Ulta Beauty, Inc. "Becoming A Lean, Mean, Beauty Machine" (Buy) Lasser

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Ulta Beauty, Inc. "Becoming A Lean, Mean, Beauty Machine" (Buy) Lasser

category. We expect between these growing pieces, and Ulta’s legacy alternative

revenue streams (e.g. credit card profit share), it should be able to offset the loss of

royalties from the dissolution of its Target partnership.

Last, we also think the print can highlight that the beauty industry has remained

resilient recently. Our recent meetings with specialty beauty retailer Sally Beauty

would corroborate this point (note here). As the prospects of inflation and

consumer uncertainty persist, this could make Ulta’s investment case stand out

even more on a relative basis against its retail peers.

How might ULTA address its FY'26 guidance in light of 1Q?

Overall, we think the most likely case is that Ulta reiterates its FY'26 outlook calling for

EPS of $28.05 to $28.55 (cons. $28.63, UBSe $28.65). We break down what we think

will be the key components to consider by line item.

We'd expect Ulta to holds its guidance for 2.5% to 3.5% comp growth this

year. Overall, 1Q will be Ulta's easiest comparison from an SSS perspective this

year. As a result, our base case assumption is that even if it outperforms this range

in 1Q, it will still hold this expectation for the year.

For 1Q specifically, our sense is that comparable sales strengthened throughout

the quarter last year. So, Ulta's SSS compares will get sequentially tougher from

February to April. Notably, last April benefitted from both an Easter calendar

shift and the launch of Beyonce's Cecred brand. That said, initial reads on

Ulta's Rare Beauty launch have been promising.

As a reminder, Space NK will enter the comparable sales base starting in 3Q.

This should provide a boost to overall reported sales growth in 1Q and 2Q.