternoon. Thank you for taking my question. First, just following up on the comp guide, the 2.5% to 3.5%—that is a touch below the long-term framework. So I was hoping you could just give us a little bit more detail on the factors driving that. Just conservatism to begin the year or just anything you are seeing in the environment that is leading you to take a more cautious approach to that today.

Kecia L. Steelman: Well, I will say that our initial plan is, you know, and I shared this in the comments, Mark, that, you know, we want to be a market share gainer. So we are looking at that as we are planning—we built this plan is that we do not want to cede market share. So, you know, I think that this plan we feel is a thoughtful plan that is one that we can, you know, continue to build the expense portfolio around. If there is potential upside, I am going to love that. We have had, you know, this last year, we had a strategy that was working. It was laid out well.

We outperformed our initial guidance that we shared in 2025. And we beat and erased throughout the year. And we exceeded on all metrics. You know, I am confident that we have got a plan for 2026 that allows us to hit our targets and continue to invest in the business. It will allow us to continue to be a share gainer and be, you know, I would say fiscally responsible in our investments. Some of the, you know, numbers that Chris shared, we are getting some of our expense rates in line.

We have been in this heavy, heavy investment cycle for many years, and it is time for us to start to reap some of the rewards of those investments, and that is what this plan is allowing us to do.

Mark R. Altschwager: Makes a lot of sense. And then, Kecia, just to follow up, wondering if you could share any more learnings you have had so far on Space NK, and any update to how you are thinking about unit growth there and geographic expansion to new markets? Thank you.

Kecia L. Steelman: Yes. Thanks, Mark. Well, what I will say is that we are pleased with the performance. They have a nice growth in sales. We feel great about the growth strategy. You know, I do not want to give—I am not going to give specifics on where we see the growth, but we view this asset as additive to our core business. We see opportunities to really leverage each other's strengths—access to new brands, clienteling strategies, loyalty programs—and there is the ability for us to continue to grow in a nice market of the U.K. for us.

So, you know, it is still a little early to say, like, how we feel like we can totally unlock the entire—all the value in Space NK, but we like what we are seeing so far and we are really pleased with the acquisition. Acquisition. Thank you.

Leila: Your next question will come from Olivia Tong with Raymond James.

Olivia Tong: Great. Thanks. You have talked in the past about leveraging investments. So can you talk about the level of investment spend for 2026, the initiatives that you have planned this year versus last year, where that leverage is coming from? And then as you look at the margin improvement, what do you think is the right level longer term now that the business is on a better track? What is the right investment level to get back to sort of a steady-state comp growth more in line with the long-term algo? That is my first question.

And then the second one is just around the consumer environment being a challenging—you know, new challenges to the consumer environment that we perhaps did not have a couple of weeks ago. And can you talk about your flexibility and the flexibility in the model to make potential pivots, adjustments if necessary? You know, you have obviously done a lot to promotional cadence, but it seems like the state of the consumer is evolving. Just wanted to get a little bit more detail on that. Thank you.

Chris Del Orfus: So maybe I will start with the second part of your first question on how we think of margin. Look. What I would share is the way we think of this is we are looking to deliver consistent, profitable growth. To maximize value creation, what we want to do is maximize profit growth. Margin is a part of that, of course. But I can do that driving incremental top line or through margin leverage. So every year—and this is what is reflected in our current guide—we will have a plan that has a strong productivity goal that is going to fuel targeted and high-ROI investments in a disciplined way. So it will not be at the expense of margin.

If I see investment opportunities throughout the year, as Kecia said, if we have upside and can increase our operating profit in the current year while continuing to also support future growth momentum, you get a double benefit and can do that preserving margin. That is what I will do. And that will support kind of consistency of growth and then a flywheel of value creation. With that said, again, every year we will have an element of leverage that we are building into our plan. And we can, as we move throughout the year, figure out how to best optimize profit growth within that while maintaining discipline on margin.

So that is what you see embedded in our plan this year. I did talk about—you asked about how much investment. It is hard to answer because we have said we would grow SG&A in line with sales to slightly below. But the product of the investments in there is actually more than that because we do have productivity initiatives. Supply chain optimization, in particular, has been positive for us. We are focused on inventory productivity, among other things.

So we feel really good about the areas that we are investing in this year and the guide that we set up within that framework that is in line with our long-term value creation algorithm and basically being a compounder of double-digit earnings growth.

Kecia L. Steelman: Yes. I would just add that, you know, we have the leadership and the team in place that can and will pivot as needed. The fact that we do carry low to lux, it gives us the ability to also flex as the consumer, you know, flexes with us. And we have better insights into the category and can leverage AI to make really good strategic business decisions to help us drive this business. You know, while it is a competitive environment, we are playing to win and to continue to take share.

Olivia Tong: Great. If I could follow up on some of the newer categories—health and wellness, marketplace, international. How do you think about further expansion in year two on those and adjustments that you need to make in year two and the level of investment in those initiatives going forward.

Kecia L. Steelman: Well, on international expansion, you know, we are planning on continuing to open stores in our partnership with Grupo Axo and with Alshaya. You know, right now, we are looking at this as more of an asset-light approach on how we can continue to grow globally. And, you know, it is an important category for us because we do want to be a global beauty retailer. We are making smart decisions on investment categories like wellness, and there was the opportunity for us to continue to leverage SKU rationalization to have more productive items that are in our store. Four-wall productivity is something that Chris and I are really leaning into.

We want to make sure that we are leveraging that fixed cost base of our 1,500 stores out there to continue to drive profit through the stores and through our P&L. So, you know, we are making good business decisions with a strategic lens that have both, you know, short-term and long-term implications on how we can really optimize this model. Alright. Well, with that, I think that would be the last question that we had. I just want to thank everyone for joining us today. I want to thank our associates once again for delivering against our ambitious plans for 2025 and for their dedication in representing the Ulta Beauty, Inc. brand to our guests each and every day.

We are confident in our strategy, we are focused on operational excellence, and committed to delivering sustainable growth even in this dynamic environment. We look forward to updating you on our progress on the next earnings call on June 2. I want to thank you all and have a great evening. Thank you.

Leila: Thank you for joining. This concludes today's call. You may now disconnect.

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