Dive Brief:
- After a year of mixed performance, Ulta Beauty showed some positive momentum in the first quarter, with net sales up 4.5% to $2.8 billion. Comps in the quarter also increased 2.9% in the period, per a company press release.
- Ulta is seeing improvement in the performance of stores that were hit by competitive openings, like Sephora’s Kohl’s shop-in-shops, CEO Kecia Steelman said Thursday on a call with analysts. The retailer’s stores recorded their first positive comps in more than a year.
- The executive added that Ulta’s efforts to improve operations, including store cleanliness, appropriate staffing and fully stocked inventory, have helped as well. Total inventory was up more than 11% in the quarter, helping Ulta’s in-stock positioning.
Dive Insight:
Though Ulta executives expressed confidence in the beauty retailer’s strategy and raised guidance slightly as a result, the company remains cautious about how consumer spending will shape up for the rest of the year.
Steelman referenced beauty’s recession-proof qualities, as well as shoppers’ view of the category as a “comfort and escape” from the stress of the current macro environment, as positives for Ulta. At the same time, though, she said customers are prioritizing value and warned that they may not follow through on their planned spending.
“While they tell us that they intend to prioritize beauty and wellness — that's what they say — but they could also do something very different depending on the environment,” Steelman said. “So we're being really prudent.”
CFO Paula Oyibo also stressed that while beauty is usually resilient, it’s not “immune to consumer pressure,” especially given the chaos and uncertainty caused by the Trump administration’s tariff policies. “One quarter doesn’t make a trend,” Oyibo said as an explanation for why Ulta’s guidance remains relatively conservative.
Nevertheless, Ulta is seeing some green shoots from its operational initiatives as well. During the quarter, the retailer invested in higher staffing in stores, added more newness to stores and tweaked its marketing approach. In particular, Ulta cut back on less productive sales offers and made more distinct calls to action in communicating with shoppers. The retailer is on track to launch its marketplace in the second half of the year and will open its first stores in Mexico City, Kuwait City and the United Arab Emirates’ Dubai later this year. Ulta said last year it planned to expand to Mexico.
Less tangibly, Steelman also noted that Ulta is making progress on “reenergizing our culture,” which she described as a competitive advantage. Steelman took over as CEO for Dave Kimbell in January and has since announced several leadership changes, including naming a chief merchandising and digital officer last month. This quarter marks the “first time in a while” that Ulta drove share across the category, according to Steelman. The retailer lost share in beauty for the first time last year.
“It seems like everything the team is doing is showing signs of effectiveness, and in a fairly quick manner,” Piper Sandler analysts led by Korinne Wolfmeyer said in an analyst note. “This undoubtedly builds on our optimism around the [long-term] opportunity here, but we still want to be prudent around competition, market volatility, and margin risks that could come.”
