Ulta Beauty Earnings Crush Estimates. The Stock Slumps.

A general view of the atmosphere at a Pre-Met Gala Brunch hosted by Live Tinted, Ulta Beauty and celebrity makeup artist Daniel Martin at The Orangery at The Warren Street Hotel on May 04, 2025 in New York City. (Craig Barritt /Getty Images)

Ulta Beauty’s second-quarter earnings handily topped Wall Street’s expectations, but the stock is getting crushed on Friday.

There was little obviously wrong with the numbers. The cosmetics retailer’s adjusted earnings of $5.78 a share beat analysts’ estimates calling for $5.10 a share, according to FactSet. Revenue of $2.79 billion was better than the Street’s projections for $2.68 billion.

Same-store sales rose 6.7% year over year in the quarter, driven by a 3.7% increase in transactions and a 2.9% increase in the average ticket amount.

Ulta also increased its guidance for the full year. It now expects net sales to range between $12.0 billion to $12.1 billion, compared with a prior forecast of $11.5 billion to $11.7 billion.

The new earnings range is $23.85 to $24.30 per share, higher than the $22.65 to $23.20 range issued earlier this year.

And the first reaction was good too. Ulta stock jumped 6.1% to $563 in the after-hours trading session, but had slumped 7.1% to $493.05 in late afternoon trading Friday. Shares had risen 22% this year, outperforming the S&P 500’ s roughly 11% gain.

“Outstanding top line performance, fueled by growth across all major categories, drove market share growth and better-than-expected profitability,” said CEO Kecia Steelman in a statement.

Since stepping into the chief executive role in January, Steelman has focused on reigniting Ulta’s sales momentum, which had seen a modest slump in 2024 after several years of outperformance. Her current turnaround plan, Ulta Beauty Unleashed, is focused on driving sales and scaling the business profitably, as well as streamlining Ulta’s broader organization.

Earlier this month, Ulta and Target announced they were dissolving a partnership that saw the cosmetics retailer opening more than 600 shops within Target. Ulta had hinted as early as April the company was evaluating its Target stores as it looked to implement the Ulta Beauty Unleashed strategy.

Concerns about margins may be weighing on the stock. “Given the comp level well above co’s target 3-4% algo, we were looking for a clearer path to margin expansion,” writes Jefferies analyst Ashley Helgans. “ULTA remains focused on making investments in order to maintain share in an intensifying competitive landscape, and to re-accelerate share growth. Co expressed they believe 12% OM% is normalized, and the 14-15% ULTA once held was in a different operating enviro.”

Whatever the reason, the shine has come off Ulta stock.

Write to Sabrina Escobar at sabrina.escobar@barrons.com