Ulta Beauty (ULTA) Sales Jumped 8.9%, but Space NK Pressured Gross Margin. Is the Deal Paying Off?

Ulta Beauty, Inc. (ULTA) reported an 8.9% increase in net sales to $3.04 billion for the fiscal second quarter of 2026, driven by comparable sales growth, new stores, and the acquisition of Space NK. Diluted earnings per share climbed 13.3% to $6.55. While Space NK expands Ulta's presence in the UK and Ireland, its lower gross-margin mix has not yet yielded clear margin accretion.

Gross profit rose 8.7% to $1.19 billion, with gross margin declining to 39.1% from 39.2%, mainly due to Space NK's business mix. Despite this, overall operating leverage remains strong, with comparable sales up 3.8% and operating margin improving to 12.5% from 12.4%. Management raised full-year sales and earnings targets, expecting growth of 6.7%-7.2% and 3.2%-3.7% in comparable sales and operating income, respectively.

Short-term debt increased to $339.6 million, and cash declined to $158.5 million, though Ulta Beauty is repurchasing $791.1 million of shares and has raised its fiscal 2026 repurchase plan to $1.8 billion. While the acquisition is strategically beneficial, the lack of standalone profitability for Space NK means the deal is not yet financially proven.