Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this quarterly report. This discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” “targets,” “strategies,” or other comparable words. Any forward-looking statements contained in this Form 10-Q are based upon our historical performance and on current plans, estimates, and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates, targets, strategies, or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation:
● macroeconomic conditions, including inflation and elevated interest rates, as well as prior labor, transportation, and shipping cost pressures, have had, and may continue to have, a negative impact on our business, financial condition, profitability, and cash flows (including future uncertain impacts, especially when combined with increased tariffs);
● changes in the overall level of consumer spending and volatility in the economy, including as a result of macroeconomic conditions, tariffs, and geopolitical events;
● our ability to sustain our growth plans and successfully implement our long-range strategic and financial plan, including our international expansion in Mexico, the Middle East, the U.K., and Ireland;
● the ability to execute our operational excellence priorities, including continuous improvement and supply chain optimization;
● our ability to gauge beauty trends and react to changing consumer preferences in a timely manner;
● the possibility that we may be unable to compete effectively in our highly competitive markets;
● the possibility of significant interruptions in the operations of our distribution centers, fast fulfillment center, and market fulfillment centers;
● the possibility that cybersecurity or information security breaches and other disruptions could compromise our information or result in the unauthorized disclosure of confidential information;
● the possibility of material disruptions to our information systems, including our Ulta.com website and mobile applications;
● the possibility that we will not realize the anticipated benefits of the acquisition of Space NK for any reason, including due to challenges with integration and/or achieving anticipated acquisition synergies;
● the failure to maintain satisfactory compliance with applicable privacy and data protection laws and regulations;
● changes in the good relationships we have with our brand partners, our ability to continue to obtain sufficient merchandise from our brand partners, and/or our ability to continue to offer permanent or temporary exclusive products of our brand partners;
● our ability to effectively manage our inventory and protect against inventory shrink;
● changes in the wholesale cost of our products and/or interruptions at our brand partners’ or third-party vendors’ operations;
● epidemics, pandemics or natural disasters, which could negatively impact sales;
● the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues;
● our ability to attract and retain key executive personnel;
● the impact of climate change on our business operations and/or supply chain;
● our ability to successfully execute our common stock repurchase program or implement future common stock repurchase programs;
● a decline in operating results which could lead to asset impairment and store closure charges; and
● other risk factors detailed in our public filings with the Securities and Exchange Commission, including risk factors contained in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended
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February 1, 2025, as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q (including this report).
Except to the extent required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
References in the following discussion to “we,” “us,” “our,” “Ulta Beauty,” the “Company,” and similar references mean Ulta Beauty, Inc. and its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.
Overview
We were founded in 1990 as a beauty retailer at a time when prestige, mass, and salon products were sold through distinct channels – department stores for prestige products; drug stores and mass merchandisers for mass products; and salons and authorized retail outlets for professional hair care products. We developed a unique specialty retail concept that offers a broad range of brands and price points, select beauty services, and a convenient and welcoming shopping environment. We define our target consumer as a beauty enthusiast, a consumer who is passionate about the beauty category, uses beauty for self-expression, experimentation, and self-investment, and has high expectations for the shopping experience. We believe our strategy provides us with the competitive advantages that have contributed to our financial performance.
Today, we are the largest specialty beauty retailer in the United States and a leading destination for cosmetics, fragrance, skin care, hair care, wellness and salon services. 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; engaging digital experiences delivered through our website, Ulta.com, and our mobile applications; our best-in-class loyalty program that enables members to earn points for every dollar spent on products and beauty services and provides us with deep, proprietary customer insights; and our ability to cultivate human connection with warm and welcoming guest experiences across all of our channels. In addition to our domestic operations, Ulta Beauty is expanding our presence internationally through a joint venture in Mexico, a franchise in the Middle East, and our subsidiary, Space NK, a luxury beauty retailer operating in the U.K. and Ireland.
The continued growth of our business and any future increases in net sales, net income, and cash flows is dependent on our ability to execute our strategic priorities across four foundational focus areas: 1) Assortment: curating the best of all things beauty and wellness for all beauty enthusiasts; 2) Experience: fostering authentic, empowering human connections that inspire, delight and engage guests at every touchpoint; 3) Loyalty: building lifelong loyalty and brand love through member growth and personalization; and 4) Access: engaging our guests wherever they want to shop by expanding our reach through seamless and immersive omnichannel experiences. We operate in an attractive and growing beauty products and salon services industry, and believe our strong operating model, competitive advantages, and financial foundation, paired with our investments to drive our growth, position us to capture additional market share in the industry.
Comparable sales is a key metric that is monitored closely within the retail industry. Our comparable sales have fluctuated in the past, and we expect them to continue to fluctuate in the future. A variety of factors affect our comparable sales, including general economic conditions, changes in merchandise strategy or mix, and timing and effectiveness of our marketing activities, among others.
Over the long term, our growth strategy is to drive profitable growth and market share leadership in beauty and wellness through growing our comparable sales, expanding omnichannel capabilities, and opening new stores. Long-term operating profit is expected to increase as a result of our efforts to drive revenue growth, leverage fixed costs, improve
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merchandise margin, increase operating efficiencies, and grow other revenue, partially offset by incremental investments in new stores and technology to enhance the guest experience, people, assortment, and advertising.
Current Trends
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. 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. In addition, inflation could cause the interest rates on any debt to remain at an elevated level or increase.
Basis of presentation
The Company has one reportable segment, which includes retail stores, salon services, and e-commerce.
We recognize merchandise revenue at the point of sale in our retail stores. E-commerce sales are recognized upon shipment or guest pickup of the merchandise based on meeting the transfer of control criteria. Retail store and e-commerce sales are recorded net of estimated returns. Shipping and handling are treated as costs to fulfill the contract and not a separate performance obligation. 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. 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. Salon service revenue is recognized at the time the service is provided to the guest. Gift card sales revenue is deferred until the guest redeems the gift card. Company coupons and other incentives are recorded as a reduction of net sales. Other revenue includes the private label and co-branded credit card programs, royalties derived from the partnership with Target Corporation, and deferred revenue related to the loyalty program and gift card breakage.
Comparable sales reflect sales for stores beginning on the first day of the 14th month of operation. Therefore, a store is included in our comparable store base on the first day of the period after one year of operations plus the initial one-month grand opening period. Non-comparable store sales include sales from new stores that have not yet completed their 13th month of operation and stores that were closed for part or all of the period in either year. Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or prior period. Comparable sales include retail sales, salon services, and e-commerce. In fiscal years with 53 weeks, the 53rd week of comparable sales is included in the calculation. In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks. There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales.
Measuring comparable sales allows us to evaluate the performance of our store base as well as several other aspects of our overall strategy. Several factors could positively or negatively impact our comparable sales results:
● the general national, regional, and local economic conditions and corresponding impact on customer spending levels;
● the introduction of new products or brands;
● the location of new stores in existing store markets;
● competition and/or alternative distribution channels;
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● our ability to respond on a timely basis to changes in consumer preferences;
● the effectiveness of our various merchandising and marketing activities; and
● the number of new stores opened and the impact on the average age of all of our comparable stores.
Cost of sales includes:
● the cost of merchandise sold, offset by vendor income that is not a reimbursement of specific, incremental, and identifiable costs;
● distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities, and insurance;
● shipping and handling costs for e-commerce orders;
● retail store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, and licenses;
● salon services payroll and benefits; and
● shrink and inventory valuation reserves.
Our cost of sales may be negatively impacted as we open new stores. Changes in our merchandise or channel mix may also have an impact on cost of sales. This presentation of items included in cost of sales may not be comparable to the way in which our competitors or other retailers compute their cost of sales.
Selling, general and administrative expenses include:
● payroll, bonus, and benefit costs for retail store and corporate employees;
● advertising and marketing costs, offset by vendor income that is a reimbursement of specific, incremental, and identifiable costs;
● occupancy costs related to our corporate office facilities;
● stock-based compensation expense;
● depreciation and amortization for all assets, except those related to our retail stores and distribution operations, which are included in cost of sales; and
● legal, finance, information systems, and other corporate overhead costs.
This presentation of items in selling, general and administrative expenses may not be comparable to the way in which our competitors or other retailers compute their selling, general and administrative expenses.
Pre-opening expenses include non-capital expenditures during the period prior to store opening for new, remodeled, and relocated stores including rent during the construction period for new and relocated stores, store set-up labor, management and employee training, and grand opening advertising.
Interest income represents interest from cash equivalents, which include highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less from the date of purchase. Interest expense includes interest costs and facility fees associated with our credit facilities, which is structured as an asset-based lending instrument. Interest on our credit facilities is based on a variable interest rate structure which can result in increased cost in periods of rising or elevated interest rates.
Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores.
Results of operations
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. Our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance.
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The following tables present the components of our consolidated results of operations for the periods indicated:
13 Weeks Ended
26 Weeks Ended
August 2,
August 3,
August 2,
August 3,
(Dollars in thousands)
2025
2024
2025
2024
Net sales
$
2,788,469
$
2,552,087
$
5,636,836
$
5,277,935
Cost of sales
1,696,773
1,573,910
3,430,921
3,229,978
Gross profit
1,091,696
978,177
2,205,915
2,047,957
Selling, general and administrative expenses
741,737
644,821
1,452,350
1,310,734
Pre-opening expenses
5,105
4,155
6,934
7,074
Operating income
344,854
329,201
746,631
730,149
Interest income, net
(1,413)
(4,526)
(4,960)
(11,426)
Income before income taxes and equity net loss of affiliate
346,267
333,727
751,591
741,575
Income tax expense
84,795
81,171
184,439
175,906
Income before equity net loss of affiliate
261,472
252,556
567,152
565,669
Equity net loss of affiliate
597
—
1,225
—
Net income
$
260,875
$
252,556
$
565,927
$
565,669
Other operating data:
Number of stores end of period (1)
1,473
1,411
1,473
1,411
Comparable sales
6.7%
(1.2%)
4.7%
0.2%
(1) Excludes 83 stores in the U.K. and Ireland operated by Space NK as of August 2, 2025.
13 Weeks Ended
26 Weeks Ended
August 2,
August 3,
August 2,
August 3,
(Percentage of net sales)
2025
2024
2025
2024
Net sales
100.0%
100.0%
100.0%
100.0%
Cost of sales
60.8%
61.7%
60.9%
61.2%
Gross profit
39.2%
38.3%
39.1%
38.8%
Selling, general and administrative expenses
26.6%
25.3%
25.8%
24.8%
Pre-opening expenses
0.2%
0.2%
0.1%
0.1%
Operating income
12.4%
12.9%
13.2%
13.8%
Interest income, net
(0.1%)
(0.2%)
(0.1%)
(0.2%)
Income before income taxes and equity net loss of affiliate
12.4%
13.1%
13.3%
14.1%
Income tax expense
3.0%
3.2%
3.3%
3.3%
Income before equity net loss of affiliate
9.4%
9.9%
10.1%
10.7%
Equity net loss of affiliate
0.0%
0.0%
0.0%
0.0%
Net income
9.4%
9.9%
10.0%
10.7%
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Comparison of 13 weeks ended August 2, 2025 to 13 weeks ended August 3, 2024
Net sales
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
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.
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.
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.
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
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
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. The comparable sales increase of 4.7% was driven by a 2.6% increase in average ticket and a 2.1% increase in transactions.
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Gross profit
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.
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.
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.
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.
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
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.
Liquidity and capital resources
Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowings under our credit facilities. 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.
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
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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.
We generally fund short-term and long-term cash requirements with cash from operating activities. We believe our primary sources of liquidity will satisfy our cash requirements over both the short term (the next twelve months) and long term.
Cash flows
We believe our ability to generate substantial cash from operating activities and readily secure financing at competitive rates are key strengths that give us significant flexibility to meet our short and long-term financial commitments.
The following table presents a summary of our cash flows:
26 Weeks Ended
August 2,
August 3,
(In thousands)
2025
2024
Net cash provided by operating activities
$
316,543
$
358,879
Net cash used in investing activities
(559,911)
(191,392)
Net cash used in financing activities
(217,088)
(520,119)
Operating activities
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 total inventory is primarily due to the following:
● $164 million for new brand launches;
● $93 million for the addition of 62 net new Ulta Beauty stores opened since August 3, 2024; and
● $77 million for the addition of 83 net new stores acquired with Space NK.
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.
The increase in net cash used in investing activities in the first 26 weeks of fiscal 2025 compared to the first 26 weeks of fiscal 2024 was primarily due to the acquisition of Space NK in the second quarter of fiscal 2025.
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Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems, and supply chain investments we undertake and the timing of these expenditures. Based on past performance and current expectations, we believe our sources of liquidity will be sufficient to fund future capital expenditures.
Financing activities
Financing activities include share repurchases, borrowing and repayment of our short-term debt, and capital stock transactions. Purchases of treasury shares represent the fair value of common shares repurchased from plan participants in connection with shares withheld to satisfy minimum statutory tax obligations upon the vesting of restricted stock.
The decrease in net cash used in financing activities in the first 26 weeks of fiscal 2025 compared to the first 26 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.
Share repurchase program
In March 2024, the Board of Directors authorized a share repurchase program (the March 2024 Share Repurchase Program) pursuant to which the Company could repurchase up to $2.0 billion of the Company’s common stock. The March 2024 Share Repurchase Program authorization revoked the previously authorized but unused amounts from the earlier share repurchase program. The March 2024 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.
In October 2024, the Board of Directors authorized a share repurchase program (the October 2024 Share Repurchase Program) pursuant to which the Company may repurchase up to $3.0 billion of the Company’s common stock. The October 2024 Share Repurchase Program authorization revoked the previously authorized but unused amounts from the March 2024 Share Repurchase Program. The October 2024 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.
A summary of common stock repurchase activity is presented in the following table:
26 Weeks Ended
August 2,
August 3,
(Dollars in millions)
2025
2024
Shares repurchased
1,231,292
1,137,856
Total cost of shares repurchased, including excise tax
$
472.4
$
501.8
Credit facility
On March 13, 2024, we entered into Amendment No. 3 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; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; 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. 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%
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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.
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. The Facility Agreement, maturing on April 17, 2028, allows Space NK to increase the revolving facility by an additional £10.0 million with lender consent. The facility is secured by the assets of Space NK and contains a requirement to maintain an interest coverage ratio not less than 4.0 to 1.0 and a leverage ratio not to exceed 2.0 to 1.0 for any relevant period. 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.
Seasonality
Our business is subject to seasonal fluctuation. Significant portions of our net sales and profits are realized during the fourth quarter of the fiscal year due to the holiday selling season. To a lesser extent, our business is also affected by Mother’s Day and Valentine’s Day. Any decrease in sales during these higher sales volume periods could have an adverse effect on our business, financial condition, or operating results for the entire fiscal year. Our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance.
Critical accounting policies and estimates
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements required the use of estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates. There have been no significant changes to the critical accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.