By Teresa Rivas

Beauty is subjective, but it's hard to paint a pretty picture about Ulta Beauty's stock after its recent quarter.

Ulta has been a long-term winner, more than doubling its shares since the pandemic through its highs in February. Unfortunately, our timing hasn't captured any of this as the stock is down more than 30% since our pick and about 13% since we followed up in March.

Ulta's recently completed first quarter had a number of good points, including upbeat sales and same-store sales, an increase in average purchases and purchase prices, and a 4% increase in loyalty members. The company was able to maintain its guidance despite ongoing upheaval with the consumer.

That wasn't good enough for the Street though. Investors are concerned that guidance implies earnings per share growth and that improved margins, based in part on reduced 'shrink,' or industry-speak for theft, isn't sustainable.

"As expressed directly on the earnings call in the form of several questions about implied deceleration and gross margin softness, there is clear anxiety that capacity to maintain or take share increasingly requires steeper investment that puts earnings at greater risk," William Blair analyst Dylan Carden wrote in a note.

Beauty has always been a very competitive industry. With more products going viral on social media, it can be difficult for legacy and bricks-and-mortar players to keep up. Moreover, while prestige products had a strong showing -- more evidence that the wealthy are still spending -- there are concerns about how regular consumers will hold up in the face of ongoing inflation.

It's worth noting that Ulta's recent launch on TikTok Shop is attracting a new, younger consumer. Management expects this to bring more people into its stores and notes that it isn't seeing evidence of customers trading down, despite the spike in energy prices.

Nonetheless, if the best of EPS momentum is behind the stock and the company doesn't provide evidence of more enduring factors pushing up margins -- and technicals are against it -- the stock will likely continue to suffer from worries that shoppers have too many other options and not enough spare cash.

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June 08, 2026 22:26 ET (02:26 GMT)

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