Barclays upgrades Ulta Beauty (ULTA.US) to "hold": stands out in the beauty category, with low impact from tariffs and good growth prospects.

Ulta Beauty (ULTA.US) will announce its second-quarter performance next week. In anticipation of this, Barclays has raised its rating on the stock from "neutral" to "hold" and increased the target price by 14% to $589, implying a 13% increase from Thursday's closing price. It is expected that Ulta's same-store sales momentum will continue to improve, and the company's impact from tariff resistance is relatively small, with cost increases negligible at only 0.2%. Under the leadership of CEO Kasey Stellman, Ulta has implemented a series of "rapid and decisive changes," focusing on optimizing their retail distribution channels - including not renewing their partnership with Target Corporation (TGT.US), improving promotional activities, and expanding price ranges and product categories, providing important distribution channels for both mass and high-end beauty brands. Regarding the overall economic environment, Barclays analyst Andrienne Yih believes that the beauty category (especially Ulta's core customer base of "beauty enthusiasts") will "continue to increase spending on beauty, health, and wellness products." Yih stated in a report to clients, "We believe that the overall beauty market, which has gradually returned to normalcy since its peak in 2022, is stabilizing, and the annual growth rate will remain in the mid-single digits level." In terms of tariffs, Ulta faces very low tariff risks - with only about 1% of goods being directly imported last year, meaning the impact of tariffs on direct costs is minimal. Ulta will announce its second-quarter performance after market close on August 28th, with an expected earnings per share of $5.08 and revenue of $2.67 billion. At the time of writing, Ulta has risen by 1.2% on Friday.