Dive Brief:
- Despite a challenging economic backdrop for consumers, Ulta Beauty gained market share in prestige beauty during the first quarter, CEO Kecia Steelman said on an earnings call Tuesday. Ulta’s Q1 net sales increased 11.1% to $3.2 billion and comparable sales grew 5.3%.
- The beauty retailer reported makeup comp sales growth was primarily driven by gains in prestige, whereas mass makeup was "relatively flat,” CFO Chris DelOrefice added on the call.
- Ulta is also developing a new “highly experiential” store in Times Square in New York City, Steelman said. The location is expected to open in late 2027.
Dive Insight:
Ulta is still driving sales in a category typically seen as discretionary for consumers, who are facing a tough macroeconomic backdrop.
“Performance was broad-based with all channels and major categories contributing positively to our strong results,” Steelman said on the call. “Consumers continue to face macroeconomic uncertainty and inflationary measures and pressures from rising fuel prices, making value increasingly important as a consideration. We are operating from a position of strength in this environment and have multiple levers to satisfy guest value needs.”
The retailer reported growth in both average ticket and transactions during the period. Fragrance was Ulta’s strongest category, delivering high-teen comp growth and increasing from 11% to 12% of total revenue, DelOrefice added.
Ulta maintained its full-year net sales and comp growth guidance provided in March, but slightly increased the expected operating income growth range to 6.5% to 9%, versus the previously provided bottom end of 6%.
The quarter beat expectations, “reinforcing solid execution, resilient beauty demand, and continued share gains in prestige,” Jefferies analysts said in a Tuesday note. “Consumers remain value-conscious, but [management] continues to see no evidence of trade-down across cohorts. Instead, spending is shifting toward perceived efficacy, brand relevance, and personalization rather than lower price points.”
On earnings calls this past month, other retailers — such as Dollar General and Walmart — remarked on the trade-down behavior coming from shoppers across income cohorts. Ulta, with its prestige performance this quarter, may be able to weather that challenge, according to TD Cowen analysts.
“We believe Ulta can continue to navigate a more value-focused consumer environment, as the company gains share in prestige,” TD Cowen analysts said in a Tuesday note. “Investor focus will likely remain centered on a more cautious consumer backdrop, tougher near-term compares, and the cadence of margins through the year.”
Some potential risks to the business include transportation costs due to heightened fuel prices, and continued softness in mass beauty, the analysts noted.
