Ulta Q2 sales rise as Space NK deal weighs on margins

Ulta Beauty reported a strong sales rebound in the second quarter of fiscal 2025, driven by rising traffic and digital growth, while warning that higher operating costs and inventory needs will weigh on margins as the retailer pursues international expansion and new initiatives. The company said revenue for the quarter ended Aug. 2 rose about 9.3 percent to $2.79 billion and diluted GAAP earnings per share were $5.78, up 9.1 percent year over year; comparable sales increased 6.7 percent, reversing a year-ago decline.

Management, speaking on an investor call, attributed the sales gain to more customer transactions and higher average ticket sizes, contributions from new stores and the recent acquisition of Space NK, and continued strength in ecommerce. Gross margin improved to 39.2 percent, up about 90 basis points, as shrink declined and promotional efficiency improved. Net income rose modestly to about $261 million. Despite the topline momentum, operating margin slipped to 12.4 percent from 12.9 a year earlier after selling, general and administrative expenses rose roughly 15 percent to $741.7 million, driven by higher payroll, incentive compensation and investments in stores...