Ulta Beauty Fiscal Q2 2026 Earnings: Sales Growth Supports Higher Guidance

Ulta Beauty (NASDAQ: ULTA) reported fiscal Q2 2026 net sales of $3.04 billion, up 8.9% year over year, while diluted EPS increased 13.3% to $6.55 from $5.78. Comparable sales rose 3.8%, and operating income grew 10.1% as SG&A leverage offset a modest gross-margin decline tied mainly to the Space NK business mix.

Core Financial Results

Revenue growth came from higher comparable sales, the Space NK acquisition, and new stores. Total sales grew faster than comparable sales because the reported figure included contributions from the acquisition and an expanded store base.

Gross profit increased broadly in line with revenue, while operating income grew faster. Net income growth was more moderate, but a lower diluted share count helped EPS increase at a faster rate.

Business Mix and Store Expansion

Ulta Beauty did not quantify the individual revenue contributions from comparable sales, Space NK, and new locations. During the quarter, the company opened 15 stores and closed one, producing 14 net additions. It ended the period with 1,622 company-operated stores, including 1,534 in the United States and 88 internationally.

The sales mix shifted modestly. Cosmetics represented 37% of quarterly sales, down from 38%, while skincare and wellness declined to 24% from 25%. Haircare increased to 20% from 19%, and fragrance rose to 13% from 12%. These percentages describe changes in sales mix and do not indicate that category revenue declined in absolute terms.

Space NK Mix Pressure Was Offset by SG&A Leverage

Space NK affected both sides of the income statement. The acquisition contributed to sales growth but also reduced the consolidated gross margin because of its business mix. Gross margin consequently declined by 10 basis points to 39.1%.

SG&A expenses increased 8.2% to $802.8 million, primarily because of Space NK, but declined to 26.4% of sales from 26.6%. That expense leverage more than offset the gross-margin pressure, allowing operating margin to edge up to 12.5% from 12.4%.

Below operating income, net interest moved from $1.4 million of income to $3.7 million of expense, while the equity net loss of an affiliate increased to $2.1 million from $0.6 million. These items help explain why net income grew more slowly than operating income and why net margin slipped to 9.3%.

Cash Flow, Balance Sheet, and Repurchases

For the first six months of fiscal 2026, operating cash flow increased to $381.6 million from $316.5 million. Capital expenditures were $139.5 million, compared with $156.0 million in the prior-year period, and supported stores, relocations, remodels, and information technology.

At the end of the quarter, Ulta Beauty held $158.5 million in cash and equivalents and $55.0 million in short-term investments. Short-term debt was $339.6 million, primarily supporting working-capital requirements and capital-allocation priorities. Merchandise inventory remained essentially flat year over year at $2.4 billion, as improved inventory management offset inventory for new brands and stores.

Ulta Beauty repurchased 1.4 million shares for $791.1 million during the first half, excluding excise taxes. Quarterly weighted-average diluted shares declined approximately 4.5% year over year, helping diluted EPS grow faster than net income. The company had $1.0 billion remaining under its existing authorization as of August 1 and expects to use that amount by the end of fiscal 2026.

Fiscal 2026 Guidance

Following its first-half performance, Ulta Beauty raised its full-year sales, comparable-sales, operating-income, and EPS ranges. Planned capital expenditures were unchanged, while the fiscal-year share-repurchase plan increased by $300 million.

Risks Investors Need to Monitor

• Comparable-sales momentum: Comparable sales grew 3.8%, below the prior-year quarter’s 6.7%. Because acquisitions and new stores also contributed to total revenue growth, comparable sales remain important for assessing underlying demand.
• Space NK profitability mix: Space NK supported revenue but reduced consolidated gross margin and increased absolute SG&A expenses. Continued mix pressure could make further margin expansion dependent on expense leverage.
• Liquidity and capital allocation: Cash and equivalents declined from $424.2 million at the beginning of the fiscal year to $158.5 million, while short-term debt reached $339.6 million. The planned increase in repurchases makes operating cash generation and working-capital management more consequential.

Summary

Ulta Beauty’s fiscal Q2 2026 results combined higher comparable sales, acquisition contributions, and store expansion to produce 8.9% revenue growth. Space NK pressured gross margin, but SG&A leverage supported a slight operating-margin improvement, while repurchases helped EPS outpace net income. The raised fiscal-year outlook shifts attention to comparable-sales execution, Space NK’s margin contribution, and the balance between cash generation and an expanded repurchase plan.