Ulta Beauty Stock Drops Nearly 10% Despite Strong Sales as Costs Surge

Ulta Beauty's stock plummeted nearly 10% Friday morning after rising operational expenses offset strong holiday sales performance. New CEO Kecia Steelman is focusing on TikTok partnerships and celebrity brands to attract younger shoppers, though increased costs from recent acquisitions are impacting profit margins.

Ulta Beauty shares tumbled as much as 9.6% during Friday morning trading after escalating operational expenses dampened the impact of robust consumer demand, though Wall Street analysts remain hopeful about the company’s digital strategy targeting younger customers through TikTok under new leadership.

The cosmetics retailer delivered impressive holiday quarter sales figures and projected positive annual revenue growth, buoyed by strong consumer interest in popular product lines including celebrity-backed brands like Rihanna’s Fenty Beauty collection. However, mounting operational expenses created concerns for investors.

New Chief Executive Kecia Steelman, who assumed leadership in January 2025, also warned about potential effects from “global conflicts” on business operations.

J.P. Morgan analysts noted that despite the quarter demonstrating a “lack of flow-through” from robust sales to actual earnings, Ulta is adopting a measured approach to future projections – a view shared by multiple other investment firms.

The company’s selling, general and administrative expenses jumped 23% to reach $1 billion during the December quarter, primarily due to increased incentive compensation payments and ongoing investments in marketing efforts and Space NK, the British retail chain acquired in the previous year.

In efforts to appeal to younger and more affluent customers, the retailer has emphasized celebrity-owned and luxury brands such as Beyonce’s Cecred hair care products. The company also executed holiday marketing campaigns featuring Khloe Kardashian and Paris Hilton.

Oppenheimer Research analysts observed that Ulta traditionally provides cautious guidance and the stock had been “priced close to perfection,” making the investor retreat predictable.

The beauty retailer plans to introduce an exclusive product collection on TikTok Shop, aiming to capture Gen Z and Gen Alpha consumers while capitalizing on digital beauty sales as traditional retail competition from Target and Walmart intensifies.

“To Ulta’s credit, it is capturing share in what we believe is a larger beauty category migration online,” William Blair analysts stated, showing confidence about potential upside to annual sales projections.

Ulta anticipates double-digit growth in selling, general and administrative costs during the first half of fiscal 2026 as Space NK-related expenses and investments persist, before moderating in the latter half as integration costs become annualized.

Following these results, at least seven investment firms reduced their price targets for the stock.

The company’s forward price-to-earnings ratio currently stands at 21.62, compared to Estee Lauder’s 29.53 and Elf Beauty’s 19.84.