Ulta Beauty shares slide as rising costs pressure margins

Ulta Beauty’s (ULTA.O) shares fell about 8% in premarket trading on Friday as rising costs weighed on the retailer’s margins, despite strong holiday-quarter sales and a promising outlook. Analysts remain cautiously optimistic, noting the company’s new TikTok-led strategy under CEO Kecia Steelman to attract younger and affluent shoppers.

While Ulta posted solid sales, driven by trendy assortments including Rihanna’s Fenty Beauty, Beyonce’s Cecred haircare, and campaigns featuring Khloe Kardashian and Paris Hilton, costs rose sharply. Selling, general, and administrative (SG&A) expenses jumped 23% to $1 billion in the December quarter, fueled by incentive compensation and ongoing investment in marketing and Space NK, the British high-street chain acquired last year, News.Az reports, citing Reuters.

To capture Gen Z and Gen Alpha consumers, Ulta plans to launch an exclusive-brand assortment on TikTok Shop, aiming to expand online beauty sales as competition from Target and Walmart intensifies. William Blair analysts noted that Ulta is “capturing share in the larger migration of the beauty category online,” signaling potential upside to annual sales forecasts.

CEO Kecia Steelman, who took charge in January 2025, also highlighted caution around the potential impact of global conflicts. Analysts at J.P. Morgan and other brokerages said the company’s cautious guidance, combined with shares that had been “priced close to perfection,” makes the pullback unsurprising.

Ulta expects SG&A growth to remain elevated in the first half of fiscal 2026 due to Space NK-related costs and ongoing investments, before easing later in the year as integration expenses annualize. At least seven brokerages have cut price targets on the stock following the results.

Ulta’s forward price-to-earnings multiple stands at 21.62, compared with 29.53 for Estee Lauder (EL.N) and 19.84 for Elf Beauty, highlighting a mix of opportunity and caution for investors amid rising costs and digital expansion.

News.Az 

By Aysel Mammadzada