Ulta Beauty shares suffered a sharp decline on the stockmarket (-10.7%) on Friday, after publishing the group published it's quarterly results. Despite sales exceeding expectations during the holiday period, its profitability was heavily penalized by rising costs and intensified marketing investments.
Margins under pressure
Higher incentive compensation, increased marketing spending, and the integration of the British chain Space NK, acquired last year, weighed on the accounts. Selling, general, and administrative expenses thus jumped 23% during the December quarter to reach $1bn.
In this context, Ulta's operating margin came in at 12.2%, compared to 14.8% a year earlier. This degradation largely explains the market's negative reaction.
Furthermore, the group forecasts comparable sales growth of between 2.5% and 3.5% for FY 2026, a sharp slowdown after the 5.4% increase recorded in 2025. These forecasts were established in an environment that CEO Kecia Steelman describes as "marked by persistent global uncertainty and potential economic volatility."
Ulta nevertheless intends to support its commercial momentum, notably through a reinforced communication strategy centered around TikTok.
Analysts still optimistic
Despite this publication being deemed disappointing, management maintains it remains "optimistic about the opportunities ahead."
Several analysts share this reading. UBS believes that Ulta still has many levers to support its growth. In a note, the bank highlights that "Ulta still has many levers to post a particularly enviable compound annual growth rate of its earnings over the coming years."
The tone is similar at Bernstein, for whom the market reaction should be put into perspective. According to the firm, "the stock was already very stretched, so the pullback seems more like a technical correction after a publication below expectations than a true signal of fundamental weakness."
