By Juveria Tabassum and Sanskriti Shekhar
March 12 (Reuters) – Ulta Beauty forecast annual profit below analysts’ estimates as higher costs drag margins, and sounded some caution on the potential impact from “global conflicts”, sending its shares down 8% in extended trading on Thursday.
To draw younger and more affluent shoppers, Ulta has leaned on celebrity-owned and premium labels such as Beyonce’s Cecred haircare line and Rihanna’s Fenty Skin Body, while it ran holiday campaigns featuring Khloe Kardashian and Paris Hilton.
Ulta also acquired British high-street chain Space NK last year to enter the UK, stepping up its international expansion and tapping into the growing skincare market.
“We are optimistic about the opportunities ahead, while remaining mindful and cautious as we navigate in an environment with ongoing global uncertainty and potential economic volatility,” said CEO Kecia Steelman, who took charge in January 2025.
Escalating tensions in the Middle East have caused a spike in energy prices and disrupted global shipping, raising concerns of economic pressure on consumers, who are already battling inflation in the U.S.
Lower- and middle-income shoppers, in particular, have been pulling back on discretionary spending as they funnel more of their crimped budgets into everyday essentials such as groceries.
While Ulta topped holiday-quarter sales expectations, its operating margin fell to 12.2% from 14.8% a year ago.
It expects comparable sales growth of 2.5% to 3.5% in fiscal 2026, down sharply from a 5.4% increase posted in 2025.
The company also faces intense competition from Target and Walmart as they broaden their beauty offerings and ride the surge in demand for K-beauty products.
“Ulta Beauty’s position as the dominant specialty beauty retailer is not in question, but Sephora, Amazon, and a growing wave of direct-to-consumer brands are all competing for the same consumer wallet,” said Ethan Feller, stock strategist at Zacks Investment Research.
“Being the leader doesn’t make you immune to multiple compressions when the valuation is elevated relative to the growth profile.”
Last month, Estee Lauder also forecast annual profit below estimates as it navigates sluggish demand in the Americas and invests in more premium price tiers and ramps up marketing efforts as part of a revamp under its new CEO.
Ulta expects full-year earnings per share to be between $28.05 and $28.55, with the mid-point below analysts’ expectations of $28.40, according to data compiled by LSEG.
Higher expenses due to investments in compensation and international expansion were a cause for small concern, said Morningstar analyst David Swartz.
Analysts have also noted that Ulta’s shares, which closed at $624.70 on Thursday and rose 39% in 2025, were expensive coming into the quarterly report.
Ulta forecast annual net sales to grow 6% to 7%, while analysts estimate a 5.94% rise.
(Reporting by Sanskriti Shekhar and Juveria Tabassum in Bengaluru; Editing by Shilpi Majumdar)
