Ulta Beauty's (ULTA) Q2 results should reinforce that the company's growth algorithm remains durable even as comparable sales moderate against a tough prior-year comparison, UBS said in a note Friday.

The firm said the slowdown reflects normalization rather than deterioration, with beauty category fundamentals still healthy and every major category posting positive growth in the quarter.

UBS said industry checks do not support the view that the promotional environment has become meaningfully more aggressive, with discount depth actually improving year over year even as promotional breadth ticked up modestly.

The firm also pointed to stable foot traffic and steady customer share-of-wallet as evidence that competitive pressure from Amazon (AMZN) and Walmart (WMT) has not materially eroded Ulta's position, stating that it expects Ulta to raise its full-year EPS guidance following the print.

UBS maintained its buy rating on the stock with a price target of $735.

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