Boosted by its acquisition of British beauty retailer Space NK and shrugging off the end of its partnership with Target Corp., Ulta Beauty beat Wall Street forecasts on both the top and bottom lines in the second quarter and lifted its full-year forecast.
Net sales increased 9.3 percent to $2.8 billion in its second quarter, compared to $2.6 billion, primarily due to increased comparable sales, the acquisition of Space NK, and new store contribution. Wall Street had forecast sales of $2.67 billion.
Net income rose 3.3 percent to $260.9 million, compared to $252.6 million. Diluted earnings per share rose 9.1 percent to $5.78, compared to $5.30 and beating analysts’ estimates of $5.10.
Ulta is now forecasting full-year sales between $12 billion and $12.1 billion, up from $11.5 billion to $11.7 billion. Diluted earnings per share are expected to come in between $23.85 and $24.30, an increase from its previous forecast of $22.65 to $23.20.
Kecia Steelman, president and chief executive officer, said: “As we look to the future, we remain committed to executing our Ulta Beauty Unleashed strategy and strengthening our operating model. Our outlook for the remainder of the year reflects both the strength of our year-to-date performance and our caution around how consumer demand may evolve in the second half of the year. While near-term uncertainty persists, we’re staying focused on what we can control and on executing with excellence to deliver our uniquely Ulta Beauty experience.”
Ulta acquired Space NK from investment firm Manzanita Capital in July. Terms of the deal were not disclosed apart from that the purchase was funded with cash on hand and capacity under Ulta’s existing credit facility.
Press reports from last year suggested Manzanita was searching for a deal valued between 300 million pounds and 400 million pounds.
Space NK has 83 stores in the U.K. and Ireland and turnover of 196.5 million pounds in 2024.
During a post earnings call with analysts, Steelman said: “Our acquisition of U.K. specialty beauty retailer Space NK was a unique and strategically compelling opportunity to enter the growing U.K. market with an established and successful player, a top destination for beauty lovers. Space NK will continue to operate as a stand-alone subsidiary, with CEO Andy Lightfoot and his talented team staying at the helm leading operations from the U.K., we see opportunities to leverage each other’s strengths, talents and expertise, and over the long-term, we will focus on sharing best practices and transferring learnings between markets, particularly around assortment, guest experience and scaling growth.”
Continuing its international expansion, Ulta just celebrated the soft opening of its first store in Mexico, with the grand opening to come in a few weeks, and remains on track to open its first store in the Middle East later this year.
On the end of its partnership with Target, Steelman said: “For perspective, the royalty revenue from our Target partnership in fiscal 2024 was well below 1 percent of net sales.”
Providing a breakdown of the second-quarter sales numbers, Steelman noted that fragrance continued to be the strongest-performing category, delivering robust double-digit growth. Performance was fueled by successful Mother’s Day and Father’s Day activations, newness and strength and gift sets and men’s fragrances.
Sales in the skin care and wellness category increased in the high-single digit range, led by strong growth in body care and wellness across both mass and prestige.
The makeup category delivered midsingle-digit comp growth, while sales in the hair care category increased in the midsingle-digit range, supported by growth in professional hair care, accessories and hair tools.
