Ulta Beauty is making a habit of proving Wall Street wrong. Driven by the SpaceNK acquisition, sales from new international stores, and strength in prestige fragrance, wellness, and K-beauty, Ulta Beauty reported its second-quarter earnings on August 27, beating analyst expectations from top to bottom and marking the fifth consecutive quarter the company beat Wall Street’s forecasts. Net sales rose 8.9% to $3.04 billion, while diluted earnings per share increased 13.3% to $6.55. The beauty giant also reported double-digit operating profit growth of 10.1%.
Kecia Steelman, President, CEO & Director of Ulta Beauty, said on the earnings call that the company grew its same-store sales by 3.8% and added 3% more members to its loyalty program, Ulta Beauty Rewards, while average spend per member increased.
“Newness” was also a key driver of Ulta Beauty’s strong quarter, with the launch of 15 brands, including Bath & Body Works, Frenshe, and Junoco. K-beauty dominated newness, contributing five of the 15 brands including the much-anticipated Centellian24 and Dr. Melaxin. K-beauty further asserted its dominance, with sales growing in double digits and nearly half of K-beauty sales coming from exclusive brands or products.
Fragrance was Ulta’s strongest-performing category, delivering high-teen comparable-sales growth and increasing its share of net sales to 13% from 12% for the same period last year. Christopher DelOrefice, Ulta Beauty’s CFO & Principal Financial Officer, said the fragrance growth came from its core luxury brands: Prada, Carolina Herrera, and YSL, as well as the exclusive new brand launch of Megan Thee Stallion. DelOrefice also mentioned how exclusive brand NOYZ, “through its innovative Mylk scent format and standout newness in collaboration with award-winning singer-songwriter Ella Langley, drove virality and strong guest engagement.”
Ulta Beauty’s cosmetics segment was approximately flat, with prestige’s modest growth canceling out mass makeup’s low-single-digit decline. Prestige makeup was queen with low-single-digit growth, driven by consumer demand for high-end brands like Rare Beauty and newly launched Charlotte Tilbury and Half Magic Beauty. Steelman attributed mass makeup’s decline to lapping of significant newness in the space compared to last year.
Bodycare was responsible for dragging down skincare and wellness, which posted a modest comparable-sales decline as the retailer lapped significant body-care brand expansions from last year. Bodycare’s poor performance was offset by the wellness subcategory experiencing double-digit growth, driven by supplements from Lemme, MaryRuth’s, Cymbiotika, Saje, and self-care devices like Therabody. Both prestige and mass skincare experienced single-digit growth, with K-beauty brands bolstering the subcategory, including Medicube, Anua, and Peach & Lily.
Haircare reported high-single-digit comparable-sales growth, buoyed by prestige hair tools from Shark and T3 and prestige products from Amika, Moroccanoil, and Ulta Beauty-exclusive Cécred. Services delivered mid-single-digit comparable-sales growth, driven by salon and specialty services, including ear piercing and makeup services.
Despite the dynamic operating environment and increased competition, Ulta Beauty proved that its agility is paying off, as it expanded retail locations where experiential marketing continues to drive sales and added exclusive brands and newness.
All eyes will be on Ulta Beauty’s Q3 earnings in December, when investors will get their first look at whether former partner Target’s new Beauty Studio can put a dent in Ulta’s winning streak.
