Ulta Beauty (ULTA -0.60%), a leading beauty retailer known for its expansive in-store and online product selection, released results for the quarter ended August 2, 2025, on August 28, 2025. The company reported GAAP revenue of $2.79 billion in Q2 FY2025, up 9.3% from the same period last year, and diluted earnings per share of $5.78 (GAAP), reflecting a 9.1% increase. Both top- and bottom-line GAAP figures surpassed market expectations. Comparable sales—an industry metric reflecting year-on-year growth from stores and digital platforms open at least a year—jumped 6.7%, reversing a rare decline in the prior year's quarter. Despite this strength, higher operating expenses led the operating margin to decline to 12.4%, from 12.9% in Q2 FY2024. Overall, the quarter showed a strong sales comeback backed by robust customer engagement and an upgraded financial outlook, even as costs rose more quickly than revenue.
| Metric | Q2 2025(13 Weeks Ended August 2, 2025) | Q2 2024(13 Weeks Ended August 3, 2024) | Y/Y Change |
|---|---|---|---|
| Diluted EPS (GAAP) | $5.78 | $5.30 | 9.1 % |
| Revenue (GAAP) | $2.79 billion | $2.55 billion | 9.3 % |
| Comparable Sales Growth | 6.7 % | (1.2 %) | 7.9 % |
| Gross Margin | 39.2 % | 38.3 % | 0.9 pp |
| Operating Margin | 12.4 % | 12.9 % | (0.5 pp) |
| Net Income | $261 million | $253 million | 3.2 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Ulta Beauty’s Business Model and Growth Focus
Ulta Beauty operates as a specialty retailer offering cosmetics, skincare, haircare, fragrance, and beauty services across more than 1,400 U.S. stores and an omnichannel digital platform. It stands out by combining mass-market and prestige brands, often carrying exclusive products and private-label lines. This broad assortment gives it a competitive edge.
The company’s business relies heavily on drawing customers into its stores for hands-on experiences and personalized advice, while also developing robust digital offerings. Key focuses include expanding its store footprint, investing in its loyalty program, introducing new and exclusive brands, and constantly enhancing the customer experience. Building and maintaining a strong loyalty program has become increasingly important, as more than 95% of sales now come from members.
Quarter Highlights: Sales Surge, Margin Pressures, and New Initiatives
The quarter saw a significant sales upswing. Revenue jumped to $2.79 billion in the quarter ended August 2, 2025, while comparable sales—a key measure tracking growth from stores and online platforms open at least a year—increased by 6.7% after a 1.2% decline in the prior year period. This growth was fueled by a 3.7% rise in customer transactions and a 2.9% increase in average ticket size, reflecting more visits and higher per-visit spending. Management directly attributed these gains to increased comparable sales, contributions from new stores, and the integration of Space NK, a luxury beauty retailer acquired in July.
Skincare, wellness, and fragrance product types increased their share of overall sales to 25% and 12%, respectively. Cosmetics and haircare—the traditional margin drivers—saw modest declines in their sales mix. Strategic launches of exclusive and new brands drove interest, supported by a pipeline that has included 19 brand introductions in recent months. The company also completed the acquisition of Space NK, expanding its physical presence into the U.K. and Ireland with 83 new stores. While this broadens Ulta’s assortment and international reach, it also introduces new integration and balance sheet risks.
Gross margin (GAAP) ticked up to 39.2%, thanks in part to “lower inventory shrink” (a reference to losses from theft or damage) and higher merchandise margins. However, operating expenses rose faster than sales, with selling, general, and administrative costs climbing 15% to $741.7 million (GAAP). The main drivers were higher payroll, incentive compensation, and corporate overhead related to ongoing investment in store experiences and digital capabilities. As a result, the company’s operating margin slipped by half a percentage point to 12.4% of net sales (GAAP). Net income (GAAP) grew to $260.9 million, though this gain was modest compared to revenue growth as spending increased.
The brand’s omnichannel approach remained a cornerstone, with ongoing enhancements to digital experiences. The company opened 24 new locations, bringing its U.S. count to 1,473. Loyalty engagement remains strong, with more than 95% of sales from registered members in FY2024. However, management did not provide updated membership figures for this quarter. Store events, new fulfillment options, and digital partnerships helped drive both traffic and engagement.
Outlook and Investor Considerations
Ulta Beauty raised its expectations for FY2025, now guiding for net sales of $12.0 billion to $12.1 billion, comparable sales growth of 2.5% to 3.5%, an operating margin of 11.9% to 12.0%, and diluted EPS between $23.85 and $24.30. These upgrades reflect strong year-to-date performance and sustained customer demand. However, management noted ongoing caution about how consumer demand might evolve going into the second half of FY2025, especially as operating expenses are expected to remain elevated due to investments in integration, new store growth, and technology.
Inventory (GAAP) grew 20.5%, outpacing sales growth, due to new store openings and inventory needs for recently launched brands. Short-term debt increased to $289.1 million after funding the Space NK acquisition, and cash balances declined to $242.7 million.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
