Ulta Beauty (ULTA) Q1 FY27 earnings call: guidance and Q&A

Which categories are showing the greatest return on marketing investments, and where is the visibility for SG&A leverage in the back half of the year?

Kecia highlighted fragrance, Ignite brands, and 21 Days of Beauty as areas with strong ROI, emphasizing a balanced portfolio and leveraging UB Media for guest engagement. Chris noted strong execution in Q1 across gross margin and SG&A, creating opportunities for operating profit. SG&A growth is expected to step down in the second half due to anniversarying prior investments, with cost optimization helping further.

“Where we are seeing the investments really paying off is -- one of the strongest categories that we're seeing results in is really fragrance.”

asked by Adrienne Yih-Tennant · answered by Kecia Steelman

Was the low single-digit comp in March/April as good as it gets, and is SG&A stepping down in the back half of the year a given?

Kecia explained that Q1 played out as expected, with February showing low double-digit comp growth and March/April in the low single-digit range. She reiterated full-year comp guidance of 2.5%-3.5% and a high single-digit 2-year stacked comp. Chris confirmed SG&A is expected to step down to low single-digit growth in H2 due to anniversarying investments, while still allowing for new investments and cost optimization.

“The year is playing out as expected. Remember, we said we expected double-digit growth in the first half. That was largely attributable to Space NK and the anniversarying of Ulta Beauty Unleashed investments we made in the back half of 2025.”

asked by Simeon Gutman · answered by Christopher DelOrefice

How is the exit rate looking for sales, what are the next key events, and what should be mindful of regarding margin comparisons through the year?

Kecia noted Q1 ticket was up 3.7% driven by product mix, and transactions up 1.6% in a challenging macro. She emphasized marketing and merchandising plans to drive traffic and conversion, and continuous improvement on events like Ulta Beauty World. Chris detailed that operating profit growth is balanced H1/H2, with H1 having stronger gross margin due to shrink benefits, while H2 will see SG&A benefits as costs moderate. Investments continue in AI, brand building, and personalization.

“As you move from first half to second half, first half, we'll have stronger gross margin performance. Remember, SG&A is going to have the increased cost because of Space NK and the anniversarying of prior year investments we made.”

asked by Dana Telsey · answered by Christopher DelOrefice

Is there any change to the 2-4% category growth assumption or ability to maintain share, and why won't Q1's gross margin expansion flow through the rest of the year?

Kecia stated that category growth was stronger in the back half last year, so they are lapping tougher comps, but remain committed to share growth, which is implied in their guidance. Chris explained that gross margin is expected to be flat for the year, with larger shrink benefits front-loaded in Q1 due to cycling prior year success. Supply chain optimization is helping mitigate fuel cost pressures.

“We started realizing that benefit towards the back end of the year, and we're going to cycle through that success. So that's one of the drivers.”

asked by Michael Binetti · answered by Christopher DelOrefice

Is the operating margin guidance still flat to up 20 basis points, and should the 12% long-term target still be used given current performance?

Chris confirmed the operating margin guidance remains flat to up 20 basis points for the year. He noted they are already ahead of 12% and committed to driving operating profit faster than sales to achieve double-digit earnings growth, emphasizing this framework for long-term value creation.

“Yes, in our prepared remarks, we did confirm that there's no change to the operating margin guidance. We expect flat to up 20 basis points, and we're committed to that.”

asked by Irwin Boruchow · answered by Christopher DelOrefice

Is the market becoming more competitive, requiring more firepower to maintain share, and has promotional activity increased?

Kecia acknowledged the competitive nature of the beauty category but asserted Ulta's unique position with its broad assortment, expertise, and focus on exclusivity. She stated their guidance implies continued market share gains and that they are playing their own game. She did not explicitly address increased promotional activity but highlighted their ability to offer value through loyalty and targeted promotions.

“Beauty has always been a competitive category. And I think a lot of people want to play in it because it's attractive. It's got attractive profit margins. But I will say this is what we do, inside and out, beauty and wellness.”

asked by Michael Lasser · answered by Kecia Steelman