Ulta beauty beats expectations, signaling opportunity for Target

Ulta Beauty just showed that beauty can still outperform when shoppers are getting choosier, and that is the signal Target store teams should read first. The company said first-quarter fiscal 2026 net sales rose 11.1% to $3.16 billion, comparable sales climbed 5.3%, operating income increased 11.6% to $448.3 million, and diluted earnings per share reached $7.74. Ulta also raised its fiscal 2026 profit forecast.

The bigger takeaway for Target is not simply that beauty is “resilient.” It is that the category is still rewarding the right mix of assortment, price points, and execution. Ulta said comparable sales growth came from both a 3.7% increase in average ticket and a 1.6% rise in transactions, which suggests shoppers were willing to buy more per trip and keep coming back. Gross margin improved to 40.1% from 39.1% a year earlier, another sign that premium and higher-priced products can keep moving when the offer is sharp enough.

That matters on the sales floor. For Target team members in beauty, personal care, hair care, gifting, and seasonal sets, Ulta’s quarter is a reminder that small indulgences and replenishment still have room to work even when guests are cautious elsewhere. It also points to where pressure lands inside the store: clean fixtures, current planograms, fast in-stocks, and team members who can help guests navigate prestige, accessible luxury, and mass-price items without friction. In beauty-adjacent areas, presentation and service can decide whether a guest buys one item or builds a basket.

Ulta backed up that demand with inventory. Merchandise inventories at quarter-end rose 12.5% to $2.4 billion, largely to support new brand launches, the Space NK acquisition, strategic investments in key categories, and 70 net new Ulta stores since May 3, 2025. The first quarter covered the 13 weeks ended May 2, 2026, and Ulta held its earnings call on June 2 at 4:30 p.m. Eastern time. CEO Kecia Steelman credited the company’s strategy and resilience in an uncertain macroeconomic environment.

For Target, the timing is especially relevant. Target and Ulta Beauty said on August 14, 2025 that they would not renew the Ulta Beauty at Target shop-in-shop partnership when the current agreement ends in August 2026. Target has said it will keep curating a differentiated beauty assortment, and in March 2026 it said it would add $2 billion in 2026 investments, including payroll, training, assortment changes, and technology. Target also reported first-quarter 2026 net sales growth of 6.7% and comparable sales growth of 5.6% on May 20. Beauty has long been one of Target’s sturdier growth engines, and Ulta’s quarter suggests that, even in a tight spending environment, the category still rewards stores that make the trip easy, the shelves current, and the advice credible.