Ulta Beauty Q1 FY2026 Earnings Call - Double-Digit EPS Growth Driven by Shrink Control and Exclusive Brand Momentum

Layla, Conference Operator: Good afternoon, everyone. My name is Layla, and I will be your conference operator today. At this time, I would like to welcome you to Ulta Beauty’s first quarter and fiscal 2026 earnings call. This conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker’s prepared remarks, there will be a question-and-answer session. At this time, I would like to turn the call over to Ms. Kylie Rollins, Senior Vice President of Investor Relations. Ms. Rollins, please proceed.

Kylie Rollins, Senior Vice President of Investor Relations, Ulta Beauty: Thank you, Layla. Good afternoon, everyone, and thank you for joining us for a discussion of Ulta Beauty’s results for the first quarter of fiscal 2026. Hosting our call today are Kecia Steelman, Chief Executive Officer, and Christopher DelOrefice, Chief Financial Officer. During today’s webcast, a presentation is being shared live and has also been posted to our website at ulta.com/investor. 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-K. 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 respectively ask that you limit your time to one question and no more than one follow-up question. As always, the IR team will be available for any questions after the call. Now I’ll turn the call over to Kecia. Kecia?

Kecia Steelman, Chief Executive Officer, Ulta Beauty: Thank you, Kylie, and good afternoon, everyone. After meeting our ambitious goals in fiscal 2025, we entered fiscal 2026 with a keen focus on continuing our progress while optimizing our model with financial discipline to deliver profitable growth. Before I dive into the details of our first quarter performance and priorities for the year ahead, I want to share my perspectives on the business. First, our core U.S. business is fundamentally strong in delivering healthy sales growth. Second, the strategic initiatives we are driving to scale new businesses are gaining traction, are contributing to our results, and position us well for long-term growth and value creation. Third, we are exercising financial discipline and working thoughtfully to optimize our cost and investments to position our business to deliver consistent double-digit earnings growth. Next, growth in the beauty category remains healthy even as consumers are increasingly value-focused.

Ulta Beauty’s diverse assortment, omni-channel convenience, and compelling loyalty rewards program uniquely positions us to meet our guests’ evolving needs. Finally, we are staying focused on capitalizing on the strengths of our model and executing our Ulta Beauty Unleashed strategy to deliver long-term profitable growth and value. While we are continuing to monitor how the macro landscape could evolve, we remain execution-focused and are confident we will deliver our fiscal 2026 expectations, which Chris will cover further later in the call. Turning now to our first quarter performance and the progress being made on our Ulta Beauty Unleashed pillars. The strength of our business continued as we delivered first quarter net sales growth of 11.1%, comparable sales growth of 5.3%, and 15.5% diluted EPS growth. Performance was broad-based, with all channels and major categories contributing positively to our strong results.

From a market share perspective, we gained share in prestige beauty, and we were roughly flat in mass beauty. Beginning with our driving the core business growth pillar. Overall company performance continues to be fueled by the strength of our core U.S. business, reflecting a relentless focus on delighting guests with every interaction and building on our new go-to-market approach, marketing leadership, and compelling merchandising innovation. Our stores delivered another solid sales performance, supported by the successful execution of key promotional and marketing events, including 21+ Days of Beauty and Spring Haul. As we begin the new fiscal year, our store team is focused on driving engagement, education, and excitement.

During the quarter, together with our brands, we executed more than 40,000 in-store events, including key activations to highlight newness from brands like Coach, Cécred, Live Tinted, and held several workshops to support education for brands like Redken, Rare Beauty, and Lancôme. As we look to Q2, we will stay focused on the fundamentals to ensure we are delivering great guest experiences, driving conversion, and fueling sales growth. E-commerce momentum continued, with the team delivering another quarter of robust sales performance. The sustained strength of our e-commerce channel is powered by the investments we’ve made over the last several years to elevate our infrastructure and the ongoing enhancements we’re continuing to roll out, like expanded same-day delivery options through Uber Eats and new buy now, pay later options through Klarna to improve functionality, expand convenience, and improve the guest experience.

The convenience of buy anywhere, fill anywhere capabilities, including buy online, pickup in store, have been a key driver of our e-commerce growth and of our strong guest satisfaction metrics. This quarter marked the exciting launch of our TikTok shop with a strategic focus on our only at Ulta exclusive brands. We hosted our first-ever TikTok shoppable live stream at our Ulta Beauty World event, garnering more than five million impressions and strong GMV, rivaling top affiliate live stream performances. This initiative is driving a lot of excitement with guests and the creator community, which is showing high interest in collaborating with us. In addition, a number of brand partners have expressed interest in offering their products as part of our curated TikTok assortment and bundles.

This new channel positions Ulta Beauty at the center of a critical discovery point and will enable us to spotlight our exclusive brands, build influence, and fuel our marketing efforts, particularly with younger consumers. Turning to brand building, we are making meaningful progress on our ambition to build multiple $100 million-plus exclusive brands over time. To compete and win in beauty and wellness, we are driving the innovation pipeline, co-investing in marketing with strategic and exclusive brand partners, and creating exciting activations in stores and online. Today, I’d like to highlight an exclusive fragrance brand, NOYZ. An approachable, vegan and cruelty-free fragrance brand inspired by relatable real-life feelings and self-expression. During Q1, NOYZ launched its innovative Mylk de Parfum, part fragrance, part hydrating skincare.

Milks are perfect for layering and are creating a new subcategory that has excited our guests and is helping drive the brand’s continued growth. Ulta Beauty collaborated with NOYZ on a 360-degree go-to-market activation strategy that helped catapult the brand into our top 20 in the category for the quarter. NOYZ continues to fuel social buzz into Q2 with the recent debut of Be Her, a fragrance collaboration with award-winning singer-songwriter Ella Langley. From a broader newness perspective, our balanced approach is driving consumer excitement across categories and fueling positive performance. During the quarter, we launched more than 20 new brands, including our record-breaking launch of Rare Beauty and Makeup, Balmain, an exclusive early lead brand in fragrance, Bloomeffects in skin, Hairstory in haircare, and Grüns in wellness.

These launches are in addition to exciting newness from our existing brand partners like Estée Lauder, Tatcha, and exclusive brand Cécred. In marketing, we focused on engaging storytelling to capture core moments in beauty and further Ulta Beauty’s authority in high-impact shopping moments. The team drove outstanding activations around key marketing and promotional events, including Valentine’s Day, 21+ Days of Beauty, and Spring Haul. In April, we hosted our flagship consumer event, Ulta Beauty World, in Orlando. Approximately 3,000 Ulta Beauty fans attended the event to engage with nearly 240 of our brand partners and discover newness through immersive, high-touch experiences with master class education offered as a separate experience. Building on last year’s inaugural event, Ulta Beauty World drove strong engagement across PR and social and expanded into new platforms like TikTok Shop Live, more than doubling earned media value year-over-year.

During the quarter, we expanded our Ulta Beauty Rewards loyalty program to nearly 47 million members, up 4% year-over-year. We are leveraging our vast first-party data and recent tech improvements to enhance our leadership in personalization. Our teams are building around key customer journeys and actions to maximize incremental sales-driving opportunities. This includes utilizing our loyalty data to understand behaviors, predict replenishment purchases, and drive cart conversion. Moving to our second pillar, scaling new businesses. Beyond the U.S., we opened a handful of new stores across our international markets. Space NK, which operates stores in the U.K. and Ireland, continues to deliver healthy, well-balanced growth, expand its loyal customer base, and gain market share.

In Mexico, we opened two new stores, including the grand opening of our Madero store, a unique two-story building that blends modern beauty retail with historic architecture and charm in the heart of Mexico City. In addition, our franchise partner, Alshaya, opened our third store in the Middle East at the Dubai Mall, one of the largest and most visited shopping destinations in the world. While the situation in the Middle East remains fluid, we continue to be excited about the potential of this flagship location and for the expansion opportunity in the region over the long term. Our marketplace continues to gain traction with the addition of exciting new brands and items. We closed the quarter offering more than 325 brands and over 8,000 SKUs across our seven marketplace assortment focus areas.

During the quarter, we successfully integrated marketplace brands into our 21+ Days of Beauty promotion, contributing to strong ongoing guest engagement. I’m incredibly proud of the way our team continues to execute this important initiative and the strong guest satisfaction we are seeing for those who purchase products from our marketplace. In wellness, we’re helping guests find their feel good with expanded assortments across key wellness focus areas, nutrition and supplements, intimate care, rest and reset, and essential routines. During the quarter, we launched several new brands, including nutritional gummies brand Grüns and intimate skincare brand Medicine Mama. We drove awareness and guest acquisition through our wellness-focused events and integrated wellness offerings into key tentpole events. We also enhanced our digital navigation and storytelling. Performance continues to build, driven by assortment and space expansion, as well as guest engagement in key pillars, including nutrition and supplements, and rest and reset.

In UB Media, we are on a journey of scaling this incremental margin driver, rolling out enhanced capabilities, features, and products to support our brands. We recently launched a YouTube enhanced measurement product, which provides deeper insights and benefits to our brand. Clinique leveraged this new capability for a recent campaign that was executed with fresh talent and best-in-class practices. It was not only able to measure brand-level sales, but they also saw meaningful higher returns on the ad spend and conversion compared to other video channels. Finally, our third strategic pillar, aligning our foundation for the future. As part of our supply chain optimization efforts, we advanced plans to expand our distribution network with the commitment to open a new regional distribution center in Salt Lake City, Utah. This new facility will leverage the latest in automation technology to improve speed, increase efficiency, and simplify product flow.

In addition, we continue to leverage AI to optimize our business. From a guest-facing perspective, we introduced an online shopping agent, Ulta AI, to enhance discovery, personalization, and shopping experiences. Initial results have been promising, and we are excited about the potential of this new feature. In addition, we are integrating with leading AI platforms, like Google’s Gemini, to enable agentic commerce. We are still in the early days in our focus on leveraging the strengths of our partners to maximize the AI opportunity. Finally, turning to our efforts to cultivate one of our most important competitive advantages, our culture. Last month, we brought together more than 1,500 general managers, along with corporate and D.C. leaders and brand partners at our annual field leadership conference. The strength of our model was on full display.

Everything about the time we spent together was aimed at growing our business, building enthusiasm, and pushing ourselves to an even higher standard. The most exciting part was the alignment and the collaboration and the camaraderie across the entire business. Importantly, there was also a unified focus on execution in stores and providing our guests with consistently great experiences. The energy I experienced, coupled with our current business performance, reinforces my confidence in the direction we are heading and my optimism that the business will continue to deliver on our revenue, income, and shareholder value creation goals. Turning to the operating environment. As I shared in the beginning of my remarks, the beauty and wellness categories remain healthy, and engagement is strong. At the same time, consumers continue to face macroeconomic uncertainty and inflationary measures and pressures from rising fuel prices, making value increasingly important as a consideration.

We are operating from a position of strength in this environment and have multiple levers to satisfy guests’ value needs, including a diverse mass-to-luxury assortment that provides our guests with choices for every budget. Omnichannel accessibility that allows our guests to browse, buy, and fulfill purchases in the way that best fits their lifestyle. A compelling loyalty program and targeted promotional capabilities that enable guests to maximize value while strengthening engagement with our brand. We will continue to thoughtfully navigate the operating environment and respond with agility to deliver for our guests, drive sales, and expand share over the long term. Looking to the future, we’re focused on expanding our U.S. business by strengthening our assortment and investing in stores and digital experiences, and deepening customer engagement through personalization, AI, and social commerce, including our new TikTok Shop partnership.

We expect to drive incremental accretive growth as we continue to scale our new businesses, including international expansion, wellness, and marketplace offerings, and enhanced UB Media capabilities. We will continue to execute our plans to support long-term growth and efficiency through investments in supply chain automation, merchandising systems, and AI-powered tools to enhance operational performance, guest experience, and profitable growth. Finally, I’m excited to share that we are beginning work on a new, highly experiential Ulta Beauty location in Times Square, New York. Expected to open in late 2027, this flagship store will be a vibrant, dynamic destination where technology, entertainment, convenience, and our differentiated assortment come together to deliver immersive guest experiences and brand activations.

This store will showcase next-level brand building and storytelling capabilities, unlock high-impact marketing through digital billboards, and drive greater awareness and loyalty with guests from all over the U.S. and the world. In closing, our Ulta Beauty Unleashed plan is delivering results, and we remain confident in the strength of the Ulta Beauty model, the resilience of our category, and the passion of our guests and associates. We are investing with discipline in the areas that matter the most. A differentiated, seamless assortment, a seamless omnichannel experience, and deeper guest loyalty, all while staying agile in a dynamic environment. As always, we will stay focused on what we can control, keeping our guests and associates at the center of all we do to drive our business forward and create value. With that, I’m going to turn it over to Chris to cover the financials.

Christopher DelOrefice, Chief Financial Officer, Ulta Beauty: Great. Thanks, Kecia, and good afternoon, everyone. I’ll begin with a discussion of our first quarter results and then share our updated expectations for the year. Starting with the quarter, the Ulta Beauty team delivered profitable growth, reflecting benefits from strong revenue growth and gross margin expansion, driven by improvements in shrink and merchandise margin. I want to express my sincere appreciation to our teams for staying disciplined and working together to deliver this strong performance. Net sales for the quarter increased 11.1% to $3.2 billion, compared to $2.8 billion last year. Total sales growth, excluding the impact of Space NK, was in the high single-digit range. During the quarter, we opened 16 net new Ulta Beauty stores and one new Space NK store. Other revenue increased $6 million to $62 million, primarily due to higher income from our credit card program and commissions from UB Marketplace.

This growth was partially offset by lower royalty income from our partnership with Target Corporation. Comparable sales for the period increased 5.3%, driven by a 3.7% increase in average ticket and a 1.6% increase in transactions. Looking at the cadence of sales through the quarter, the period played out largely as we expected. February delivered low double-digit comp growth as we lapped our weakest comp performance in fiscal 2025. Comp growth for both March and April was in the low single-digit range. From a channel perspective, both store and digital channels contributed to comp growth, with e-commerce delivering mid-teen sales growth and comp stores delivering sales growth in the low single-digit range. Turning now to sales by category, fragrance was our strongest category again this quarter, delivering high teen comp growth and increasing from 11% to 12% of total revenue.

We continue to execute well and advance towards our goal of being the number one destination for fragrance. We are playing to win and to support this ambition, we are investing in newness, enhancing our in-store experience, improving core in-stocks, and leaning into key events like Valentine’s Day and Mother’s Day. For the quarter, growth was primarily driven by newness from core luxury brands including YSL, Carolina Herrera, Valentino, and an early lead of new brand Balmain, as well as innovation, including the new Mylk de Parfum format from exclusive brand NOYZ. The haircare category delivered high single-digit comp growth this quarter, driven primarily by strong performance in prestige haircare. New brands amika and Moroccanoil drove healthy growth, and exclusive brand Cécred continue to resonate with guests, driving robust results with core hero SKUs as well as exciting innovation.

Hair treatments, including repair-focused products and scalp regimens outperformed, while hair tools declined as the impact of lapping prior year launches and softness in traditional tools more than offset growth from innovative and accessible brands Shark and T3. Comp sales in the makeup category increased in the low single-digit range, with growth driven primarily by prestige makeup. Strong guest engagement with new brand Rare Beauty, as well as newness from existing brands including MAC, Kylie Cosmetics, and Estée Lauder, helped deliver growth for prestige makeup. Mass makeup was relatively flat, with compelling innovation from brands like Morphe and L’Oréal offsetting limited innovation from other mass brands. The skincare and wellness category delivered low single-digit comp growth this quarter. Prestige skincare continued to perform well as newer brands, including Medicube and Dermalogica, and newness from existing brands, including Tatcha and exclusive brand Peach & Lily, drove healthy guest engagement.

Mass skincare delivered solid growth supported by in-store expansion for Anua, sustained virality for Biome, and exclusivity from Cocokind. In wellness, continued strength in supplements including Lemme and MaryRuth’s, as well as self-care brands including Therabody, Nodpod, and Saje Natural Wellness delivered strong growth. This growth was partially offset by pressure in body care as we lapped meaningful expansion of key brands last year. Finally, services delivered mid-single-digit comp growth driven by strong member engagement in salon and specialty services, including ear piercing and makeup services. Gross margin for the quarter increased 100 basis points to 40.1% of sales, primarily due to lower inventory shrink and higher merchandise margin. Our team’s relentless focus on reducing inventory shrink continues to deliver meaningful benefits to profitability.

In addition to our continued focus on process improvements and associate training across all stores, we have applied data insights to take deliberate, targeted actions to improve performance in high-risk locations. As a result of these combined efforts, we saw shrink reductions across every category and every region this quarter. Merchandise margin increased this quarter primarily due to improving inventory turns and the impact of favorable category mix from Space NK. Although elevated fuel prices resulted in higher-than-planned transportation costs, productivity and efficiency unlocks from our supply chain optimization investments enabled our teams to mitigate this pressure in the quarter. Moving to expenses, SG&A increased 14.6% to $850 million as planned, driven primarily by the impact of Space NK and investments made to support our Ulta Beauty Unleashed strategy, including investments made in the second half of fiscal 2025, which have not yet anniversaried.

Operating profit grew faster than net sales, increasing 11.6% to $448 million, or 14.2% of sales. Interest income was $0.7 million, inclusive of the impact from our increased share buybacks. The effective tax rate decreased 70 basis points to 23.9%, primarily due to the purchase of transferable federal tax credits, resulting in a one-time income tax benefit recorded during the quarter. Wrapping up the P&L, net income increased 11.6% to $340 million, and diluted earnings per share for the quarter increased 15.5% to $7.74 per share. Moving to the balance sheet and our capital deployment strategies, our focus on cash management, including a disciplined approach to capital expenditures, is driving greater cash efficiency. We ended the quarter with $221 million in cash and short-term investments and $145 million in short-term debt.

Total inventory increased 12.5% to $2.4 billion, primarily reflecting additional inventory to support new brands, the acquisition of Space NK, and the impact of 70 net new Ulta Beauty stores. On a per store basis, inventory increased 1.4%. Capital expenditures were $58 million for the quarter, mostly driven by investments in new and existing stores. We executed against our increased share buyback plan and deployed cash and leveraged our revolver to support $555 million of stock repurchases during the quarter. Turning now to our updated outlook. We remain focused on expanding market share and delivering profitable growth in fiscal 2026. The first quarter positioned us well against these goals with strong execution throughout the P&L. At the same time, we believe it is prudent to take a measured approach to our guidance, given the uncertain macro landscape.

For the year, we are maintaining our guidance for sales and continue to expect net sales will increase between 6% to 7%. We expect net sales growth will be stronger in the first half, reflecting our strong Q1 performance and the benefit from the acquisition of Space NK. Given our strong Q1 performance, we are maintaining our comp sales growth commitment and continue to expect comp growth for the full year will be between 2.5% and 3.5%. Based on this, we expect our two-year stacked comp will be in the high single-digit range and relatively consistent across the balance of the quarters, including Q2, which was our highest comp performance last year. Reflecting the strong performance execution in the first quarter, we have enhanced our expectations and now expect operating profit will increase between 6.5% and 9% for the year.

For modeling purposes, we continue to expect gross margin will be roughly flat for the year, driven by higher inventory productivity, continued momentum in supply chain productivity, and a modest improvement in inventory shrink, which is expected to offset pressure from higher fuel costs and help balance targeted investments to bring competitive offerings across our unique mass-to-luxury assortment to our value-focused guest. We delivered SG&A growth in the first quarter consistent with our expectations, and we have not changed our full-year targets. We continue to plan SG&A growth in line to slightly below net sales growth and intend to invest in a disciplined way that supports and maximizes profitable growth. We continue to expect to generate strong operating cash flow, which will enable reinvestment to support future growth and also support our intent to return capital to shareholders through our stock repurchase program.

We see deploying capital towards increased share buybacks in the current environment as a compelling value creation opportunity. In the first quarter, we announced an increase in our fiscal 2026 stock buyback target from $1 billion to $1.5 billion. Reflecting the impact of these assumptions, we have increased our EPS estimates. We now expect diluted EPS will be between $28.36 and $28.80 per share. Our new guidance represents growth between 10.6% and 12.3% respectively, compared to previous growth expectations of 9.4% to 11.4%. Note, our updated estimates assume a weighted average share count of approximately 43 million shares and a tax rate of approximately 24.5%. In closing, Ulta Beauty is well-positioned to deliver compelling value to our shareholders. This is evidenced by our first quarter results, where our focused execution delivered strong performance consistent with our expectations.

As we continue to navigate near-term uncertainty, we are focused on executing with excellence against our plans, maintaining financial discipline, including focused investments to increase market share and deliver strong, profitable growth for our shareholders. Now I’ll turn the call over to our operator to moderate the Q&A session.

Layla, Conference Operator: We will now begin Q&A. To join the queue to ask a question, please press star five on your telephone. Again, that’s star five 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. Our first question will come from Adrienne Yih with Barclays. Your line is now open. Please go ahead.

Adrienne Yih, Analyst, Barclays: Great. Thank you very much, and let me state my congratulations for a fantastic start to the year. Kecia, along those lines, I wanted to just talk about the categories year-to-date that you’re seeing the greatest return on the investments that you’re making in the marketing and some of the heavy ads, too, that you’ve been doing. Kind of along those same lines, Chris, can you talk about, you raised the lower end of the profit expectations and then the higher end of the EPS, certainly due to probably the buyback. The top line remained the same. Within the SG&A leverage, where are you seeing the most visibility for the back half? Thank you so much.

Kecia Steelman, Chief Executive Officer, Ulta Beauty: I’ll start, Adrienne. Thank you for the question. Where we’re seeing the investments really paying off is one of the strongest categories that we’re seeing results in is really fragrance. When you look at Mother’s Day, the Mother’s Day promotion, how we’ve risen the fixtures up and been able to add assortment into our stores, and then the marketing that we’ve done along with it, that’s definitely come into play. We’ve also been investing in our Ignite brands and looking at ways that we can continue to lean into our brand-building plans that are a 360 approach, that are around the exclusive brands that we have here at Ulta Beauty. We love what we’re seeing there.

We’re focused on being very balanced in our portfolio and continuing to look at how we can continue to drive sales across the store and not just being focused in one area of the business. 21 Days of Beauty, we were pleased with the results there. We do think that the guest is continuing to look at value. We’re also leveraging our tool of UB Media to really capture that guest, to get them, because we know where they’re shopping and we know where they’re at, and we can take those brand dollars to get them engaged into our store and online. Those are the places where we’ve been really seeing a nice return for the investment that we’ve been spending. Again, we’re going to be continuing to focus on that in Q2. Chris?

Christopher DelOrefice, Chief Financial Officer, Ulta Beauty: Yeah, thanks for the question. One was pleased with the strong execution through the P&L in Q1, which gives us confidence to deliver against our full-year goals, increase our operating profit commitments at the low end and the midpoint, and certainly, as you noted, raising EPS, both due to the operating profit increase and share buybacks. I’ll go back to the principles. Our goal is to maximize value creation through driving increases in operating profit. As we start the year, we’ll have opportunities both on the leverage side and both on the invest to grow slide while maintaining discipline on margin and ensuring that based on the guidance we provided, our operating margin will not go backwards year-over-year, and there’s opportunities for leverage within that. As I think of the balance of the year, I’ll point to where we’re seeing some strength.

We’re seeing some strength in supply chain. You saw shrink play out positively in the quarter. The supply chain team continues to do a great job in supply chain optimization. I think you also saw very strong discipline and consistent performance on SG&A. I would say there’s some opportunities in there. The balance of the year, it’s going to be this, how do we thread the needle of trying to optimize growth while capitalizing on where those leverage opportunities and balancing those two to keep trying to deliver against and where we can drive operating profit up.

Adrienne Yih, Analyst, Barclays: Fantastic. Very helpful. Best of luck. Thank you.

Layla, Conference Operator: Your next question will come from Simeon Gutman with Morgan Stanley. Your line is now open. Please go ahead.

Simeon Gutman, Analyst, Morgan Stanley: Hi, everyone, thanks for the question. Two parts. First, the exit rate comp, or what you did, I think in, was it April? I guess, is that as good as it gets given the compare step up, or was there something unique timing-wise end of the quarter that pushed it down, maybe temporarily? Chris, just following up to what you said. Some of the language you used, trying to optimize or managing both. Is it in the plan for SG&A to step down and that’s a given, or it’s not a given and it’s going to take some maneuvering as you work through the back half of the year? Thank you.

Christopher DelOrefice, Chief Financial Officer, Ulta Beauty: Yeah. Maybe I’ll take SG&A first. We’re highly confident in the SG&A execution. The year’s playing out as expected. Remember we said we expected double-digit growth in the first half. That was largely attributable to Space NK, and the anniversarying of Ulta Beauty Unleashed investments we made in the back half of 2025. That included wellness and marketplace, as an example. We simply stepped down into low single-digit growth, in the second half of the year because we’re going to anniversary over those items. We are investing in the second half of the year. We also have cost optimization that’s helping actually further get ROI and benefit and put more back in the business. You’re going to see SG&A consistently play out.

Each year, as we have opportunities to either further accelerate top line, that balance of top line versus leverage while maintaining discipline in margin, and constantly adjusting those two levers to capitalize on opportunities to drive operating profit up would be the goal as we progress through the year. You saw us do that in Q1. Obviously, there’s the macro environment and some uncertainty there. We think this is a prudent guidance with strong double-digit EPS growth, and our goal at the end of the day is to be a consistent compounder of EPS at double digits. This guide provides that, and I think you should feel positive about the strong execution in Q1.

Kecia Steelman, Chief Executive Officer, Ulta Beauty: I’ll take the comp trends. Q1 played out largely as we expected. February was in the low double digits as we lapped our weakest comp from fiscal year 2025, comp growth in March and April was in the low single-digit range. As Chris shared, we continue to expect our comp sales growth for the year to be between 2.5%-3.5%. Just as a quick reminder, Q2 2026 is our toughest comp comparison on a one-year basis over the strong results that we had in 2025. The guide implies high single-digit comp growth on a two-year stacked basis. We’re very confident in our ability to grow sales and to deliver our guidance, we have great plans in place to fuel our performance. I do think that this is where our unique model plays into that.

We can have a consistent track record of delivering sales growth in many different kinds of economic time frames that are out there. Hopefully that answered your question, Simeon.

Simeon Gutman, Analyst, Morgan Stanley: It does. Yep. Thank you. Good luck. Appreciate it.

Kecia Steelman, Chief Executive Officer, Ulta Beauty: Thank you.

Layla, Conference Operator: Your next question will come from Dana Telsey with Telsey Group.

Dana Telsey, Analyst, Telsey Group: Hi, good afternoon, everyone. As you think about the sales growth, Kecia, which is very impressive with transactions and with traffic, as you exited the quarter, how’s the exit rate looking forward? Just like you had Ulta Beauty World, what are the next events, and how do they break out by quarter going forward? Then, Chris, as you think about the margin comparisons going forward, either on SG&A or gross margin, whether merch margin or others, anything we should be mindful of, and how do you think of the investment spend going into the margin profile through the shaping of the year? Thank you.

Kecia Steelman, Chief Executive Officer, Ulta Beauty: I’ll start, and then I’ll turn it over to Chris. Thanks for the question, Dana. Our ticket was up 3.7% in Q1. It was largely driven by product mix. Our transactions were up 1.6%, and that was in a challenging macro environment. We are really focused on how we can continue to drive traffic. We’re very confident in our marketing and our merchandising plans to really support and to drive our business, and our teams are doubling down, particularly in stores, to really drive traffic and the guest conversion through our guest service. Eventing, which we did a lot of events in the last quarter, we’re going to continue that trend. Loyalty and personalized marketing efforts. You asked a little bit about Ulta Beauty World. We are really focused on creating excitement and energy both in our online platforms and in store.

We build great plans around what activities we had last year and how do we continue to improve them even more for this next year. I’m pleased with what I see in the Q2 and the back half plans for taking our learnings and continuing to improve always. The teams from a marketing, merchandising, store operations, and digital perspective are all working very closely together, and I feel great that the go-to-market team has good plans in place for Q2 and the rest of the year.

Christopher DelOrefice, Chief Financial Officer, Ulta Beauty: Yeah. As you think of the margin and call it the profit profile as we progress through the year. 1, we actually have a very balanced first half, second half operating profit growth profile, which is positive. First half is modestly above the second half. 2 primary factors there. Obviously, slightly higher sales. As you think of gross margin, higher benefits of shrink in the first half of the year is the big difference, and we had articulated that, right? We started getting shrink benefits more through the back end of last year. We’ll start cycling through success. As you move from first half to second half, first half will have stronger gross margin performance. Remember, SG&A is going to have the increased cost because of Space NK and the anniversarying of prior year investments we made.

When you move to the second half of the year, you have a slight flip where you see the gross margin moderate a bit as planned, and then you start seeing the benefits of SG&A driving some margin improvement in the second half of the year with low single-digit growth. It’s playing out exactly as planned. Remember, we made investments in 2025 that we’re going to continue to benefit from, Marketplace, Wellness, just to name a couple. In 2026, we’re also making investments. We have agentic AI as a core strategy. We continue to invest there. Ongoing brand-building investments that we talked about in the prepared remarks, and the personalization initiatives to maximize incremental sales opportunities. We feel good about both the investment profile and the actions we’re taking to deliver a strong, profitable growth profile for the year and ultimately deliver double-digit earnings growth.

Dana Telsey, Analyst, Telsey Group: Thank you.

Layla, Conference Operator: Your next question will come from Michael Binetti with Evercore. Your line is now open. Please go ahead.

Michael Binetti, Analyst, Evercore: Hey guys. Thanks for taking our question. Sorry to ask you again about the near-term stuff. I think the stocks have been a little sensitive to it with the macro that you guys have commented on here. I think a high single-digit stack would put second quarter in the maybe 1.5%-2.5% range. I think you expected the category last time we talked to grow 2%-4% this year, is there any change to that assumption we should think about rest of the year or your ability to maintain share? Then on the gross margin, I guess it’s implied to be down about 30 basis points after the first quarter being up 100 basis points.

I’m curious what, maybe a little bit more on what caused the merch margin to expand, why we don’t flow that through the rest of the year, or why some of those shrink tailwinds from first quarter can’t continue even though you anniversary a little bit in the second half.

Kecia Steelman, Chief Executive Officer, Ulta Beauty: Thanks for the question, Michael. I’ll start, and then I’ll kick it over to you, Chris. In regards to the industry, what we’re seeing is that last year, growth in beauty grew stronger each quarter as the year went. We’re going against stronger growth in the back half, and we expect that growth to really normalize as a whole. That’s really what we’re seeing in the industry. We’re still committed to share growth, at Ulta Beauty, and we feel like that’s implied in our guidance and our numbers that we’ve put in front of you guys today. The category is still competitive, and we know others are going to be continuing to level up the battle for share, which just means that we’re going to have to be even better as we execute through the remainder of the year. We are confident in our plans.

Brand building, exclusivity and wellness. Just as a reminder, if you look at our total sales, we came in at 11.1%. That’s really strong when you’re looking at the total market growth and where our growth came. That’s nothing to be shy of. I’m pretty really pleased with 11.1%.

Michael Binetti, Analyst, Evercore: Got it, yeah.

Kecia Steelman, Chief Executive Officer, Ulta Beauty: Again, I would guess I just would close out by saying, we’re staying really close to the customer needs, and we’re continuing to sharpen our operational focus. We’re making the targeted investments that Chris and I both talked about to really strengthen our long-term competitive advantage. We are playing our game and continuing to lean into the places where we can, really continue to differentiate ourselves. Chris?

Christopher DelOrefice, Chief Financial Officer, Ulta Beauty: To one, I would just add one thing on sales. Obviously, our total guidance is 6%-7%, which of course includes the one-time benefit from Space NK. Even taking that out, the total growth at Space NK, strong mid-single digits, well within our long-term algorithm, and to Kecia’s point, competitive from a share standpoint. We’re going to continue to execute this. I think this is more us cycling through success from the prior year, and you have a strong two-year double stack in high single digits through the balance of the year. Feel good about that. Look, as you think of gross margin, it’s about flat for the year. I think we’re managing gross margin nicely. To your point, we, and this was planned, we expected larger shrink benefits early in the year. That was a conscious effort.

We started realizing that benefit towards the back end of the year, and we’re going to cycle through that success. That’s one of the drivers. Obviously, with some moderating growth, there’s a little bit of deleverage in there, in gross margin, but it’s not substantive. Supply chain continues to drive strong optimization, right? They’ve been absorbing the fuel impact, with something that wasn’t fully planned. It’s not significant for total Ulta, but it’s actions that they’re taking to own that. Feel good about gross margin being flat for the year. We’re going to continue to execute against the P&L, be disciplined on SG&A, focus on that balance of finding leverage opportunities or investing to grow, to deliver against our operating profit commitment.

Michael Binetti, Analyst, Evercore: Thanks for all the clarification, guys.

Layla, Conference Operator: Your next question will come from Mike Baker with D.A. Davidson. Your line is open. Please go ahead.

Mike Baker, Analyst, D.A. Davidson: Great, thanks.