Ulta Beauty Financial Model

Ulta Beauty reports as a single operating segment but provides a net sales breakdown by product category.

Cosmetics

• Revenue driver formula: Total Net Sales x Cosmetics Mix Percentage
• Historical growth rate: Low single-digit CAGR (normalising post-pandemic)
• Key growth levers and headwinds: Innovation in prestige makeup, exclusive brand launches, offset by consumer trade-down to mass market brands.
• Pricing dynamics: Highly competitive, driven by brand pricing power and promotional intensity.
• Seasonality: Peaks significantly in Q4 due to holiday gifting.

Skincare and Wellness

• Revenue driver formula: Total Net Sales x Skincare Mix Percentage
• Historical growth rate: Mid-to-high single-digit CAGR
• Key growth levers and headwinds: Increasing consumer focus on dermatological health and self-care routines.
• Pricing dynamics: Premium pricing for prestige clinical brands.
• Seasonality: Steady throughout the year, with a slight bump in Q4.

Haircare

• Revenue driver formula: Total Net Sales x Haircare Mix Percentage
• Historical growth rate: High single-digit CAGR
• Key growth levers and headwinds: Premium styling tools and professional hair care product adoption.
• Pricing dynamics: High ticket prices for styling tools.
• Seasonality: Strong in Q4 for tool gifting.

Fragrance

• Revenue driver formula: Total Net Sales x Fragrance Mix Percentage
• Historical growth rate: Double-digit CAGR recently
• Key growth levers and headwinds: Luxury brand introductions and Gen Z adoption.
• Pricing dynamics: High margin, prestige pricing.
• Seasonality: Extremely concentrated in Q4 and around major holidays like Valentine's Day.

Services

• Revenue driver formula: Active Salons x Revenue per Salon
• Historical growth rate: Mid single-digit CAGR
• Key growth levers and headwinds: Foot traffic driver, though limited by physical salon capacity and stylist retention.
• Pricing dynamics: Service-based pricing, highly dependent on local market rates.
• Seasonality: Peaks around holidays and back-to-school seasons.

*Revenue Recognition Notes:* Merchandise revenue is recognised at the point of sale. E-commerce revenue is recognised upon shipment. Loyalty programme points are deferred and recognised as revenue when redeemed or when they expire.

• Total assets: Approximately $6.5 billion to $7.5 billion.
• Key asset categories: Merchandise inventories, operating lease right-of-use assets, and property and equipment.
• Goodwill & intangibles: Historically minimal, but increased recently due to the Space NK acquisition.
• Working capital profile:
• Days Sales Outstanding (DSO): Near zero (retail business).
• Days Inventory Outstanding (DIO): 110 to 130 days.
• Days Payable Outstanding (DPO): 45 to 60 days.
• Net working capital as % of revenue: Typically positive but low. The company carries significant inventory ($2.2 billion in FY2025) to support new brand launches and store expansion.
• PP&E: Primarily leasehold improvements, store fixtures, and supply chain equipment. Useful life is typically 5 to 10 years for fixtures.
• Right-of-use assets: Highly material due to the leased store fleet, typically exceeding $1.5 billion.

• Capex as % of revenue: 3.0% to 4.0% (FY2025 was $434.8 million).
• Maintenance vs. growth capex: Approximately 40% maintenance and IT, 60% growth (new stores, relocations, and remodels).
• Major capex programmes: Supply chain optimisation, cloud-based software investments, and new store rollouts (targeting 60 to 70 net new stores annually).
• Capitalised software: Material component of corporate capex as the company modernises its digital and omnichannel platforms.
• M&A pattern: Historically an organic grower, but recently executed a transformational international acquisition with Space NK in the UK and Ireland.

• Total debt: Historically zero traditional long-term debt. The company relies on a revolving credit facility for seasonal working capital. Short-term debt was $62.3 million at the end of FY2025.
• Debt/EBITDA ratio: Near 0.0x (excluding operating leases).
• Credit rating: Investment grade profile, though often unrated due to lack of bond issuance.
• Key debt instruments: $1.0 billion revolving credit facility.
• Maturity profile: N/A for long-term debt.
• Interest rate profile: Floating rate on the revolver.
• Share repurchase programme: Highly active. The company repurchased $890.5 million in FY2025 and has $1.8 billion remaining under its current authorisation.
• Dividend policy: The company does not pay a regular dividend, preferring to return capital via share repurchases.

• Operating cash flow conversion: Consistently strong, typically 1.1x to 1.3x Net Income ($1.5 billion OCF in FY2025).
• Free cash flow margin: 8.0% to 10.0% of revenue.
• Major non-cash items: Depreciation and amortisation, stock-based compensation, and non-cash lease expense.
• Working capital cash flow impact: Inventory builds are a major use of cash during periods of high store expansion or new brand onboarding.
• Capex intensity: Moderate (asset-light leased model, but requires heavy fixture investment).
• Cash tax rate: Closely mirrors the GAAP effective tax rate of approximately 24.0% to 24.5%.

1. Assumptions: Hardcoded drivers for macroeconomic inputs, store growth, comparable sales, margins, and capital allocation.
2. Store Roll-Forward: Beginning stores, gross openings, closures, acquired stores (Space NK), and ending stores. Calculates average open stores.
3. Revenue Build: Calculates total net sales using average stores and sales per store, driven by comparable sales (transactions and average ticket). Breaks down total revenue into the six product categories.
4. Income Statement: Revenue, COGS (including occupancy), Gross Profit, SG&A, Pre-opening expenses, Operating Income, Interest, Taxes, and Net Income.
5. Balance Sheet: Cash, Inventory, Other Current Assets, PP&E, ROU Assets, Goodwill, Accounts Payable, Deferred Revenue (loyalty), Lease Liabilities, and Shareholders' Equity.
6. Cash Flow Statement: Net Income, D&A, Working Capital changes, OCF, Capex, FCF, Share Repurchases, and Net Change in Cash.
7. Debt & Lease Schedule: Revolver balance, interest expense calculation, and ASC 842 lease liability roll-forward.
8. Working Capital Schedule: Inventory, Accounts Payable, and Deferred Revenue projections based on days outstanding metrics.
9. Depreciation & CapEx Schedule: Capex split by new stores vs. maintenance, feeding into the PP&E roll-forward and D&A calculation.
10. Shareholders' Equity & Shares: Retained earnings roll-forward, share repurchase impact, and basic/diluted share count calculation.
11. DCF Valuation: Unlevered free cash flow, WACC calculation, terminal value, and implied share price.

1. Ending Store Count = Beginning Store Count + New Stores Opened - Stores Closed + Acquired Stores
2. Comparable Sales Growth = Transaction Growth Percentage + Average Ticket Growth Percentage
3. Total Net Sales = (Average Store Count x Average Sales per Store) + E-commerce Sales
4. Category Revenue = Total Net Sales x Category Mix Percentage
5. Gross Profit = Total Net Sales - Product Costs - Store Occupancy Costs - Inventory Shrink
6. SG&A Expense = Store Payroll + Corporate Overhead + Marketing + Incentive Compensation
7. Operating Income = Gross Profit - SG&A Expense - Pre-opening Expenses
8. Ending Inventory = Beginning Inventory + Purchases - COGS (Product Costs)
9. Loyalty Deferred Revenue = Beginning Balance + Points Earned - Points Redeemed - Points Expired
10. Ending Share Count = Beginning Share Count - (Share Repurchase Amount / Average Share Price)
11. Free Cash Flow = Operating Cash Flow - Capital Expenditures

The Assumptions sheet dictates the Store Roll-Forward, which is the primary driver for the Revenue Build. The Revenue Build feeds the top line of the Income Statement. The Income Statement generates Net Income, which anchors the Cash Flow Statement. The Cash Flow Statement dictates the ending cash balance and revolver needs on the Debt & Lease Schedule, which then feeds interest expense back into the Income Statement. The Working Capital Schedule and Depreciation & CapEx Schedule bridge the Income Statement to the Balance Sheet and Cash Flow Statement. Finally, the Shareholders' Equity & Shares sheet calculates the final per-share metrics used in the DCF Valuation.

• Revenue and Asset balances are entered as positive numbers.
• Liability and Equity balances are entered as positive numbers.
• Expenses on the Income Statement (COGS, SG&A, Interest, Taxes) are entered as positive numbers and subtracted in subtotal formulas (e.g., Gross Profit = Revenue - COGS).
• Cash inflows on the Cash Flow Statement are positive.
• Cash outflows (Capex, Share Repurchases, Debt Repayment) are negative.

• Misclassifying store occupancy costs: Ulta includes rent and store depreciation in COGS, not SG&A. Moving this to SG&A will incorrectly inflate Gross Margin.
• Ignoring the Space NK acquisition: Historical store counts and revenue bases must be adjusted to account for the 86 UK/Ireland stores added in FY2025.
• Mishandling the loyalty programme: Ultamate Rewards creates a deferred revenue liability. Failing to model the build and release of this liability will distort working capital cash flows.
• Pre-opening expenses: These are reported as a separate line item below SG&A but above Operating Income. Do not bury them in SG&A.
• Lease accounting (ASC 842): The balance sheet must include massive Right-of-Use Assets and corresponding Lease Liabilities. The amortisation of these leases impacts operating cash flow.
• E-commerce cannibalisation: Assuming store productivity grows linearly without accounting for the shift to digital channels will overstate physical store margins.
• Share count circularity: Share repurchases reduce share count, which increases EPS, which often drives the assumed share price, which changes how many shares can be repurchased. Break the circularity by using a hardcoded average share price for the repurchase calculation.
• Shrink volatility: Inventory shrink has been a major margin headwind recently. Assuming a flat historical average may miss management's recent commentary on shrink mitigation.

• Gross margin should remain strictly within the 38.0% to 40.0% band; flag if it deviates.
• Operating margin should not exceed 14.5% without a specific scenario flag, as the company is investing heavily in SG&A.
• Capex as a percentage of revenue should run between 3.0% and 4.0%.
• The Balance Sheet must balance: Total Assets = Total Liabilities + Shareholders' Equity in every forecast period.
• Operating Cash Flow to Net Income conversion should consistently be greater than 1.1x.
• Debt to EBITDA should remain below 1.0x (excluding operating lease liabilities).
• Effective tax rate should remain between 24.0% and 24.5% based on current US corporate tax law.
• Total store count growth should not exceed 80 net new stores per year without triggering a warning regarding capital deployment limits.

• SEC EDGAR: Ulta Beauty (ULTA) 10-K and 10-Q filings.
• Ulta Beauty Investor Relations page: Earnings call transcripts, investor presentations, and financial supplements.
• Key peers for benchmarking: Sephora (LVMH), Bath & Body Works (BBWI), Sally Beauty Holdings (SBH), and Target (TGT).
• Industry data sources: Circana (formerly NPD Group) for prestige beauty market share data, and Nielsen for mass market beauty data.
• Consensus estimates: Bloomberg or FactSet for forward-looking street estimates.

• Ulta Beauty, Inc. Form 10-K for the Fiscal Year Ended January 31, 2026.
• Ulta Beauty Q4 and Full Year Fiscal 2025 Earnings Press Release (March 12, 2026).
• Ulta Beauty Q4 2025 Earnings Call Transcript.
• Ulta Beauty Investor Presentation (March 2026).