In the beginning of 2025, Ulta Beauty was not promising much for the next 12 months. Coming off less than 1 percent growth in 2024, its full-year projection was flat.
But on Thursday, that projection ended up becoming a case of underpromising and overdelivering, as the beauty retailer’s higher-than-expected 9.3 percent quarterly net sales increase has upped its full-year projection to between 2.5 and 3.5 percent. Its sales growth was its highest in eight quarters, and came even as beauty conglomerates like Estée Lauder Companies and L’Oréal have reported softness in the US market amid weakened consumer sentiment.
“Engagement with beauty and wellness remains healthy,” said chief executive Kecia Steelman on a call with analysts and investors on Thursday. Steelman has led the “Ulta Beauty Unleashed” turnaround plan first announced in 2025 after a C-suite overhaul. Merchandising, under the new appointment of Lauren Brindley as chief merchandising and digital officer, has been a focus of the plan, with the retailer bringing in 24 new brands over the past quarter. The new brands on its roster have upped its cool factor while chipping away at Sephora’s exclusive partners.
Exclusives like Beyoncé’s hair care line Cécred, Shakira’s Isima, and other buzzy lines like Half Magic, Live Tinted, Snif, Noyz and Dibs Beauty have helped drive growth by differentiating the retailer from the competition. And former Sephora exclusive brands have been strong sellers as well, including prestige skincare maker Tatcha after it entered in January this year, as well as afford British line The Inkey List.
Still, the business is in a period of transformation, having announced in August that it will abandon its shop-in-shop partnership with big-box retailer Target, and with new initiatives like its forthcoming online marketplace and international expansion into Mexico and the Middle East as of yet unproven, and its full-year guidance, while higher than before, still implies some deceleration, said Raymond James analyst Olivia Tong in a note.
Recapturing Market Share
Beyond its brand roster, another factor in Ulta Beauty’s turnaround has been its success in fending off competitor Sephora’s encroachment via its Sephora at Kohl’s strip mall locations. Not only has “competitive distribution expansion has started to slow,” said Steelman in response to an analyst question about Sephora at Kohl’s, but a focus on elevating the in-store experience through events and services has paid off. Its loyalty program growth continued at a 4 percent rate for the quarter, reaching 45.8 million members.
“We still expect there to be some competitive pressures and impact for our fleet, but we expect that impact is going be lower than what we experienced in 2024,” said Steelman.
Sephora’s Kohl’s partnership has helped the LVMH-owned retailer move in on strip malls and suburban America, Ulta Beauty’s bread and butter. Ulta Beauty’s now-cancelled partnership with Target didn’t ultimately drive meaningful growth for the company — royalty revenue from the Target partnership was less than 1 percent of total 2024 sales — but Steelman said by axing the partnership, Ulta Beauty is better able to focus on its own stores and other goals. “[There’s] huge upside potential opportunity for us to really recapture those guests back into the Ulta Beauty ecosystem and keep them whole here.”
It’s also betting on several other new sales channels being more fruitful. These include international expansion via its new Space NK acquisition in the UK, a joint venture partnership in the Middle East, and its new franchise stores in Mexico. Its Amazon-competitor marketplace will also be unveiled in the third quarter, which it hopes will cut into the giant’s encroaching beauty share. Observers will be watching the upcoming performance of newly launched brands, like the viral K-beauty labels Tirtir and Medicube or the soon-to-be-launched, Ulta-exclusive body-care line by former Sephora exclusive Fenty.
As the effects of tariffs are expected to hit beauty especially hard later this year, Ulta Beauty will continue to “take a cautious approach given continued uncertainty around consumer spending,” said interim chief financial officer Chris Lialios on the earnings call.
CEO Steelman added that, despite this uncertainty, “Beauty enthusiasts tell us that they’re prioritising their beauty regimens and remain strongly engaged within the category.”
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