Goldman Sachs reiterates Buy on Ulta Beauty; promotional activities and traffic trends support upward revision to 2Q forecasts

Overview

This is a company update report on Ulta Beauty Inc. The core content includes promotional event traffic analysis, key takeaways from communication with the investor relations department, earnings forecast revisions, as well as valuation and risks. Goldman Sachs believes that despite market concerns over second-half revenue and SG&A pressure, a tougher 2Q comparison base, and increasing beauty industry distribution channels, the company’s investments in promotions, marketing, services, and labor are creating market share opportunities, while the current valuation is also lower than historical levels.

Core views

The core view of the report is to maintain a Buy rating: first, major promotional events such as Spring Haul and Big Summer Beauty Sale performed better than expected, supporting an upward revision to 2Q same-store sales; second, investments in marketing, in-store events, exclusive brand partnerships, digitalization, and personalization are improving traffic and conversion; third, the company is strengthening differentiation and acquisition of younger customers through exclusive products, private label, and TikTok Shop; fourth, 2Q guidance still appears conservative against a high comparison base, and the 15.8x P/E is below both 1-year and 3-year historical levels.

Analysis framework

Goldman Sachs cross-validated the 2022 to 2026 promotional event timeline, traffic during promotional periods, the company’s long-term operating algorithm, and earnings forecasts using Placer.ai traffic data, Similarweb web traffic data, company data, Pathmatics advertising spend data, communications with management and IR, and its own forecasting model. Valuation uses a relative P/E multiple framework, with the target price based on relative P/E multiple assumptions of 85%/90%/100% and a reduced market multiple of 22.2x.

Methodology notes

• Traffic and promotion analysisPromotional event traffic and web traffic tracking

  Assess the effectiveness of marketing activities through changes in store traffic and website visits during key promotional events.

  The report focuses on tracking four types of events—Jumbo Love/Love Your Skin, 21 Days of Beauty, Spring Haul, and Big Summer Beauty Sale—and compares 2026 performance with prior years.

• Earnings forecastGS Forecast estimate revision

  Update quarterly and annual EPS based on promotional performance, comparable sales, SG&A, and margin assumptions.

  Goldman Sachs raised its 2Q same-store sales, 2Q EBIT margin, and 2Q EPS forecasts, and also modestly increased FY26 to FY28 EPS.

• Valuation methodsrelative P/E multiples

  Derive the 12-month target price using relative P/E multiples and the market multiple.

  The target price was lowered from $652 to $648, mainly because the market multiple was reduced from 22.4x to 22.2x, while relative P/E multiple assumptions remained unchanged.

• Factor profileGS Factor Profile

  Compare the stock with the market and industry peers across growth, financial returns, valuation multiple, and integrated score dimensions.

  The disclosure section explains that Growth, Financial Returns, Multiple, and Integrated are calculated using normalized rankings based on forward-looking indicators to provide investment context.

• M&A probabilityM&A Rank

  Goldman Sachs uses a tiered framework from 1 to 3 to assess the probability that a company becomes an acquisition target.

  ULTA’s M&A Rank is 3, representing a low probability, and it is typically not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Ulta Beauty Inc. (ULTA.US)

  Research subject and recommended stock

  Strengths

  Promotional-event traffic is improving, marketing investment is creating conversion and market share opportunities, the share of exclusive products is rising, and the long-term algorithm for sales growth and EPS growth remains intact.

  Weaknesses

  Investors are concerned about revenue sustainability, SG&A pressure, and the high 2Q comparison base, while traffic in some events declined year over year.

  Comparison

  Current P/E is about 15.8x, below the 1-year historical 19.5x and 3-year historical 17.6x; the report also compares ULTA within its coverage universe of Americas retail hardlines, supermarkets, and discount stores.

  Risks

  Deteriorating market share, rising promotional intensity, slower membership growth, supply chain pressure, and increasing premium beauty distribution points.

• S&P 500

  Benchmark for price performance comparison

  Strengths

  Used as a relative performance benchmark to measure ULTA’s stock performance over the past 3 months, 6 months, and 12 months.

  Weaknesses

  ULTA underperformed the S&P 500 by 17.2%, 32.7%, and 17.4% over the past 3 months, 6 months, and 12 months, respectively.

  Comparison

  The report shows ULTA’s absolute return over the past 12 months was -2.1%, versus -17.4% relative to the S&P 500.

  Risks

  If broad market valuation multiples continue to decline, ULTA’s target price framework could also face pressure.

Key data

• 12-month target price$648.00Reduced from the previous $652 to $648.
• Current price$479.57Price on the report cover, implying 35.1% upside.
• RatingBuyThe rating has been Buy since April 1, 2025.
• Market cap$21.1bnKey Data on the report cover.
• Enterprise value$21.0bnKey Data on the report cover.
• 3-month average daily trading value$376.8mnKey Data on the report cover.
• 2Q same-store sales growth forecast+2.4%Raised from the previous +1.9%.
• 2Q EBIT margin forecast12.1%Raised from the previous 11.8%.
• 2Q EPS forecast$6.19Raised from the previous $6.02.
• FY26 EPS forecast$28.95Raised from the previous $28.80.
• FY27/FY28 EPS forecast$32.37/$35.39Raised by 0.5% respectively.
• FY26 same-store sales growth forecast+3.4%Slightly raised from the previous +3.3%.
• FY25 exclusive product mix11%Higher than 9% in the prior year.
• Spring Haul 2026 traffic+2.1%The chart in the report shows year-over-year growth.
• Big Summer Beauty Sale 2026 traffic+10.9%The chart in the report shows year-over-year growth.
• Jumbos/Love Your Skin 2026 traffic-1.7%The chart in the report shows a year-over-year decline.
• 21 Days of Beauty 2026 traffic-1.8%The chart in the report shows a year-over-year decline.
• Market multiple assumption22.2xThe market multiple used in the target price model, below the previous 22.4x.

Impact & implications

The report’s investment implication for ULTA is positive overall: in the short term, promotional activities and observable sales improvement create the possibility of 2Q results beating expectations; in the medium term, exclusive products, marketing efficiency, loyalty program operations, and TikTok Shop should help enhance differentiation and customer acquisition capabilities; on valuation, the discount to historical P/E supports the Buy rating. However, if promotions need to be intensified further, market share deteriorates, or premium beauty distribution channels continue to expand, earnings elasticity and valuation recovery may come under pressure.

Risks

• Deteriorating market share.
• More aggressive promotions to drive traffic could compress margins.
• Structural issues in the business, including slower membership growth.
• Freight or port issues could impact the supply chain.
• An increase in premium beauty distribution points could create incremental competitive pressure.
• There is uncertainty around second-half revenue and SG&A expectations.
• 2Q faces the toughest comparison base, and same-store sales may decelerate.

What to watch

• Whether 2Q same-store sales meet or exceed the revised +2.4% forecast.
• Whether Spring Haul and Big Summer Beauty Sale continue to drive store traffic and web traffic going forward.
• Efficiency improvements between SG&A growth and investments in marketing, labor, and services.
• Whether the share of exclusive products continues to increase, and progress in introducing emerging brands.
• TikTok Shop’s contribution to acquiring younger consumers, brand building, and selling multi-brand assortments.
• Whether FY26 EBIT margin can remain around 12.5%.
• Whether expansion of premium beauty distribution channels weakens Ulta’s differentiation.