Key Takeaways:
Ulta Beauty’s second-quarter earnings gave investors a look into its first-ever expansion outside the US as the company prepares to open stores in the Middle East and Mexico, while underscoring that the domestic market remains its main focus.
The Chicago-based cosmetics retailer will enter new markets this year through a franchise deal with Kuwait’s Alshaya Group in the Middle East and a joint venture with Mexico’s Grupo Axo in the Latin American country. The push builds on Ulta Beauty's July acquisition of prestige British retailer SpaceNK for an undisclosed amount—funded with cash on hand and borrowings under its existing credit facility—a move that has already boosted Ulta Beauty's latest results and that the company expects will generate learnings it can bring back to its US operations.
Ulta Beauty had first targeted Canada for its international debut under then-Chief Executive Mary Dillon in 2019, but scrapped plans to open 30 stores the following year to refocus on its domestic market as it grappled with weaker sales tied to the coronavirus pandemic. The company “saw the disruption coming,” as former CEO Dave Kimbell later said at a retail conference in 2021. The withdrawal came with charges of around $30 million in fiscal 2020, including $10 million in employee severance and $5.6 million in lease termination expenses tied to the closure of 19 stores. This time, the company appears more committed to global growth, even as it pledges to cut $200 million to $250 million from its operating model between 2025 and 2027.
Recently appointed CEO Kecia Steelman, the third to take over the top job in four years, said the company just celebrated the soft opening of its first Ulta Beauty store in Mexico, with a grand opening to come in a few weeks. She added that the company remains on track to open its first store in the Middle East later this year.
“International expansion is an integral part of our Ulta Beauty Unleashed strategy to drive long-term growth,” Steelman said on her turnaround plan as Ulta Beauty reported a 9.3% increase in sales and a 3.3% rise in profit for the August quarter and raised its outlook for the year.
Still, Steelman was careful to temper expectations. The global rollout represents Ulta Beauty's “second strategic priority,” Steelman told analysts during the earnings call.
“What I would just say is that our US business does remain our top priority. I have a small team that's really focused on building our international business, but we’re very excited,” Steelman said.
Analysts believe this is the right moment for Ulta Beauty to expand.
“Ulta [Beauty] has been very successful in its main market, but it’s reaching a ceiling in the US and the opportunity there is going to become progressively hard,” said Neil Saunders, Managing Director and retail analyst at GlobalData.
The agreements reached with Grupo Axo and Alshaya Group should allow Ulta Beauty to avoid major risks in markets it hasn’t entered before as they will assume some of the capital expenditures, Saunders said. “So it’s sensible to take this market approach in case this doesn’t work out,” he noted, adding that in markets like the Middle East, it’s important to have a strong partner for things like securing good real estate sites.
Each market has its own dynamics. In Mexico, most beauty sales come through physical stores, with department store chains El Palacio de Hierro and Liverpool—which recently acquired US luxury chain Nordstrom in a deal valued at about $6.25 billion including debt—serving as the preferred destinations for prestige cosmetics shopping, Saunders said.
In the Middle East, where department stores play a strong role, specialist retailers such as Chalhoub-owned Faces, India’s Nykaa, and Russia’s Golden Apple also shape the competitive landscape. Ulta Beauty likewise faces pressure from LVMH-owned Sephora, its biggest rival in the US after the French retailer opened its first store in New York in 1998, eight years after Ulta Beauty's founding. The French retailer had 32 stores in Mexico in 2024 and nearly 90 in the Middle East in 2025, according to its website.
“The Middle East is a very competitive market, and that's one of the things that Ulta [Beauty] is going to have to take care with to make sure that their proposition is distinctive and interesting because it can be a nice proposition, but how is it adding value?” Saunders said.
Overall, Ulta Beauty shouldn’t replicate its US playbook in new markets, Saunders cautioned. “In Mexico, the beauty market is very strong, though more informal, and the consumer is struggling there,” he said. “Then the Middle East is a very big beauty market, so there’s potential, but the consumer is interested in a different product mix of products.”
Despite those hurdles, McKinsey and Euromonitor International point to significant opportunities.
McKinsey highlights rising wealth in Latin America and the Middle East as a driver of fresh growth for global beauty companies. Euromonitor sees Mexico as a sizable market with strong prospects.
“While the broader economic environment shows signs of moderation, private consumption continues to be resilient ... The increasing sophistication of Mexican consumers is driving demand for beauty and personal care products,” said Ignacio Rojas, Project Delivery Manager at Euromonitor.
The Middle East and Africa region is also viewed as a lucrative hub, with demand spanning international, regional, and local brands. “As consumers are becoming more vocal about their preferences and willing to invest in products and services that enhance their beauty, health, and wellness, businesses that enable consumers’ desire to fulfill their needs are to benefit,” said Amna Abbas, Senior Consultant for Health and Beauty at Euromonitor.
The size of both markets has been accelerating in recent years. In Mexico, beauty and personal care sales rose to 296.30 billion Mexican pesos ($15.83 billion) in 2024, up from 268.85 billion Mexican pesos ($14.36 billion) in 2023 and 236.41 billion Mexican pesos ($12.63 billion) in 2022. In the Middle East and Africa, the market reached $42.6 billion in 2024, compared with $40.23 billion in 2023 and $40.45 billion in 2022. Looking ahead, Mexico is projected to grow to 487.62 billion Mexican pesos ($26.05 billion) by 2029, while the Middle East and Africa are forecast to more than double to $84.56 billion from 2024 levels.
Burt Flickinger, Managing Director of Strategic Resource Group, sees the Middle East as a particularly strong bet. “I’ve done a lot of work in places like Dubai and Abu Dhabi in the Middle East, and shopping and tourism continue to break records,” Flickinger said. “It’s an ideal place for Ulta [Beauty].”
Ulta Beauty's international debut will test whether it can evolve beyond its US model while defending share at home amid growing competition from online players like Amazon’s Premium Beauty and TikTok.
“Ulta [Beauty] needs to focus on acquiring new exclusive brands, competing against Sephora, Amazon, TikTok, rethinking the store and format and going global,” TD Cowen’s Retail Analyst Oliver Chen said.
In the US, Ulta Beauty is currently striking a more cautious tone as consumer spending remains uncertain. Interim Finance Chief Chris Lialios said on the latest earnings call that Ulta Beauty will be deliberate on “pacing and prioritization” as conditions evolve. The retailer, which generates about 80% of sales from stores, now plans to open 150 to 160 new locations over the next two to three years, down from the 200 Steelman reiterated in June.
“It has to do with making sure that we're thinking very thoughtfully of investing our capital and expense dollars in the right way for our return and making sure that we're making really good business decisions on our new store opening growth,” Steelman said, stressing the slowdown isn’t tied to the end of its Target partnership, which accounted for less than 1% of Ulta Beauty's sales. The companies formally split in late August after months of speculation as they stopped mentioning the alliance after their March quarterly results and then paused their expansion plans.
Ulta Beauty is also ramping up online efforts with a curated beauty marketplace set to launch in the third quarter.
“We're keeping a close eye on TikTok,” Steelman said. “I think you want to be where the guest is and make sure that we're putting products in relevant spaces and engaging with a guest in the way that they want. So I'd say stay tuned.”
In this context, Ulta Beauty is expanding its board to include Sephora’s former President and CEO, Martin Brok, and Stephenie Landry, a senior executive with more than 20 years of experience, including several positions at Amazon. “Their transformative track records and strategic vision will be invaluable as we navigate our next chapter of growth,” Steelman said on the appointments. They joined the board on September 1.
Investors have so far backed Steelman’s strategy. Shares are up about 21% this year to around $520, as the company reiterates the long-term goals it outlined at its October Investor Day—4% to 6% revenue growth, mid-single-digit operating profit growth, and low-double-digit EPS growth.
“We think it's a little premature to change our long-term goals at this time,” Steelman said during the company’s latest earnings call. “Right now, we're just staying really laser-focused on executing our strategy, making the necessary investments to improve our competitiveness and reaccelerate our long-term share growth.”
