What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-12-04 compared with 2025-08-28 · 61 added, 64 removed, 219 unchanged (36% of the section changed)

39 unchanged sentences

Key aspects of our business include:

a differentiated assortment of approximately 29,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in approximately 1,500 stores predominantly located in convenient, high-traffic locations;

a differentiated assortment of approximately 29,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in 1,500 Ulta Beauty stores predominantly located in convenient, high-traffic locations;

engaging digital experiences delivered through our website, Ulta.com, and our mobile applications;

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Industry trend s

The overall beauty market expanded in 2024 and into the second quarter of 2025, supported by on-going consumer engagement with the beauty category.

The overall beauty market expanded in 2024 and into the third quarter of 2025, supported by on-going consumer engagement with the beauty category.

We remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains over the long term.

Impact of inflation and other macroeconomic trends

Persistent inflationary and macroeconomic pressures, including existing and potential tariffs, have impacted consumer spending habits broadly, which we believe could contribute to lower sales trends throughout fiscal 2025.

The continuation of inflationary and macroeconomic pressures, including existing and potential tariffs, could further impact our ability to grow sales and maintain historical profitability levels.

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Accordingly, we recognize revenue for our single performance obligation related to online sales at the time control of the merchandise passes to the customer, which is at the time of shipment or guest pickup.

We provide refunds for merchandise returns within 30 days from the original purchase date.

We generally provide refunds for merchandise returns within 30 days from the original purchase date.

State sales taxes are presented on a net basis as we consider our self a pass-through conduit for collecting and remitting state sales tax.

45 unchanged sentences

Our quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31.

The Company’s second quarter in fiscal 2025 and 2024 ended on August 2, 2025 and August 3, 2024, respectively.

The Company’s third quarter in fiscal 2025 and 2024 ended on November 1, 2025 and November 2, 2024, respectively.

Our quarterly results of operations have varied in the past and are likely to do so again in the future.

8 unchanged sentences

Operating income

Interest income, net

Interest expense (income), net

Income before income taxes and equity net loss of affiliate

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(1) Excludes 84 stores in the U.K.

and Ireland operated by Space NK as of August 2, 2025.

and Ireland operated by Space NK as of November 1, 2025.

13 Weeks Ended

5 unchanged sentences

Operating income

Interest income, net

Interest expense (income), net

Income before income taxes and equity net loss of affiliate

2 unchanged sentences

Equity net loss of affiliate

Comparison of 13 weeks ended August 2, 2025 to 13 weeks ended August 3, 2024

Net sales increased $236.4 million, or 9.3%, to $2.8 billion for the 13 weeks ended August 2, 2025 compared to $2.6 billion for the 13 weeks ended August 3, 2024.

The net sales increase was primarily due to increased comparable sales, the acquisition of Space NK, and new store contribution.

The comparable sales increase of 6.7% was driven by a 3.7% increase in transactions and a 2.9% increase in average ticket.

Gross profit increased $113.5 million, or 11.6%, to $1.1 billion for the 13 weeks ended August 2, 2025, compared to $978.2 million for the 13 weeks ended August 3, 2024.

Gross profit as a percentage of net sales increased to 39.2% for the 13 weeks ended August 2, 2025, compared to 38.3% for the 13 weeks ended August 3, 2024.

The increase in gross profit margin was primarily due to lower inventory shrink and higher merchandise margin, partially offset by deleverage of supply chain costs and other revenue.

Comparison of 13 weeks ended November 1, 2025 to 13 weeks ended November 2, 2024

Net sales increased $327.5 million, or 12.9%, to $2.9 billion for the 13 weeks ended November 1, 2025, compared to $2.5 billion for the 13 weeks ended November 2, 2024.

The net sales increase was primarily due to increased comparable sales, the acquisition of Space NK, and net new store contribution.

The comparable sales increase of 6.3% was driven by a 3.8% increase in average ticket and a 2.4% increase in transactions.

Gross profit increased $150.0 million, or 14.9%, to $1.2 billion for the 13 weeks ended November 1, 2025, compared to $1.0 billion for the 13 weeks ended November 2, 2024.

Gross profit as a percentage of net sales increased to 40.4% for the 13 weeks ended November 1, 2025, compared to 39.7% for the 13 weeks ended November 2, 2024.

The increase in gross profit margin was primarily due to lower inventory shrink and higher merchandise margin, partially offset by unfavorable channel mix.

Selling, general and administrative expenses

Selling, general and administrative (SG&A) expenses increased $96.9 million, or 15.0%, to $741.7 million for the 13 weeks ended August 2, 2025, compared to $644.8 million for the 13 weeks ended August 3, 2024.

SG&A expenses as a percentage of net sales increased to 26.6% for the 13 weeks ended August 2, 2025, compared to 25.3% for the 13 weeks ended August 3, 2024, primarily due to higher incentive compensation, store payroll and benefits, and corporate overhead.

Selling, general and administrative (SG&A) expenses increased $158.7 million, or 23.3%, to $840.9 million for the 13 weeks ended November 1, 2025, compared to $682.3 million for the 13 weeks ended November 2, 2024.

SG&A expenses as a percentage of net sales increased to 29.4% for the 13 weeks ended November 1, 2025, compared to 27.0% for the 13 weeks ended November 2, 2024, primarily due to higher incentive compensation, store payroll and benefits, higher store expenses, and amortization of cloud-based software investments.

Pre-opening expenses

Pre-opening expenses were $5.1 million for the 13 weeks ended August 2, 2025 compared to $4.2 million for the 13 weeks ended August 3, 2024.

Interest income, net

Interest income, net was $1.4 million for the 13 weeks ended August 2, 2025 compared to $4.5 million for the 13 weeks ended August 3, 2024.

As of August 2, 2025, we had $289.1 million outstanding under our credit facilities.

We did not have any outstanding borrowings on the credit facilities as of February 1, 2025 and August 3, 2024.

Pre-opening expenses were $5.3 million for the 13 weeks ended November 1, 2025, compared to $4.9 million for the 13 weeks ended November 2, 2024.

Interest expense (income), net

Interest expense, net was $4.1 million for the 13 weeks ended November 1, 2025, compared to interest income, net of $1.7 million for the 13 weeks ended November 2, 2024.

As of November 1, 2025 and November 2, 2024, we had $551.7 million and $199.7 million, respectively, outstanding under our credit facilities.

We did not have any outstanding borrowings on the credit facilities as of February 1, 2025.

Income tax expense

Income tax expense of $84.8 million for the 13 weeks ended August 2, 2025 represents an effective tax rate of 24.5%, compared to $81.2 million of income tax expense representing an effective tax rate of 24.3% for the 13 weeks ended August 3, 2024.

Net income was $260.9 million for the 13 weeks ended August 2, 2025, compared to $252.6 million for the 13 weeks ended August 3, 2024.

The increase in net income is primarily due to the $113.5 million increase in gross profit, partially offset by the $96.9 million increase in SG&A expenses, the $3.6 million increase in income taxes, the $3.1 million decrease in interest income, net, and the $1.0 million increase in pre-opening expenses.

Comparison of 26 weeks ended August 2, 2025 to 26 weeks ended August 3, 2024

Net sales increased $358.9 million, or 6.8%, to $5.6 billion for the 26 weeks ended August 2, 2025, compared to $5.3 billion for the 26 weeks ended August 3, 2024.

The net sales increase was primarily due to increased comparable sales, the acquisition of Space NK, and new store contribution, partially offset by a $3.6 million decrease in other revenue.

Income tax expense of $73.4 million for the 13 weeks ended November 1, 2025 represents an effective tax rate of 24.1%, compared to $78.0 million of income tax expense representing an effective tax rate of 24.4% for the 13 weeks ended November 2, 2024.

Net income was $230.9 million for the 13 weeks ended November 1, 2025, compared to $242.2 million for the 13 weeks ended November 2, 2024.

The decrease in net income is primarily due to the $158.7 million increase in SG&A expenses, the $5.8 million increase in interest expense, net, and the $0.4 million increase in pre-opening expenses, partially offset by the $150.0 million increase in gross profit and the $4.6 million decrease in income taxes.

Comparison of 39 weeks ended November 1, 2025 to 39 weeks ended November 2, 2024

Net sales increased $686.4 million, or 8.8%, to $8.5 billion for the 39 weeks ended November 1, 2025, compared to $7.8 billion for the 39 weeks ended November 2, 2024.

The net sales increase was primarily due to increased comparable

sales, the acquisition of Space NK, and net new store contribution.

The comparable sales increase of 5.2% was driven by a 3.0% increase in average ticket and a 2.2% increase in transactions.

Gross profit increased $158.0 million, or 7.7%, to $2.2 billion for the 26 weeks ended August 2, 2025, compared to $2.0 billion for the 26 weeks ended August 3, 2024.

Gross profit as a percentage of net sales increased to 39.1% for the 26 weeks ended August 2, 2025, compared to 38.8% for the 26 weeks ended August 3, 2024.

The increase in gross profit margin was primarily due to lower inventory shrink, higher merchandise margin, and favorable channel mix shifts, partially offset by lower other revenue and deleverage of supply chain costs.

Gross profit increased $308.0 million, or 10.1%, to $3.4 billion for the 39 weeks ended November 1, 2025, compared to $3.1 billion for the 39 weeks ended November 2, 2024.

Gross profit as a percentage of net sales increased to 39.6% for the 39 weeks ended November 1, 2025, compared to 39.1% for the 39 weeks ended November 2, 2024.

The increase in gross profit margin was primarily due to lower inventory shrink and higher merchandise margin, partially offset by deleverage of other revenue.

Selling, general and administrative expenses

SG&A expenses increased $141.6 million, or 10.8%, to $1.5 billion for the 26 weeks ended August 2, 2025, compared to $1.3 billion for the 26 weeks ended August 3, 2024.

SG&A expenses as a percentage of net sales increased to 25.8% for the 26 weeks ended August 2, 2025, compared to 24.8% for the 26 weeks ended August 3, 2024, primarily due to deleverage of store payroll and benefits, higher incentive compensation and higher store expenses.

SG&A expenses increased $300.3 million, or 15.1%, to $2.3 billion for the 39 weeks ended November 1, 2025, compared to $2.0 billion for the 39 weeks ended November 2, 2024.

SG&A expenses as a percentage of net sales increased to 27.0% for the 39 weeks ended November 1, 2025, compared to 25.5% for the 39 weeks ended November 2, 2024, primarily due to deleverage of store payroll and benefits, higher incentive compensation, and higher store expenses.

Pre-opening expenses

Pre-opening expenses were $6.9 million for the 26 weeks ended August 2, 2025 compared to $7.1 million for the 26 weeks ended August 3, 2024.

Pre-opening expenses were $12.3 million for the 39 weeks ended November 1, 2025, compared to $12.0 million for the 39 weeks ended November 2, 2024.

Interest income, net

Interest income, net was $5.0 million for the 26 weeks ended August 2, 2025 compared to $11.4 million for the 26 weeks ended August 3, 2024.

As of August 2, 2025, we had $289.1 million outstanding under our credit facilities.

We did not have any outstanding borrowings on the credit facilities as of February 1, 2025 and August 3, 2024.

Interest income, net was $0.8 million for the 39 weeks ended November 1, 2025, compared to interest income, net of $13.1 million for the 39 weeks ended November 2, 2024.

As of November 1, 2025 and November 2, 2024, we had $551.7 million and $199.7 million, respectively, outstanding under our credit facilities.

We did not have any outstanding borrowings on the credit facilities as of February 1, 2025.

Income tax expense

Income tax expense of $184.4 million for the 26 weeks ended August 2, 2025 represents an effective tax rate of 24.5%, compared to $175.9 million of income tax expense representing an effective tax rate of 23.7% for the 26 weeks ended August 3, 2024.

The higher income tax rate is primarily due to a reduced benefit from income tax accounting for stock-based compensation.

Net income was $565.9 million for the 26 weeks ended August 2, 2025 compared to $565.7 million for the 26 weeks ended August 3, 2024.

The increase in net income is primarily due to the $158.0 million increase in gross profit, partially offset by the $141.6 million increase in SG&A expenses, the $8.5 million increase in income taxes, and the $6.5 million decrease in interest income, net.

Income tax expense of $257.9 million for the 39 weeks ended November 1, 2025 represents an effective tax rate of 24.4%, compared to $253.9 million of income tax expense representing an effective tax rate of 23.9% for the 39 weeks ended November 2, 2024.

Net income was $796.8 million for the 39 weeks ended November 1, 2025, compared to $807.8 million for the 39 weeks ended November 2, 2024.

The decrease in net income is primarily due to the $300.3 million increase in SG&A expenses, the $12.3 million decrease in interest income, net, and the $4.0 million increase in income taxes, partially offset by the $308.0 million increase in gross profit.

Liquidity and capital resources

1 unchanged sentence

The most significant components of our working capital are merchandise inventories, cash and cash equivalents, and receivables, reduced by accounts payable, deferred revenue, and accrued liabilities.

As of August 2, 2025, February 1, 2025, and August 3, 2024, we had cash and cash equivalents of $242.7 million, $703.2 million, and $414.0 million, respectively.

As of November 1, 2025, February 1, 2025, and November 2, 2024, we had cash and cash equivalents of $204.9 million, $703.2 million, and $177.8 million, respectively.

Our primary cash needs are for rent, capital expenditures for new, remodeled, and relocated stores, increased merchandise inventories related to store expansion and new brand additions, supply chain improvements, share repurchases, and continued investment in our information technology systems.

Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for lease expenses, inventory, labor, distribution, advertising and marketing, and tax liabilities) as well as periodic spend for capital expenditures, investments, and share repurchases.

Our working capital needs are greatest from

August through November each year as a result of our inventory build-up during this period for the approaching holiday season.

Our working capital needs are greatest from August through November each year as a result of our inventory build-up during this period for the approaching holiday season.

Long-term cash requirements primarily relate to funding lease expenses and other purchase commitments.

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Operating activities consist of net income adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, deferred income taxes, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes.

The decrease in net cash provided by operating activities in the first 26 weeks of fiscal 2025 compared to the first 26 weeks of fiscal 2024 was mainly due to a larger increase in merchandise inventories in the first 26 weeks of fiscal 2025 and the net increase in other assets and liabilities, partially offset by the timing of accounts payable and accrued liabilities.

Merchandise inventories, net were $2.4 billion at August 2, 2025 compared to $2.0 billion at August 3, 2024, representing an increase of $408.8 million or 20.5%.

The increase in net cash provided by operating activities in the first 39 weeks of fiscal 2025 compared to the first 39 weeks of fiscal 2024 was mainly due to the timing of accounts payable and accrued liabilities, partially offset by a larger increase in merchandise inventories in the first 39 weeks of fiscal 2025, the net increase in other assets and liabilities, and the decrease in net income.

Merchandise inventories, net were $2.7 billion at November 1, 2025 compared to $2.4 billion at November 2, 2024, representing an increase of $378.5 million or 16.0%.

The increase in total inventory is primarily due to the following:

● $158 million for new brand launches;

● $93 million for the addition of 62 net new Ulta Beauty stores opened since August 3, 2024;

● $77 million for the addition of 83 net new stores acquired with Space NK.

● $106 million for the acquisition of Space NK;

● $80 million for the addition of 63 net new Ulta Beauty stores opened since November 2, 2024.

Investing activities

We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems.

Investing activities for capital expenditures were $156.0 million during the 26 weeks ended August 2, 2025, compared to $186.3 million during the 26 weeks ended August 3, 2024.

During the 26 weeks ended August 2, 2025, we opened 30 new stores, closed two stores, relocated four stores, and remodeled nine stores, compared to the 26 weeks ended August 3, 2024, when we opened 29 new stores, closed three stores, relocated two stores, and remodeled nine stores.

Investing activities for capital expenditures were $243.3 million during the 39 weeks ended November 1, 2025, compared to $300.5 million during the 39 weeks ended November 2, 2024.

During the 39 weeks ended November 1, 2025, we opened 58 new stores, closed three stores, relocated four stores, and remodeled 24 stores, compared to the 39 weeks ended November 2, 2024, when we opened 57 new stores, closed five stores, relocated two stores, and remodeled 36 stores.

The increase in net cash used in investing activities in the first 39 weeks of fiscal 2025 compared to the first 39 weeks of fiscal 2024 was primarily due to the acquisition of Space NK in the second quarter of fiscal 2025.

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The decrease in net cash used in financing activities in the first 39 weeks of fiscal 2025 compared to the first 39 weeks of fiscal 2024 was primarily due to borrowings from short-term debt and a decrease in the dollar amount of share repurchases.

As of August 2, 2025, we had $289.1 million outstanding under our credit facilities.

We did not have any outstanding borrowings on the credit facility as of February 1, 2025 and August 3, 2024.

As of November 1, 2025 and November 2, 2024, we had $551.7 million and $199.7 million, respectively, outstanding under our credit facilities.

We did not have any outstanding borrowings on the credit facilities as of February 1, 2025.

Share repurchase program

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Credit facility

On March 13, 2024, we entered into Amendment No.

On August 27, 2025, we entered into Amendment No.

4 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder;

1 unchanged sentence

JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender;

PNC Bank, National Association, as Documentation Agent and a Lender;

and the other lenders party thereto.

The Loan Agreement matures on March 13, 2029, provides maximum revolving loans equal to the lesser of $800.0 million or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $200.0 million, subject to the consent by each lender and other conditions.

The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold.

The Loan Agreement matures on March 13, 2029, provides maximum revolving loans equal to the lesser of $1.0 billion or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), and contains a $50.0 million subfacility for letters of credit.

The Loan Agreement requires the Company to maintain a minimum fixed charge coverage ratio of 1.0 whenever availability under the Loan Agreement falls below the specified threshold.

Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement.

Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0.5%

to 1.0% or the Term Secured Overnight Financing Rate plus a margin of 1.5% to 2.0%, and a credit spread adjustment of 0.10%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.25% to 0.375% per annum.

As of August 2, 2025, the Company had $237.7 million of borrowings outstanding under this credit facility.

The weighted average interest rate was 6.89% for the 26 weeks ended August 2, 2025.

As of February 1, 2025 and August 3, 2024, there were no borrowings outstanding under the credit facility.

As of August 2, 2025, we were in compliance with all terms and covenants of the Loan Agreement.

borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0.5% to 1.0% or the Term Secured Overnight Financing Rate plus a margin of 1.5% to 2.0%, and a credit spread adjustment of 0.10%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.25% to 0.375% per annum.

As of November 1, 2025 and November 2, 2024, the Company had $488.3 million and $199.7 million, respectively, of borrowings outstanding under this credit facility.

The weighted average interest rate was 6.42% and 7.15% for the 39 weeks ended November 1, 2025 and November 2, 2024, respectively.

As of February 1, 2025, there were no borrowings outstanding under the credit facility.

As of November 1, 2025, we were in compliance with all terms and covenants of the Loan Agreement.

Ulta Beauty’s wholly owned subsidiary, Space NK, maintains a multi-currency revolving credit facility (the Facility Agreement) with National Westminster Bank plc, providing up to £40.0 million for working capital requirements.

2 unchanged sentences

Borrowings bear interest at either the compound or term Sterling Overnight Index Average plus a margin of 1.75%, and an unused line fee of 0.60% per annum.

As of August 2, 2025, there was $51.4 million outstanding under this credit facility.

As of August 2, 2025, Space NK was in compliance with all terms and covenants of the Facility Agreement.

As of November 1, 2025, there was $63.4 million outstanding under this credit facility.

As of November 1, 2025, Space NK was in compliance with all terms and covenants of the Facility Agreement.

Our business is subject to seasonal fluctuation.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis