Ulta Beauty, Inc.

Good afternoon, everyone. My name is Ryan, and I will be your conference operator today. At this time, I'd like to welcome you all to Ulta Beauty's second quarter and fiscal 2026 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 look to turn the call over to Ms. Kiley Rawlins, Senior Vice President of Investor Relations. Ms. Rawlins, please proceed.

Thank you, Ryan. Good afternoon, everyone, and thank you for joining us for a discussion of Ulta Beauty's results for the second quarter of fiscal 2026. Hosting our call today are Kecia Steelman, Chief Executive Officer, and Chris DelOrefice, Chief Financial Officer. During today's webcast, a presentation is being displayed live and has been posted to our website, ulta.com backslash investor. Thank you for joining us. Kecia? Kecia?

Thank you, Kiley, and good afternoon, everyone. The Alta Beauty team delivered another quarter of impressive results, including 8.9% net sales growth, 10.1% operating profit growth, and 13.3% diluted earnings per share growth. Our results reflect consistent operational execution and disciplined financial management. We stayed close to our guest, managed the fundamentals with rigor, and continued to invest in capabilities that will drive long-term growth. Thank you so much for joining us. At the same time, we strategically leveraged promotions to drive traffic and sales, fueled incremental sales through personalization, and increased app engagement, with the app now accounting for more than 60% of online sales. Importantly, our sales outpaced the U.S. beauty market in a dynamic environment. We increased our share of prestige beauty while holding mass share flat, according to Tarkana. Thank you for joining us. Let me now share more details on our second quarter performance and the progress we're making across our Alta Beauty Unleashed pillars. Beginning with our core business growth pillar, our U.S. business continues to power the company's overall performance, supported by our focus on delighting guests at every interaction, advancing our go-to-market approach, delivering compelling merchandising innovation, and strengthening our marketing leadership. Starting with the heart of our omnichannel ecosystem, our stores. We fueled growth with the addition of 13 net new Alta Beauty stores during the quarter and drove modest comp growth in stores as we lapped our strongest quarter from last year. Performance was driven by effective execution of key promotions and events, along with the impact of compelling newness. Our store associates maximized key selling opportunities and drove guest excitement in sales during key events like the Big Center Beauty Sale, Mother's Day, and Father's Day. During the quarter, we held more than 40,000 in-store events to support significant brand launches and brand activations. These high-energy events featured brand education and drove in-store traffic, strong guest engagement, and sales. E-commerce momentum continued in Q2 as we delivered our sixth consecutive quarter of double-digit sales growth, driven by ongoing investments in our guest experience, omnichannel capabilities, and emerging channels. Sales were fueled by planned merchandise and marketing promotions that resonated with guests, along with the enhanced convenience of our buy-anywhere, fill-anywhere capabilities. During Q2, we fulfilled more than 50% of our e-commerce orders through our vast network of more than 1,500 convenience store locations. Alta Beauty's TikTok shop continued to gain traction during the quarter, supported by the official brand opening campaign and the addition of several new brands to the shop, including TikTok's first live celebrity fragrance launch by rapper Ice Spice. We also used our new Chelsea, New York store as a TikTok shop live shopping studio, driving in-store guest excitement and online impressions. Since the launch, our TikTok initiative has driven over 100 million impressions. Notably, we're attracting significant attention from brand partners who are interested in joining our TikTok shop assortment and from creators who are interested in collaborating with the Ulta Beauty brand. We're pleased with the ongoing success of TikTok initiative and the competitive differentiation that is enabling for Ulta Beauty. From a merchandising perspective, we're focused on creating a continuous sense of discovery, bringing guest products, brands, trends, and experiences to give them reasons to keep coming back to Ulta Beauty. Our merchants are curating innovation across established brands, emerging brands, exclusive offerings, and fresh beauty trends, effectively translating what is culturally relevant into a guest experience that feels accessible and exciting. This starts with our focus on brand building. First, let me highlight some of the exciting go-to-market and brand building efforts underway to advance our ambition to win in fragrance. Fragrance continues to be an important growth driver for Ulta Beauty, supported by a strong pipeline of newness and culturally relevant brand launches that are bringing excitement and discovery to the category. During the second quarter, we launched several new and exclusive fragrances, including Clouder by Drake's Better World Fragrance, Exo Blue by Khloe Kardashian, Hot Girl Summer by Megan Thee Stallion, and Victor & Ross Bon Bon Collection, among several others. Bringing compelling newness to our assortment, our marketing team reinforced Alta Beauty as a destination for fragrance through a number of high-impact campaigns, while our store and e-commerce teams brought these launches to life through prominent, engaging experiences both in-store and online. Together, these efforts helped drive meaningful market share expansion in fragrance. Beyond Fragrance, K-Beauty Momentum continued. We expanded our leading assortment with the addition of five new K-Beauty brands, including Dr. Molasson, M. Boonson, Dr. Rio, Beardia, and Centillium 24. A robust double-digit growth in K-Beauty sales compared to the same period last year gives us confidence in our K-Beauty assortment. Importantly, nearly half of our K-Beauty sales during the quarter came from exclusive brands or products. Our efforts contributed to continued share gains and reinforced our optimism in the longevity of the K-Beauty brands over time. From a broader newness perspective, newly launched brands like Rare Beauty, Amica, and Moroccan Oil contributed nicely to performance. During the quarter, we launched 15 new brands, including Bath & Body Works, Frenchie, Junoco, and others. And in addition to new brand launches, our merchants are collaborating in close partnership with existing brands to fuel the innovation pipeline and address key white space opportunities. During the quarter, we launched exclusive newness from our existing brand partners, including L'Oreal's Infallible Cushion Foundation, Charlotte Tilbury's Exaggerized Waterproof Eyeshadow Sticks, and Salterre's Shimmering Body Oil. We continue to advance our marketing strategy, strengthening Ulta Beauty's position at the intersection of beauty, culture, and community. Our Rewrite the Rules summer campaign champions self-expression, amplified through our partnership with Supergirl and Millie Alcock across high-impact theater, store, and social experiences that invited every beauty lover to rock your look and find your power. We showed up at the Center of Culture with activations at Bottle Rock and Lollapalooza, bringing beauty and music together with Ulta Beauty at the center. We amplified our reach through a powerful creator ecosystem, spanning influential voices across social platforms, the UB Collective, our own Ulta Beauties, brand partners, and celebrity founders. We also expanded social commerce through TikTok Shop and TikTok Live, creating new pathways from inspiration and discovery to engagement and purchase. Together, these efforts drove strong growth in brand awareness and consideration with earned media value and impressions reaching record levels. Our robust loyalty program, which now encompasses about 47 million active members, remains central to inspiring members through personalized experiences, meaningful rewards, and exclusive benefits that deepen engagement and build lasting relationships with Ulta Beauty. Thank you so much for joining us. From predicting replenishment needs to improving cart conversion, we're creating more opportunities to drive engagement and incremental sales while delivering greater relevance for every guest. Moving to our second player, scaling new businesses. Our international operations continue to scale. We recently celebrated the one-year anniversary of our acquisition of SpaceNK, which operates stores in the UK and Ireland. Performance continues to be strong, and during the quarter, the SpaceNK team drove robust sales growth and continued market share expansion. In Mexico, we continued to expand our footprint with the opening of a new store in Chiapas, bringing total stores to 12 at the end of the quarter. The team leaned into the excitement of the World Cup as a sponsor of Campo Marte's International Soccer Fan Festival, where they held an experiential beauty activation, driving awareness and guest excitement. In addition, our franchise partner in the Middle East, Alshaya, is making progress on several new store openings planned for later this year. We are navigating the ongoing geopolitical environment in partnership with Alshaya and remain optimistic about the expansion opportunities in the region over the long term. We are expanding our assortment and giving guests even more choice through Alta Beauty's Marketplace Initiative. During the quarter, we continue to add new brands and SKUs across each of the seven Marketplace assortment focus areas, closing the quarter with more than 450 brands and over 12,000 SKUs in our Marketplace assortment. Our marketplace is an excellent example of how each element of our model makes the next better. Marketplace is attracting new and reactivating lapsed loyalty members, serving as a source of newness that elevates our assortment with high potential brands and fueling incremental UB media growth as more marketplace brands leverage our media network to drive awareness and sales. Moving to overall UB media performance, we're seeing solid momentum as the team drove double-digit growth compared to the second quarter in 2025. The strength of new products include a connected TV, along with new brand investment from both core and marketplace brands, with growth and profitability. We continue to test and expand new product offerings to round out our suite of tools to support brand partner advertising effectiveness and sales growth. In wellness, our assortment continues to resonate with guests, and we're fueling incremental growth through this important element of our business. We held our inaugural Find Your Feel Good Wellness event, which sparked meaningful guest engagement and awareness. We built on our first quarter success, incorporating wellness into our strategic temple events like Big Summer Beauty Sale, and continued to elevate our assortment with the addition of four new brands, including the exclusive only at Ulta brand, Good Day, by Patchology, and Higher Dose, a wellness tools brand designed to ignite vitality from the inside out. I'm proud of how our teams are thoughtfully building our position in wellness, continuously applying what we learned to strengthen our approach and better serve the evolving needs of our guests. And finally, our third strategic pillar, aligning our foundation for the future. Within supply chain, we are effectively leveraging prior investments in technology, automation, and network optimization to improve speed to guest, improve efficiency, and help offset the impact of rising fuel costs. In addition, our AI-powered sourcing capabilities continue to optimize the omni-channel inventory across all nodes, allowing us to meet greater guest and customer demand more efficiently and reduce markdowns. Beyond just supply chain, we are advancing our AI capabilities across the business to elevate the guest experience and unlock meaningful operational efficiencies. As consumers increasingly turn to AI for search and discovery, we have scaled content creation and enriched product information across AI platforms like OpenAI's ChatGPT, positioning Ulta Beauty as an authoritative source for beauty discovery, inspiration, and expertise. We also leveraged our partnership with Google Gemini to launch first-to-market capabilities, including multi-skew purchases. At the same time, we enhanced our on-site shopping agent, Alta AI, with new features and broader placement of a high-performing discovery experience. These efforts are delivering encouraging results, driving meaningful increases in site traffic and improved conversion. At the same time, we're in the early stages of applying AI across key corporate uses to enhance how we work, improve productivity, and drive greater efficiency. As these capabilities mature, we see opportunities to scale AI thoughtfully across the organization and deliver incremental value over time. Turning to the operating landscape, we see continued beauty and wellness resilience and strong consumer interest and engagement. At the same time, perceived value continues to influence purchase decisions, and consumers are being choiceful as they navigate macro uncertainty and higher everyday expenses, including elevated fuel costs. Against this backdrop, we are uniquely positioned to meet our guests wherever they are. We are focused on emphasizing the multiple ways we deliver meaningful value while continuing to deepen engagement with our brand, including an assortment that spans all price points, giving guests choice and flexibility to shop on any budget. A seamless omnichannel experience for convenient shopping and fulfillment options. and a powerful value-rich loyalty program that rewards members with personalized promotions, relevant offers, and exclusive perks. Looking ahead, we will remain disciplined and responsive as we manage the evolving operating landscape with a focus on serving our guests, driving sales growth, and positioning Alta Beauty to consistently capture market share. As we move into the second half of the year, we're excited about our ability to execute on our key strategic priorities within our Alta Beauty Unleashed strategy to further fuel core business growth and scale new growth vectors while aligning our foundation for sustained profitable growth. In closing, our year-to-date performance, including strong sales and earnings growth, as well as continued share gains, is a compelling demonstration that Ulta Beauty's differentiated model is more relevant than ever, and that our Ulta Beauty Unleashed strategy is working. What sets our differentiated model apart is the power of our entire ecosystem. Leading assortment, services, loyalty, omnichannel convenience, beauty expertise, and shopping experience all working together. This combination creates a flywheel that attracts more guests, more loyalty, more data and some insights, and more brand partnerships, which in turn makes Ulta Beauty the ultimate beauty discovery destination and represents a strategic advantage that is very difficult to replicate. By leveraging our unique understanding of our guests and the beauty landscape, we are strengthening trust and deepening loyalty to ensure Ulta Beauty is the beauty destination our growing number of guests choose again and again. I want to thank all of our associates for delivering these strong results and advancing our long-term strategic priorities amidst a dynamic operating environment. We are energized by our continued progress and confident in the enduring relevance of beauty, the powerful connection our guests and associates have with Ulta Beauty, and the significant growth opportunities ahead. I am confident that we have the right team, strategy, and model to continue to win in beauty and drive profitable, Thanks, Kecia, and good afternoon, everyone. I'll begin with the discussion of our second quarter results and then share our updated expectations for the year.