Ulta Beauty, Inc. Common Stock Barclays 19th Annual Global Consumer Staples Conference
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Okay, great. Thank you very much. Good morning, everybody, and thank you for joining us. I am Adrienne Yih, Barclays specialty retail apparel and footwear analyst, and it is my pleasure to welcome Kecia Steelman, President and Chief Executive Officer of Ulta Beauty, and Chris DelOrefice, Chief Financial Officer. I always like to give a little bit of background on the management before we start for those who are not as familiar with the company. Kecia joined Ulta Beauty in 2014 and has held leadership roles spanning store operations, merchandising, enterprise strategy, including Chief Store Operations Officer, Chief Operating Officer, and President, before being named President and CEO in January of 2025, a very well-deserved recognition. Prior to Ulta Beauty, she also held leadership positions at Family Dollar, The Home Depot, and Target. Chris is the newcomer. Chris joined Ulta Beauty as a CFO in December of 2025, and prior to that, he served as EVP and CFO of Becton, Dickinson and Company, and previously to that, more than two decades at Johnson & Johnson in a variety of senior finance leadership roles.
I think what we have really been impressed so far, having known you, is the amount of rigor from your CPG background that you are now bringing and overlaying to the retail landscape here. We thank you for all that work there. What makes this story particularly interesting today is entering a period where years of investment in loyalty, digital capabilities, stores, services, and technology are now beginning to create meaningful leverage. Today, I want to focus on five key areas that sit at the center of the investment debate.
The first is what investors misunderstand about the beauty category and perhaps the Ulta Beauty story. Why Ulta's moat and competitive advantages remain very difficult to replicate. Number three, the strength and loyalty of this customer. The beauty enthusiast. Not just any beauty purchaser, but the beauty enthusiast. Number four, the next wave of growth, including the potential scaling of wellness and other white space opportunities. Then the fifth, to wrap it all up, is how these growth investments translate into more leveraged earnings. That is where Chris comes in to do all the lifting on the finance. Kecia, let us start with the consumer. We are asking all of our companies. There is a debate of a consumer macro. You can see it every day in every data point. Where we were at the beginning of the year, at the beginning of the year, we were regenerating, actually.
Ulta was returning to positive comps and coming out of the normalization post-COVID. Where we are in the second quarter and how you are looking at the backdrop with all the oil going up, gas going up, et cetera.
Yeah. What we've seen is that the consumer, you're right, they've been navigating a very dynamic macroeconomic industry right now today, and there's a lot of unknowns that are out there. But we've not really seen any change with our consumer shopping behaviors, and I think it's because they view beauty as an affordable luxury. It's also self-care for them. It's something that they can do for themselves, even if they feel like they have to pull back in other parts of their spending. The fact that Ulta Beauty has categories from low-end, entry-level price points, all the way to luxury, we have something that is for absolutely everyone in the store, and we're really happy how we've seen our consumer weathering the storm right now. And you saw that when we just reported our Q2 earnings, that we beat our guidance and we've raised our guidance for the year.
We feel like this is going to be in the category that the consumer is going to continue to invest in and spend.
Great. And then with Space NK, you have a little exposure to the European consumer and the health of that. We've heard, I would say, notions of a deterioration in that European consumer. Can you speak to that and the fact that Space NK is quite a bit at the prestige side of it?
Yeah. Absolutely. Space NK has previously reported strong double-digit comps. We're not seeing any change in that consumer either. We're still actively investing in growth in the U.K. with Space NK stores. Yeah, I think that they're experiencing very similar things to what we are. They're just a little bit earlier in their growth cycle, how Ulta Beauty was many, many years ago. But we're continuing to invest in Space NK. We see the U.K. as still a very important growth opportunity. The U.K. is the sixth-largest beauty market in the countries. So we're investing. We like what we see, and we're really happy with that acquisition.
Fantastic. Any meaningful differences in income cohorts, age cohorts, or regions of the country? I know that there has been discussion between more the mass versus prestige that you have called out on the earnings calls. Maybe you can touch on that.
Yeah, I can take that. Yeah, sure. Again, as Kecia Steelman said, beauty has demonstrated to continue to be a very resilient category. Folks are very engaged. Our per average member spend was actually up. As we looked at the dynamics that played out in Q2, we did not see any change, whether it be age demographics, income cohorts. Behaviors were pretty consistent across. We actually had increases in all average spend at the income cohort level and age demographics. I think, again, it is a testament to the category. It is a testament to the competitive moat that we have. We executed strong in the quarter, and we continue to feel good about how we progress through the year.
Obviously, we are watching it, but I think we have set up a guide that we feel confident that we can deliver, as we said on our earnings call, and continuing to focus on what we can control, and delivering strong performance.
Great. Just as an analyst, I often get these questions about just beauty as a category. Within beauty, there are so many subcategories. There is fragrance, skincare, makeup, haircare, services, now wellness. Can you talk about the speeds or the maturity of each of those categories for Ulta Beauty, specifically within the box, and how you think about those over the next one-year horizon, then maybe the three-year horizon?
Yeah. As you mentioned earlier, I've been with the company for 12 years, and what I would say is that we've really evolved into a much more balanced portfolio than when I started 12 years ago. We were so heavily reliant on the makeup category in and of itself. Let me just take those one by one. Fragrance right now is one of our largest growing categories. It's really continuing to propel our business. If you looked at our Q2 results, a little bit of our AOV, our average trans- volume transaction, was due to the fragrance category itself. We've leaned into fragrance. We have gone out there and publicly said that we want to be number one in the U.S. in fragrance, and we're on the path to be able to do that.
Fragrance is really important to us because not only is it continuing to bring in new guests into the category, and as you mentioned, it skews a little bit more higher end, luxury, prestige in price point, but it also is bringing in a new consumer around the male consumer. A younger male consumer is coming into this category, and we like what we're seeing because it gets them into our store. The behaviors around fragrance specifically is that you used to buy a signature scent, and that's the one you kind of stuck with. Now, you're buying multiple scents, and you're layering, and you're actually creating your own personalized scent, and you're even changing that from day to night. We love what we're seeing in the fragrance category itself.
We've also got some great exclusivities that have launched with us with a brand like NOYZ, some part strong partnerships with Ella Langley. That cultural moment and product coming together is really brought to life in fragrance. If you look at skincare next, skincare, the K-beauty launching stronger in the U.S. For the last 18 months, Ulta Beauty has been the number one retailer of K-beauty, and in the last quarter, I shared that 50% of our sales in K-beauty were due to exclusives. Our merchants have done a fantastic job of really going out and curating the best of the best of the assortments within K-beauty. I announced on our second quarter earnings call that we're bringing in Proya, the number one C-beauty, so from China.
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