rewrite this title Despite positive Q2 results, Ulta Beauty’s stock falls amid cost concerns | AlphaStreet

Ulta Beauty, Inc. (NASDAQ: ULTA), a leading retailer of cosmetics and personal care products, has reported stronger-than-expected results for the second quarter of fiscal 2025, benefitting from growth across business segments and continued store expansion. Encouraged by the positive outcome, the management raised its full-year sales and earnings guidance. However, the stock declined soon after the announcement, and the losses deepened in the following session.

Stock Dips

In after-hours trading, the stock dropped below the $500 threshold, halting its recent streak of steady gains. Pre-earnings, it was trading around 24% above the levels seen at the beginning of the year. It appears that weak margin performance amid cost escalation and uncertainties over consumer demand dampened investor confidence. It is worth noting that selling, general, and administrative expenses rose 15% in the most recent quarter.

The company said it is making progress in the Ulta Beauty Unleashed turnaround strategy, but remains cautious about how consumer demand may evolve in the second half of the year. Going forward, a potential growth driver will be the recently acquired Space NK business, a UK-based specialty beauty retailer that enabled Ulta Beauty to enter the fast-growing UK market.

Key Metrics

Net sales increased to $2.79 billion in the second quarter from $2.55 billion in the same period of fiscal 2024. Comparable store sales rose by 6.7%. Second-quarter net income moved up to $260.9 million or $5.78 per share from $252.6 million or $5.30 per share in the corresponding quarter a year earlier. Both earnings and the top-line exceeded Wall Street’s expectations, marking their seventh beat in a row.

Commenting on the results, Ulta Beauty’s CEO Kecia Steelman said, “Performance in the second quarter was fueled by the strength of our core business, reflecting our commitment to getting back to the basics, improved in-store execution, and elevating our go-to-market approach through operational excellence, marketing leadership, and compelling merchandising and innovation. Tighter collaboration and planful coordination across our field, marketing, and merchandising teams is having a tangible impact. We continue to make progress in advancing our brand building and digital, and personalization efforts.

Guidance

The Ulta Beauty leadership raised its full-year 2025 sales guidance to the range of $12.0 billion to $12.1 billion from the previous forecast of $11.5-11.7 billion. It expects FY25 comparable store sales to grow in the 2.5-3.5% range, vs. the earlier growth projection of 0-1.5%. Full-year earnings per share guidance has been raised to the range of $23.85 to $24.30 from $22.65-23.20.

On Friday, Ulta Beauty’s shares traded lower throughout the session, extending the post-earnings downturn. The average stock price for the last 52 weeks is $412.18.