Ulta Beauty, Inc. (NASDAQ:ULTA) reported solid growth, but the Space NK acquisition is creating a more complicated margin story. Fiscal second-quarter 2026 net sales increased 8.9% to $3.04 billion, supported by comparable sales growth, new stores, and Space NK. Diluted earnings per share increased 13.3% to $6.55.
Space NK is adding scale. The British luxury beauty retailer gives Ulta Beauty, Inc. (NASDAQ:ULTA) an established presence in the United Kingdom and Ireland without building a new network from scratch. However, the acquisition has not yet demonstrated clear margin accretion.
Gross profit increased 8.7% to $1.19 billion, slightly slower than sales. Gross margin declined to 39.1% from 39.2%, primarily because of the Space NK business mix. That is a small consolidated decline, but it shows that the acquired revenue currently carries different economics from the existing business of Ulta Beauty, Inc. (NASDAQ:ULTA).
The strongest argument for the acquisition is that the gross-margin pressure did not prevent overall operating leverage. Comparable sales increased 3.8%, while selling, general and administrative expense as a percentage of sales declined to 26.4% from 26.6%. SG&A expense in dollars increased 8.2% to $802.8 million.
Operating income rose 10.1% to $379.6 million, and operating margin improved to 12.5% from 12.4%. Those figures indicate that Ulta Beauty, Inc. (NASDAQ:ULTA) absorbed Space NK's lower gross-margin mix while still producing slightly faster operating-income growth than sales growth. The result does not isolate Space NK's profitability, but it shows that the acquisition has not prevented consolidated operating-margin improvement.
Management also raised its principal full-year sales and earnings targets. Ulta Beauty, Inc. (NASDAQ:ULTA) now expects sales growth of 6.7% to 7.2%, compared with 6% to 7% previously. Comparable-sales guidance increased to 3.2% to 3.7%, while projected operating-income growth rose to 8.3% to 9.3%.
Extract — continue reading at the source.
