ULTA — Q2 2026 Financial Report Analysis

Overview

Ulta Beauty's fiscal second quarter of 2026 (the 13 weeks from May 3 to August 1, 2026) delivered net sales of $3.04 billion, up 8.9%, and diluted earnings per share (EPS — profit divided by the number of shares) of $6.55, up 13.3%. Roughly two-fifths of the sales growth came from existing stores and the website; the rest came from Space NK, the UK luxury beauty chain Ulta bought during the same quarter last year, and from new stores. On the back of a strong first half, management raised its full-year outlook for sales, profit and EPS.

Two things matter most in this report: growth at existing stores slowed and now comes almost entirely from customers spending more per visit rather than more visits, and EPS is growing noticeably faster than net income because Ulta is buying back its own shares with borrowed money.

Key Figures

Q2 FY2026 = 13 weeks ended August 1, 2026; Q2 FY2025 = 13 weeks ended August 2, 2025. Ulta's fiscal 2026 ends in late January 2027.

Where the Sales Growth Came From

Comparable sales — sales from stores and e-commerce that have been open for more than 13 months, which strips out the effect of simply adding new stores or buying another company — rose 3.8%. The 10-Q says this was "primarily driven by a 3.9% increase in average ticket" (the average amount spent per purchase). Since ticket growth alone slightly exceeds the total comp increase, the number of transactions was roughly flat. That is a change from the first quarter: for the full 26 weeks, the 4.6% comp increase came from a 3.8% ticket increase and 0.8% more transactions. In other words, traffic growth stalled in the second quarter.

It is also a slowdown against a demanding comparison: last year's Q2 comp was 6.7%.

The dollar increase in net sales was $247.2 million. Applying the 3.8% comp rate to last year's $2.79 billion base accounts for roughly $106 million; the remaining ~$140 million came from outside the comparable base — mainly Space NK (which was only in last year's figures for part of the quarter) and new stores. Ulta opened 15 stores and closed one in the quarter, ending with 1,534 US stores and 88 Space NK stores in the UK and Ireland.

By category, fragrance rose to 13% of sales from 12% and haircare to 20% from 19%, while cosmetics slipped to 37% from 38% and skincare and wellness to 24% from 25%. Cosmetics remains the largest category, but it is growing more slowly than the business as a whole.

Margins: Space NK Mix Offset by Lower Overhead

Gross margin (the share of sales left after paying for the merchandise and store occupancy costs) dipped to 39.1% from 39.2%. The filing attributes this "primarily" to "the impact of the Space NK business mix" — Space NK's luxury model carries a different cost structure than Ulta's US stores.

Selling, general and administrative (SG&A) costs rose 8.2% to $802.8 million, a bit slower than sales, so they fell to 26.4% of sales from 26.6%. Management cites "lower incentive compensation and leverage of corporate overhead," partly offset by higher advertising. Note the incentive-pay line: lower bonus accruals are a cost saving that does not necessarily repeat.

Net result: operating margin (the share of revenue left after running the business, before interest and tax) edged up to 12.5% from 12.4%, and operating income grew 10.1%.

Why EPS Grew Faster Than Profit

Net income rose 8.1%, but diluted EPS rose 13.3%. The gap comes from share buybacks: the diluted share count fell 4.5%, to 43.1 million from 45.1 million. In the first six months of fiscal 2026 Ulta repurchased 1.4 million shares for $791.1 million, and it has raised its fiscal 2026 buyback plan to $1.8 billion from $1.5 billion, using up the remaining $1.0 billion of its current authorization by year-end.

Those buybacks are partly funded with debt. Cash fell to $158.5 million from $424.2 million at the start of the year, short-term borrowings stood at $339.6 million, and the income statement swung from $1.4 million of net interest income a year ago to $3.7 million of net interest expense. The amounts are small relative to operating income of $379.6 million, but it means some of the EPS growth is financial engineering rather than a faster-growing business.

Operating cash flow for the first half was $381.6 million, up from $316.5 million, helped by inventory that was flat year on year at $2.4 billion despite 66 more stores.

Takeaway: Ulta's headline growth is healthy, but its quality has shifted. Existing-store growth is now coming almost entirely from higher spend per purchase with flat transaction counts, a larger share of total sales growth comes from the Space NK acquisition, and the buyback is doing more of the work on EPS. Once Space NK laps its acquisition date next quarter, reported sales growth will depend much more on the existing-store business.

Outlook

Management raised its fiscal 2026 guidance:

Our read: The raise at the midpoint is modest and mostly reflects the first half already being banked. With first-half EPS of $14.31, the new range implies second-half EPS of about $14.39 to $14.69. First-half sales grew 10.0% with a 4.6% comp; full-year guidance of 6.7%–7.2% sales growth and a 3.2%–3.7% comp implies a clear back-half slowdown — on simple arithmetic, comparable sales growth of roughly 2%–3%. Part of that is mechanical: Space NK was acquired in the second quarter of fiscal 2025, so from the third quarter onward it is in both years' numbers and stops adding to growth. The numbers to watch in the Q3 report (quarter ending around October 31, 2026) are whether transaction counts turn negative and whether the gross-margin pressure from Space NK fades once it is fully in the comparison base.