Ulta Beauty’s shares opened lower in premarket trading, sliding roughly 8% as investors focused on rising operating expenses that undercut the company’s otherwise solid sales performance for the holiday quarter. Management reported robust demand at stores for on-trend assortments, including celebrity and premium labels, but elevated costs constrained conversion of sales into earnings.
The company said sales were strong across the holiday period and reaffirmed an upbeat annual sales outlook, citing consumer appetite for trending brands such as Rihanna’s Fenty Beauty. Still, higher spending drove a meaningful expansion in selling, general and administrative (SG&A) costs, and analysts noted a visible lack of flow-through from sales gains to the bottom line.
Ulta’s SG&A expenses rose 23% in the December quarter, reaching $1 billion. Company executives attributed the increase to a spike in incentive compensation and continued investments in marketing as well as expenditures tied to Space NK, the British high-street chain Ulta acquired last year. Management expects SG&A to remain elevated - projecting double-digit SG&A growth in the first half of fiscal 2026 as Space NK-related costs and other investments continue - before those costs ease in the back half of the year as integration expenses annualize.
In January 2025, Kecia Steelman took the reins as CEO. Steelman flagged caution around potential headwinds from what she described generally as "global conflicts," signaling management’s guarded stance on risk factors that could affect performance. Brokerage analysts, including those at J.P. Morgan, described Ulta’s outlook as conservative, a view that several other brokerages echoed following the results.
To broaden its reach among younger and more affluent shoppers, Ulta has emphasized celebrity-owned and higher-end labels, promoting lines such as Beyonce’s Cecred haircare, and running holiday campaigns that featured Khloe Kardashian and Paris Hilton. The retailer is also preparing a strategic digital initiative: an exclusive-brand assortment slated for TikTok Shop that management hopes will draw Gen Z and Gen Alpha consumers and capture additional share as online beauty sales grow and competition from big-box rivals intensifies.
Some analysts see promise in Ulta’s digital and assortment plays. William Blair said the company is capturing share amid a larger migration of beauty sales online and expressed confidence that actual results could exceed the annual sales forecast. Conversely, Oppenheimer Research noted Ulta historically guides conservatively and suggested the stock had been "priced close to perfection," making the investor pullback less surprising.
Market reaction included at least seven brokerages lowering price targets on the stock after the results. Valuation metrics cited by investors show Ulta’s forward price-to-earnings multiple at 21.62, compared with 29.53 for Estee Lauder and 19.84 for Elf Beauty.
The company’s digital focus and brand partnerships form a central element of management’s plan to attract younger demographics and support sales. At the same time, elevated SG&A and integration costs related to Space NK, combined with management’s cautious outlook, left analysts and investors reassessing near-term earnings prospects, prompting the decline in share price in premarket trading.