Good afternoon, everyone. My name is Leila, and I will be your conference operator today. At this time, I would like to welcome you to Ulta Beauty, Inc.'s fourth quarter and fiscal 2025 earnings call. This conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks, there will be a question and answer session. At this time, I would like to turn the call over to Ms. Kiley F. Rawlins, Senior Vice President of Investor Relations. Ms. Rawlins, you may begin. I am so sorry, everyone. I am going to have to take that back again. One moment, please. At this time, I would like to welcome you to Ulta Beauty, Inc.'s fourth quarter and fiscal 2025 earnings call. This conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks, there will be a question and answer session. At this time, I would like to turn the call over to Ms. Kiley F. Rawlins, Senior Vice President of Investor Relations. Ms. Rawlins, please proceed.

Good afternoon, everyone, and thank you for joining us for a discussion of Ulta Beauty, Inc.'s results for the fourth quarter and fiscal 2025. Hosting our call today are Kecia L. Steelman, Chief Executive Officer and Chris Del Orfus, Chief Financial Officer. During today's webcast, a presentation is being displayed live and will be posted to our website at ulta.com/investor shortly after the webcast concludes. As a reminder, today's earnings release and the comments made by management during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, factors identified in the earnings release and in our most recent 10-Ks and 10-Q filings. The company undertakes no obligation to revise any forward-looking statements. To allow us to accommodate as many questions as possible during the hour scheduled for this call, we respectfully ask that you limit your time to one question with no more than one follow-up question. As always, the IR team will be available for any follow-up questions after the call. I will now turn the call over to Kecia.

Thank you, Kiley, and good afternoon, everyone. I am excited today to be joined by Ulta Beauty, Inc.'s new CFO, Chris Del Orfus. Welcome, Chris. We are so thrilled to have you as a part of the team. As I reflect in the past twelve months, I am incredibly proud of the Ulta Beauty, Inc. team and all we have accomplished. We closed the year strong, delivering full-year financial performance ahead of our plans while making important guest-facing investments to position our business for future growth. For the year, we grew net sales by nearly 10%, to $12.4 billion, delivered operating income of $1.5 billion or 12.4% of sales, and EPS of $25.64. Today, I will start by briefly highlighting our fourth quarter and holiday performance and then discuss our full-year performance and the progress we made against our Ulta Beauty unleashed strategy before sharing more details on our plans and priorities for fiscal 2026. Our team stayed focused on executing and caring for our guests, delivering stronger-than-expected fourth quarter sales, and continued market share gains in mass and prestige beauty. Successful events fueled all of our performance including Black Friday and Cyber Monday, along with key post-holiday events like our fan favorite Love Your Skin and Jumbo Love promotions. Holiday served as a culmination of our efforts to advance the business throughout 2025. We developed a thoughtful cross-functional holiday strategy supported by outstanding in-store and digital execution, bold and relevant marketing campaigns and activations, and compelling holiday assortment and gift sets. Guest engagement was high, and many guests leaned into the convenience of our omnichannel buy-anywhere, fulfill-anywhere capabilities during the busy holiday season. Our store and digital teams executed with excellence, delivering record-breaking holiday performance. We introduced a fun holiday marketing campaign focused on the Twelve Days of Giftmas…

Thanks, Kecia, and good afternoon, everyone. Before I discuss our recent financial results and our outlook for fiscal 2026, let me first say how excited I am to join Ulta Beauty, Inc. Over the last three months, I have enjoyed getting to know the Ulta Beauty, Inc. team and gaining a deeper appreciation for the company's strategic positioning, financial strengths, and its strong people-focused culture. Ulta Beauty, Inc. is a beloved brand operating in an attractive and resilient category. Our Ulta Beauty unleashed strategy is fueling market share growth, driving guest engagement, and furthering our differentiation in a competitive category. We have more than 60,000 talented associates who bring our brand to life and serve our guests with passion and commitment every day. We have strengthened our foundation, invested in key capabilities, and maintained a solid financial foundation with strong operating cash flow that enables value creation and also provides us with financial flexibility to pursue growth opportunities and weather dynamic macro environments. I am excited and optimistic about the future of Ulta Beauty, Inc., and I am energized to serve as a strategic partner to Kecia and the rest of the executive team to ensure we build on our momentum with a strong focus on driving long-term sustainable growth and maximizing value creation. So with that, let us get into our results. Starting with the quarter, net sales for the quarter increased 11.8% to $3.9 billion compared to $3.5 billion last year. During the quarter, we opened five new and remodeled 18 Ulta Beauty, Inc. stores. We also opened two new and relocated one Space NK store. For the year, we opened a total of 63 net new stores, relocated six stores, and remodeled 42 stores, in line with our previously provided guidance. We ended the year with 1,505…

We will now open for questions. To join the queue to ask a question, please press 5 on your telephone. Again, that is 5 on your telephone to ask a question. Please limit to one question before jumping back in the queue. Thank you. We will now pause a moment to assemble the queue. Your first question will come from Christina Kattai with Deutsche Bank.

Hi, good afternoon. Thank you for taking the question. I wanted to start by asking on the composition of the comp. Can you talk about pricing and what you are seeing from the brands? Because the 4.2% ticket was very strong. On the other hand, transactions decelerated, especially when looking on a two-year stack. Maybe can you touch on the dynamics there and just how you are thinking about it in 2026 as it unfolds? Thank you.

Hi, Christina. Thanks for the question. You know, we see pricing increases every year. They typically impact about 10% to 15% of the overall assortment. And we are really planning for normalized pricing environments in fiscal 2026. You know, we will continue to work with our brand partners and navigate potential pricing increases, but we are not seeing or hearing anything that is outside of the normal territory.

Okay. And then just a question on SG&A. It came in a little bit higher. Can you maybe touch on how much of that was incremental marketing and how you are thinking about the wraparound effect of that in 2026? And then as we think about the, you know, if you could touch on the promotional backdrop in beauty across the industry. Just what are you seeing with the cost of customer acquisition? We would love to get your thoughts there. Thank you.

Chris, why do you not start?

Yes. So regarding SG&A, obviously, we were pleased with the performance in Q4 and the ability to over-deliver both sales and EPS above the high end of our guidance. We also delivered our operating at the high end of our guidance. So if you think about it, we over-delivered sales above the high end of our guidance by about $85 million, and we had flow-through of EPS upside similar to our margin rate. So we did make some investments in SG&A in between there. A few things I would point to. One, we had to absorb higher incentive comp on the over-performance. The second thing to note is, of course, there are some variable costs that are attributed to the increased sales, for example, increased tasking in stores. In addition to that, we did make some investments to support the outperformance and growth, most notably marketing, some media investments, not only help 2025, but position us nicely as we look into 2026. So we are definitely pleased with how we finished 2025, and we think that positions us as we move into 2026 as you can see from the guidance we provided.

Yes. And then just a little bit on promotionality. We do not have any plans to accelerate promotion, but we recognize that the environment is competitive, it is dynamic, and there is an increased focus right now out there on value. But, you know, it is one of the levers that we can pull into. And, you know, with us having such a strong loyalty base, our investments that we have made in personalization, along with other ways that we have invested to really be relevant and top of mind for that guest, we currently do not have any elevated promotionality built into the current plan or in the guidance.

That is great. Best of luck.

Thank you.

Your next question will come from Christopher Michael Horvers with JPMorgan.

Thanks, and good evening, everybody. I just want to jump back on your comments earlier about the backdrop, Kecia. In a 2% to 4% industry growth, is that a deceleration versus 2025? And then to what extent are you baking in the geopolitical backdrop? Obviously, a lot changed in the past two weeks. You know, did you take that into account when you were thinking about the sales outlook for the year and including your own share gains?

Yes. Let me—thanks, Chris, for the question. You know, it is very close to 2025. We—you know, the comp guidance really reflects a normalization and a fact that, you know, we are going to be increasingly having some challenging comps as we move through the year. We have, you know, adjusted for dynamic operating environments. We are staying really focused on controlling what we can control. You know, just a little color on how we looked at when we were building, you know, the 2.5%–3.5%, there were really four areas that we looked at. The first was really on consumer demand. You know, we are cautious about how the consumer demand could evolve given the macro pressures and rising conflicts, but, you know, beauty has been a resilient category to these macro pressures. So we see that beauty engagement is going to continue to be healthy in 2026. The second—I touched on this just earlier about the promotional environment. There are no plans for us to accelerate promotion, but, you know, it is going to be competitive out there. And, you know, I want to continue to focus on driving share and growth, and we are going to stay close to it, but we always want to look at market share and top-line healthy growth as a measure to our success. And then pricing, you know, I talked on that. We do not see anything that is going to be out of the ordinary within pricing. And then, you know, the growth of the category is between that 2% to 4%. But just as a quick reminder, you know, we are going against some easier comps in the first half versus the second half of this year, and we are just continuing to focus on controlling what we can control and making sure that we have a plan that gives us the ability to continue to take share and to build a strategy around numbers that we feel like, you know, regardless of the economic environment that we can continue to hit.

Got it. And then, I guess, you launched Rare Beauty to start the year. And so can you talk about what the early response is to Rare Beauty? How should we size it in terms of an analog? Is this something like Kylie? Is this something like when you launched Fenty? Typically, you talked about, you know, 25% to 30% of sales growth is newness. How should we think about Rare, you know, relative to that number and relative to other analogs when you launched some significant brands? Thanks so much.

Absolutely. So, you know, just to maybe start with your last point, when you look at 2025, you are right. Twenty percent to 30% of our growth is coming from newness. We were a little on that higher end of the scale in 2025. So we are closer to that 30%. You know, Rare, well, it came out of the gates very strong and we are thrilled because it, you know, makeup having this halo impact in makeup is fantastic for us. It is one brand and we carry, you know, 600 brands in the assortment. What we are—what I can share about quarter-to-date trends so far is that we are pleased with February. We are still early in the quarter and, you know, we do have easier compares as I mentioned, you know, earlier in Q&A that we are going against easier numbers in the first half comp. But, you know, we have this embedded already in our guidance of the 2.5% to 3.5%. But, yes, we were thrilled with what we saw with Rare coming out of the gate strong. You know, Lauren and team had done a great job with newness and the cadence of newness in 2025. We like what we see with the cadence of newness in 2026. But, you know, it is one brand. It does not change the entire course of our business at the same time. Hopefully, that answered your question.

Understood. Thanks so much.

Your next question will come from Sydney Wagner with Jefferies.

Hi. Thanks for taking our question. Can you just give us a little bit more of an update on what you are seeing in terms of the competitive environment? We have seen some pushing from mass retailers into prestige. I am just curious what you think about are the most important elements of the business to maintain your competitive moat in the category, and what helps you continue to win new brands? Thank you.

Thanks for the question, Sydney. You know, beauty has always been a competitive category. But, you know, I would say that this is what we do. This is what Ulta Beauty, Inc. is about. We cover everything from low to lux and everything in between. And when you add wellness into this mix, you know, we are a trusted, you know, location with expertise that is broad in a curated assortment, with our leading loyalty program, with this omnichannel activation that we are continuing to invest in. You know, we just announced today about our TikTok, which I think is going to be another quiver for us to continue to engage with new guests. You know, we just are leaning into what makes us different which again I do believe it is that low to lux with services and wellness all captured into it. We have been talking a little bit more about leaning into our brand-building capabilities. We are bringing, you know, an elevated focus on how do we continue to engage with newness and exclusivity which continues to, you know, separate us from everyone else. But, again, you know, a lot of people want to get into beauty because it is an attractive category because of the margins, etc. But this is what we do, and we are just going to double down on the strength and the power of this model. The Ulta Beauty unleashed plan, I could not be more pleased with how we were performing against the plan in 2025. We are just going to continue to double down and really start to reap the reward of the investments that we made in 2025 and harvest that in 2026. And I would just say, you know, stay tuned. We are pleased with the progress we have made and I feel like we are focused on the right strategies for us to continue to be a share gainer in the future.

Next question will come from Oliver Chen with TD Cowen.

Hi, Kecia and Chris. As we think about makeup next year, what do you see happening relative to mass and prestige? And is the comp going to be pretty modest in makeup and outperform in fragrance? The related product question is K-Beauty and wellness. I know you have a lot of really good talent in wellness and you are thinking about that category more dramatically. Does that—when you put that space in, you know, how does it interplay with the categories that currently exist? And K-Beauty might be a massive megatrend, so would love your take. And Chris, a follow-up: On the comp store sales guidance, what do you need to leverage your fixed costs? And, historically, it has been higher than mid single digits, but what should we know in terms of deleverage on the 2.5% to 3.5%? And then your promotional question on guidance, were you saying promos this year ahead will be flat to last year, or are you giving yourself some breathing room to have higher promos than last year? Although I know you are working on many efficiencies around simplified, better promotions. Thank you.

Alright. Well, thanks, Oliver. I will start. Yes. You know, we are focused on everything from low to lux and everything in between. I think it gives us a strategic advantage that we do carry across all price points, especially if there could be potential pressures on the consumer's wallet in the future. In regards to K-Beauty and wellness, one of the things that I am very pleased with is that Lauren and team are working on SKU rationalization and making sure that, you know, unproductive SKUs—that we are really leveraging and bringing in both wellness and K-Beauty. One of the things that we are really focused on is this authenticity and quality of the brands. You see a lot of K-Beauty in and out, and it is almost like fashion that you see. We are really leaning into, at Ulta Beauty, Inc., the efficacy of the products and making sure that the products really give the results. We want to do all of the research for the guests. So when they come in, they buy K-Beauty products that are known and trusted, that they actually work, and that has been working really well for us. And I would say that same philosophy is true for wellness. One of the things that I am very excited about is in regards to our marketplace. And if you think about marketplace, you think about it as mezzanine into our existing store. So it is a complementary assortment that does not, you know, take away from what you could buy in store today, but it is, you know, another item that you could add to your basket. So we are taking that approach really from end to end with K-Beauty, with wellness, with marketplace, and everything from low to lux and everything in between.

Yes. On the store fixed cost and the deleverage, maybe what I would share is, one, as you heard, we are planning gross margin flat year over year. So we have multiple levers that we use to try and manage that. So we see opportunity in merchandise margin. We are continuing to drive supply chain optimization as well and we will still continue to benefit from shrink. I think the other thing I would point to is the new stores is obviously still an important component to driving growth. And what we are also doing is we are rolling out new store formats, a smaller format this past year, about 25% of our stores with that new format. In 2026, we expect more like 15% to be the small store format. So it is not just about driving top line, it is also about how we execute putting new stores in market. And we think that will be an element that helps us. The deleverage there is really modest and manageable, and we will manage things holistically across gross margin.

Your next question will come from Susan Anderson with Canaccord Genuity.

Hi. Thanks for taking my questions. I was wondering maybe if you could talk about the timing of the new DC in the Northwest. And I guess how should we think about the cost there? And then I do not know if I missed this or not, but maybe if you could talk about too, just the drivers of the op margin being better in the back half. Is that just when the efficiencies start to roll in, I guess? And then are you guys assuming, like, gross margins pretty flattish throughout the quarters?

Yes. Thanks for your question, Susan. I will start, and then I will kick it over to Chris. You know, when we talked about the new DC, it will not be up and functioning until 2027, but these things take a while to, of course, get out of the ground, especially when you are building from ground level up. We have those dollars built into our CapEx plan. So they are both in the long-term algorithm and what we are expected to spend is already in this year's guidance too with the cost to get that building started. And then, Chris, I will turn it over to you.

Yes. So on the progression of operating margin, the primary driver is—right—we are absorbing Space NK. So you have that impact. Really SG&A. There are two key factors. First of all, in the first half of the year all the way up until Q3. The second one is the annualization of the investments we made in the back half of 2025. Then as you move into the second half, you cycle over those. And in addition, especially with Space NK, right, the holiday season, it tends to be higher sales, and you should get the leverage from the SG&A there. So those are the key drivers. Our productivity was active in 2025 and will progress throughout the year. I would more point to those two factors as the big factors that impact the timing of operating margin first half versus second half.

Okay. Great. Thanks for the details. Good luck with the year.

Your next question will come from Katharine Amanda McShane with Goldman Sachs.

Hi, good afternoon. Thanks for taking our question. So our question centered around SG&A as well. Totally understand the different laps that we are encountering here in 2026. But if we were just to focus on how you are spending around marketing, I know that was part of the Unleashed plan to spend more on marketing. Could you maybe talk a little bit more about plans for that, just how the dollars look maybe versus what you spent in 2025? And what that could look like going forward.

You know, so we would not share that level of detail, but what I could share is a couple things. One is our SG&A growth profile, right, that we outlined was either in line with sales to slightly below sales. Again, that does include us absorbing Space NK and the annualization of investments. We have been very targeted with our investment priorities. And so one of the top areas that we have continued to prioritize is personalization, which will certainly be a core part of our marketing investment. So we are still investing to grow within that plan in addition to having the carryover investment that we put into place in 2025. I will also point to—you heard me say, in Q4, we did invest on the upside sales performance. That did include some marketing and media that we have some benefit as we rolled into 2026. So we feel really good that we actually have a very disciplined approach on SG&A. We are prioritizing growth investments in key areas and making intentional choices of where not to invest, and certainly marketing and personalization remains our high priority.

Thank you. Your next question will come from Mark R. Altschwager with Baird.

Good afternoon. Thank you for taking my question. First, just following up on the comp guide, the 2.5% to 3.5%—that is a touch below the long-term framework. So I was hoping you could just give us a little bit more detail on the factors driving that. Just conservatism to begin the year or just anything you are seeing in the environment that is leading you to take a more cautious approach to that today.

Well, I will say that our initial plan is, you know, and I shared this in the comments, Mark, that, you know, we want to be a market share gainer. So we are looking at that as we are planning—we built this plan is that we do not want to cede market share. So, you know, I think that this plan we feel is a thoughtful plan that is one that we can, you know, continue to build the expense portfolio around. If there is potential upside, I am going to love that. We have had, you know, this last year, we had a strategy that was working. It was laid out well. We outperformed our initial guidance that we shared in 2025. And we beat and erased throughout the year. And we exceeded on all metrics. You know, I am confident that we have got a plan for 2026 that allows us to hit our targets and continue to invest in the business. It will allow us to continue to be a share gainer and be, you know, I would say fiscally responsible in our investments. Some of the, you know, numbers that Chris shared, we are getting some of our expense rates in line. We have been in this heavy, heavy investment cycle for many years, and it is time for us to start to reap some of the rewards of those investments, and that is what this plan is allowing us to do.

Makes a lot of sense. And then, Kecia, just to follow up, wondering if you could share any more learnings you have had so far on Space NK, and any update to how you are thinking about unit growth there and geographic expansion to new markets? Thank you.

Yes. Thanks, Mark. Well, what I will say is that we are pleased with the performance. They have a nice growth in sales. We feel great about the growth strategy. You know, I do not want to give—I am not going to give specifics on where we see the growth, but we view this asset as additive to our core business. We see opportunities to really leverage each other's strengths—access to new brands, clienteling strategies, loyalty programs—and there is the ability for us to continue to grow in a nice market of the U.K. for us. So, you know, it is still a little early to say, like, how we feel like we can totally unlock the entire—all the value in Space NK, but we like what we are seeing so far and we are really pleased with the acquisition. Acquisition. Thank you.

Your next question will come from Olivia Tong with Raymond James.

Great. Thanks. You have talked in the past about leveraging investments. So can you talk about the level of investment spend for 2026, the initiatives that you have planned this year versus last year, where that leverage is coming from? And then as you look at the margin improvement, what do you think is the right level longer term now that the business is on a better track? What is the right investment level to get back to sort of a steady-state comp growth more in line with the long-term algo? That is my first question. And then the second one is just around the consumer environment being a challenging—you know, new challenges to the consumer environment that we perhaps did not have a couple of weeks ago. And can you talk about your flexibility and the flexibility in the model to make potential pivots, adjustments if necessary? You know, you have obviously done a lot to promotional cadence, but it seems like the state of the consumer is evolving. Just wanted to get a little bit more detail on that. Thank you.

So maybe I will start with the second part of your first question on how we think of margin. Look. What I would share is the way we think of this is we are looking to deliver consistent, profitable growth. To maximize value creation, what we want to do is maximize profit growth. Margin is a part of that, of course. But I can do that driving incremental top line or through margin leverage. So every year—and this is what is reflected in our current guide—we will have a plan that has a strong productivity goal that is going to fuel targeted and high-ROI investments in a disciplined way. So it will not be at the expense of margin. If I see investment opportunities throughout the year, as Kecia said, if we have upside and can increase our operating profit in the current year while continuing to also support future growth momentum, you get a double benefit and can do that preserving margin. That is what I will do. And that will support kind of consistency of growth and then a flywheel of value creation. With that said, again, every year we will have an element of leverage that we are building into our plan. And we can, as we move throughout the year, figure out how to best optimize profit growth within that while maintaining discipline on margin. So that is what you see embedded in our plan this year. I did talk about—you asked about how much investment. It is hard to answer because we have said we would grow SG&A in line with sales to slightly below. But the product of the investments in there is actually more than that because we do have productivity initiatives. Supply chain optimization, in particular, has been positive for us. We are focused on inventory productivity, among other things. So we feel really good about the areas that we are investing in this year and the guide that we set up within that framework that is in line with our long-term value creation algorithm and basically being a compounder of double-digit earnings growth.

Yes. I would just add that, you know, we have the leadership and the team in place that can and will pivot as needed. The fact that we do carry low to lux, it gives us the ability to also flex as the consumer, you know, flexes with us. And we have better insights into the category and can leverage AI to make really good strategic business decisions to help us drive this business. You know, while it is a competitive environment, we are playing to win and to continue to take share.

Great. If I could follow up on some of the newer categories—health and wellness, marketplace, international. How do you think about further expansion in year two on those and adjustments that you need to make in year two and the level of investment in those initiatives going forward.

Well, on international expansion, you know, we are planning on continuing to open stores in our partnership with Grupo Axo and with Alshaya. You know, right now, we are looking at this as more of an asset-light approach on how we can continue to grow globally. And, you know, it is an important category for us because we do want to be a global beauty retailer. We are making smart decisions on investment categories like wellness, and there was the opportunity for us to continue to leverage SKU rationalization to have more productive items that are in our store. Four-wall productivity is something that Chris and I are really leaning into. We want to make sure that we are leveraging that fixed cost base of our 1,500 stores out there to continue to drive profit through the stores and through our P&L. So, you know, we are making good business decisions with a strategic lens that have both, you know, short-term and long-term implications on how we can really optimize this model. Alright. Well, with that, I think that that would be the last question that we had. I just want to thank everyone for joining us today. I want to thank our associates once again for delivering against our ambitious plans for 2025 and for their dedication in representing the Ulta Beauty, Inc. brand to our guests each and every day. We are confident in our strategy, we are focused on operational excellence, and committed to delivering sustainable growth even in this dynamic environment. We look forward to updating you on our progress on the next earnings call on June 2. I want to thank you all and have a great evening. Thank you.

Thank you for joining. This concludes today's call. You may now disconnect.