Ulta Beauty, Inc.

Good afternoon, everyone. My name is Layla, and I will be your conference operator today. At this time, I would like to welcome you to Ulta Beauty's fourth quarter and fiscal 2025 earnings call. This conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's prepared remarks, there will be a question and answer session. At this time, I would like to turn the call over to Ms. Kylie Rollins, Senior Vice President of Investor Relations. Ms. Rollins, please proceed.

Good afternoon, everyone, and thank you for joining us for a discussion of Ulta Beauty's results for the fourth quarter and fiscal 2025. Hosting our call today are Keisha Steelman, Chief Executive Officer, and Chris DeLorifus, Chief Financial Officer. During today's webcast, a presentation is being displayed live and will be posted to our website at ulta.com slash investor shortly after the webcast concludes. As a reminder, today's earnings release and the comments made by management during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to factors identified in the earnings release and in our most recent 10-K and 10-Q filings. The company undertakes no obligation to revise any forward-looking statements. To allow us to accommodate as many questions as possible during the hours scheduled for this call, we respectfully ask that you limit your time to one question with no more than one follow-up question. And as always, the IR team will be available for any follow-up questions after the call. Now I'll turn the call over to Keisha. Keisha?

Thank you, Kylie, and good afternoon, everyone. I'm excited today to be joined by Ulta Beauty's new CFO, Chris Del Orfez. Welcome, Chris. We're so thrilled to have you as a part of the team. As I reflect on the past 12 months, I'm incredibly proud of the Ulta Beauty team and all we have accomplished. We closed the year strong, delivering full-year financial performance ahead of our plans while making important guest-facing investments to position our business for future growth. For the year, we grew net sales by nearly 10% to $12.4 billion, delivered operating income of $1.5 billion, or 12.4% of sales, and EPS of $25.64. Today, I will start by briefly highlighting our fourth quarter and holiday performance and then discuss our full year performance and the progress we made against our Ulta Beauty Unleashed strategy before sharing more details on our plans and priorities for fiscal 2026. Our team stayed focused on executing and caring for our guests, delivering stronger than expected fourth quarter sales and continued market share gains in mass and prestige beauty. Successful events fueled our performance, including Black Friday and Cyber Monday, along with key post-holiday events like our fan favorite Love Your Skin and Jumble Love promotions. Holiday served as a culmination of our efforts to advance the business throughout 2025. We developed a thoughtful, cross-functional holiday strategy supported by outstanding in-store and digital execution. bold and relevant marketing campaigns and activations, and compelling holiday assortment and gift sets. Guest engagement was high, and many guests leaned into convenience of our omnichannel buy-anywhere, fill-anywhere capabilities during the busy holiday season. Our store and digital teams executed with excellence, delivering record-breaking holiday performance. We introduced a fun holiday marketing campaign focused on the 12 Days of Giftmas, featuring celebrity brand founders, which drove meaningful gains in awareness and brand love scores. We drove comp growth across all categories and made gifting easy with a curated and powerful holiday assortment, impactful newness, and leading fragrance offering. Our relentless commitment to operational excellence had store teams quickly restocking after high-volume holidays to serve guests and maximize selling opportunities, while our supply chain teams leveraged recent distribution center upgrades to increase our delivery speed to guests. Turning to our full-year performance, fiscal 2025 was a year of strategic investment and deliberate transformative change for Ulta Beauty. Change that challenged us to sharpen our focus, strengthen our capabilities, and position our business for sustainable, profitable growth in the rapidly evolving beauty market. We began the year with a clear vision on how we intend to unleash the power of our model, build on our foundational advantages, and reassert our leadership position in beauty through the execution of our Ulta Beauty Unleashed strategy with a clear focus on three priorities, driving core business growth, scaling new businesses, and realigning our foundation for the future. Paired with the collective commitment and agility of our teams, we turned vision into reality and made exceptional progress across each pillar of our strategy, reigniting our growth, strengthening our core, and delivering better-than-planned financial performance. Let me briefly highlight the advancements we made during the quarter. We elevated our execution and more consistently delivered a differentiated omnichannel guest experience, further solidifying Ulta Beauty as the unmatched beauty destination for all guests. This came to life through a recommitment to the best-in-class execution and stronger merchandise in stock. incremental investments and payroll hours to support the guest experience, more than 100,000 in-store events, which included brand launches, brand education, and celebrity appearances, and highlighted our differentiated in-store experience. Ongoing digital upgrades, which added guest-friendly features like replenish and save and wishlist, and expanded convenience through features like split card, and increased personalization through the power of AI in our automated marketing engine that delivered relevant, dynamic, and timely content across the customer journey. We strengthened and modernized our assortment and merchandising strategy, accelerating pipeline momentum and delivering a powerful wave of newness that included more than 100 new brands this year, including Moroccan Oil, Amica, Medicube, Isama, Drake's Better World Fragrance, and Tear Tear, among many more. Key elements that supported our merchandising evolution included thoughtful, purposeful collaboration with our brand partners to fuel the innovation pipeline with new products like Fenty's Diamond Collection and Morphe eyeshadow palettes. A new elevated go-to-market approach that established tighter collaboration between our merchandising, marketing, and store teams and helped drive operational excellence, marketing leadership, and compelling merchandising innovation. A bold new marketing strategy with reimagined events like our Only at Ulta event, which highlighted our differentiated exclusive assortment and powerful cultural activations like our sponsorship of the Cowboy Carter Tour in conjunction with Beyonce's Sacred Haircurl launch. and elevating our brand building capabilities, enabling us to build stronger portfolios of exclusive brands and products that drive meaningful differentiation and new member acquisition. Noteworthy successes in 2025 include Sacred, which became our largest prestige haircare launch in history, prestige skincare K-beauty brand Peach & Lily, influencer-founded makeup brand Dibs, and Gen Z's most loved fragrance brand Noise. We built and expanded into new growth channels through our international expansion beyond the US with nearly 100 stores in five countries. This included our acquisition of Space NK, a luxury beauty retailer operating more than 80 stores in the UK and Ireland, the opening of nine stores in Mexico via our joint venture partner, Grupo AXO, and the opening of two stores in the Middle East through our franchise partner, Alshaya. Our newly launched Marketplace, a curated online assortment that allows guests to explore a complimentary array of beauty, wellness, and lifestyle products on alta.com and our app. The assortment includes more than 200 established and emerging brands and 5,000 SKUs. Our wellness initiative, which included the addition of nearly 30 new brands in our core wellness assortment and nearly 40 new brands in our marketplace assortment, along with an expanded store presence in more than 400 stores. And new UB media capabilities, like the addition of connected TV and streaming audio products that drove engagement and incremental ad revenue. We made notable progress aligning our foundation to support future growth through important leadership changes to ensure our team was positioned to meet the needs of our evolving business. and ongoing cost optimization efforts, including investment in AI and automation, like the testing and new conversational AI capabilities for our guest services team, which streamlined and increased resolution efficiency and quality, as well as the implementation of an AI-powered order management system to optimize fulfillment across our network, enabling our expansion of ship from store and reducing out of stocks and markdown risks. Finally, and perhaps most importantly, we reignited our culture and reinvigorated our brand, and our guests, associates, and brand partners took notice. We did this through decisive organizational changes that accelerated decision-making and aligned teams and resources around guest-centric goals. Adopting a winning mindset as we stacked key successes and built momentum throughout the year, we steadily reignited our collective spirit, or as I like to say, we got our swagger back. And a new marketing brand equity campaign, Beauty Happens Here, and bold and fresh marketing activations, which place Ulta Beauty at the center of exciting cultural moments like Lollapalooza and Coachella. And a renewed enthusiasm for the magic of our mission, to bring the power of beauty to life for all ages and all life stages. By nearly all measures of success, our team delivered against our plans. During fiscal 2025, we drove 5.4% comparable sales growth and positive comp growth across all categories. We strengthened conversion in stores, increased transactions, and drove improving NPS scores. We grew our loyalty program by 5% to a record 46.7 million active members driven by strong growth and reactivated members and strong retention of existing members. We gained market share in both mass and prestige beauty. We delivered greater app engagement with approximately 60% of online sales made through the app and drove active app users up 15% year over year. And we drove significant EMV and reached record levels of unaided awareness. While the guest-facing investments we made this year pressured profitability, the steady progress and results driven in fiscal 2025 reinforce our expectations that these investments position us to return sustainable, profitable growth and to deliver against our long-term financial targets in fiscal 2026 and beyond. Before I turn to our plans and priorities for 2026, let me first touch on our view of the consumer, the current beauty landscape and our expectations going forward. Throughout 2025, we closely monitored consumer behavior and observed continued resilience, a strong focus on value and affordability, and increasing discernment in spending decisions. At the same time, engagement with the beauty category remained healthy, and the landscape remained competitive. We expect these themes to continue into fiscal 2026, though we are increasingly mindful of rising global conflicts that could impact economic conditions. Absent increased broader macro disruption for the year, our expectation for the beauty category growth is in line with the average historical growth rate with expected growth in the 2% to 4% range. As we turn to fiscal 2026, our Alta Beauty Unleashed strategy will continue to guide our priorities as we build on the successes of fiscal 2025. Chris will highlight our financial outlook, but let me touch on our priorities and plans for 2026. First, our core business in the U.S., which now includes more than 1,500 stores and robust digital offering, is our top priority, and we continue to see significant opportunity to unlock further growth. In 2026, we will continue to enhance our brand building efforts to further elevate and differentiate our assortment and strengthen our position as the retailer of choice to launch, build, scale, and globalize across the full low-to-luxury portfolio. We will continue to strengthen our appeal to meet guests' evolving beauty needs with innovative and relevant newness, like the record-breaking launch of Rare Beauty by Selena Gomez and the exclusive launch of Balmain's new ascent, Destin de Balmain. We will continue to invest in the heart of our experience, our stores, to extend our competitive advantage and capture key growth opportunities. We will build on our progress across our digital platforms with new capabilities and stronger guest engagement through personalization as we leverage greater automation and real-time content to tailor the guest experience and provide even more value to our loyal members. And we are pleased to announce today an expanded strategic integration with TikTok. Next week, we will launch Ulta Beauty on TikTok Shop, where guests can purchase immediately as they engage with content from Ulta Beauty and our brands on the platform. We are excited about the opportunities both social and AI-enhanced commerce platforms are providing us to bring our undeniably Ulta Beauty experience and assortment to life. We will initially launch with a thoughtfully curated assortment of only adult brands, which will add another exciting tool to our brand building playbook. Next, in order to maximize key incremental growth opportunities and remain resilient in a rapidly changing world, we will work to scale our new businesses. We intend to continue our international expansion in the UK, in Mexico and the Middle East through our existing partners. We will thoughtfully expand our wellness and marketplace assortment to drive new member acquisition and spend per member and add new UB Media capabilities to collectively fuel incremental profit growth. Finally, turning to our third area of focus, aligning our foundation for the future by optimizing our ways of working and streamlining our cost structure. In 2026, we plan to continue our supply chain transformation efforts with the rollout of increased automation and existing facilities and start of construction of a new regional distribution center in the Northwest later this year that will expand network capacity and increase fulfillment speed. We plan to invest in systems and processes to drive sales and inventory productivity through new merchandising transformation efforts. And we will continue to further our mission to support human possibility by expanding our AI capabilities to support the guest experience, drive associate productivity, empower smarter decision-making. Beauty is deeply personal, and we believe leveraging new AI capabilities will enable us to deliver relevance, inspiration, and expertise seamlessly across the guest's beauty journey. Powered by our loyalty ecosystem, rich first-party data, and convenient omnichannel footprint, we are engaging with industry leaders to explore how we can further leverage AI to amplify what makes Ulta Beauty distinct. All of these efforts will support our ongoing cost optimization efforts to fuel investment and support profitable growth. As we close out a strong fourth quarter in a transformative year, I want to thank our associates, guests, brand partners, and shareholders for their continued trust and partnership. As I reflect on my first year as CEO, I am proud of the progress that we made to deliver on our commitments, strengthen our strategic position, and invest in capabilities that will drive our next phase of growth. We are optimistic about the opportunities ahead, while remaining mindful and cautious as we navigate an environment with ongoing global uncertainty and potential economic volatility. Looking forward, we will control what we can control, put our prior strategic investments to work as we focus on strong execution, innovation that creates real value for our guests, and disciplined results return-driven capital allocation. I'm excited about what the future holds for Ulta Beauty. We have ambitious plans, and I'm confident that we have the right team, the right model, the right strategy, and the swagger to continue to win in the beauty category and create value for our shareholders. And with that, I'll turn it over to Chris to cover some of the specific financial results and our 2026 outlook. Chris?