Ulta Beauty reported another quarter of profitable growth during fiscal 2026 as sales increased nearly 9%, operating income grew at a double-digit rate and management raised multiple components of its full-year financial outlook.
Second-quarter net sales increased 8.9% year-over-year to $3.036 billion from $2.789 billion.
Comparable sales increased 3.8%.
The company’s overall sales increase reflected a combination of positive comparable performance, contributions from new stores and revenue associated with the acquisition of Space NK.
Operating income increased slightly faster than revenue.
Quarterly operating income rose 10.1% to $379.6 million.
Operating margin edged higher to 12.5% from 12.4%.
Diluted EPS increased 13.3% to $6.55 from $5.78, meaning per-share earnings also grew faster than revenue.
Gross profit increased 8.7% to approximately $1.2 billion.
Gross margin was essentially stable at 39.1% compared with 39.2% in the prior-year period.
Management attributed the modest 10-basis-point decrease primarily to the business mix associated with Space NK.
SG&A expense as a percentage of sales improved to 26.4% from 26.6%, helping offset the slight pressure on gross margin and contributing to higher operating margin.
Inventory management was another positive element of the quarter.
Merchandise inventory remained approximately flat year-over-year at $2.4 billion despite nearly 9% sales growth and continued investments in new stores and brands.
Holding inventory relatively steady while growing sales can improve inventory productivity and reduce the risk of excess products requiring markdowns.
The strong first-half performance prompted Ulta to increase several components of fiscal 2026 guidance.
The company now expects net sales growth of 6.7% to 7.2%.
Previous guidance called for growth of 6% to 7%.
Comparable sales are now projected to increase 3.2% to 3.7%, compared with the previous expectation of 2.5% to 3.5%.
Management also became more optimistic about profit growth.
Operating income is now expected to increase 8.3% to 9.3%, compared with the previous range of 6.5% to 9%.
Diluted EPS guidance increased to $28.70 to $29 from the previous $28.36 to $28.80 range.
Ulta is also increasing capital returns.
The company raised its fiscal 2026 share-repurchase plan to $1.8 billion from $1.5 billion.
Management expects to use the remaining $1 billion available under the existing repurchase authorization by the end of the fiscal year.
The increased buyback plan can provide another source of per-share earnings leverage by reducing the number of shares outstanding over time.
The quarter demonstrates a balanced financial profile.
Ulta generated nearly 9% sales growth, maintained essentially stable gross margin, increased operating income 10%, grew EPS more than 13%, held inventory roughly flat and raised its annual outlook.
The combination indicates that the company’s growth is translating into higher profitability without requiring a disproportionate increase in inventory.
Management’s decision to increase revenue, comparable-sales, operating-income and EPS expectations after the first half provides an additional indication of confidence heading into the remainder of fiscal 2026.
KEY QUOTES:
“Our team delivered another impressive quarter of strong sales, profit, and earnings growth, demonstrating that we are executing with discipline and translating our Ulta Beauty Unleashed strategy into tangible benefits for our guests.”
“With our strong first-half performance, we have raised our financial guidance for the year.”
Kecia Steelman, President and Chief Executive Officer of Ulta Beauty
