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Ulta Beauty (ULTA -6%) is trading lower today after reporting its Q2 (Jul) results last night. This retailer of beauty products delivered its top and bottom line above expectations. The company is no stranger EPS beats and extended its streak to four consecutive quarters of double-digit upside. Revenue was also strong, growing 9.3% yr/yr to $2.79 bln, coming in above expectations and marking its highest growth rate in 5 quarters. While management raised its FY26 guidance for EPS, revenue, and comps, we think its cautious tone is driving the negative reaction. It highlighted ongoing uncertainty around consumer spend, and notably, its comp guidance of +2.5-3.5% implies flat-to-low single-digit growth in the second half. 

• Revenue was boosted by ULTA's impressive comp of +6.7%, accelerating from +2.9% in Q1 (April). It was nice to see its comp driven mostly by traffic compared to average ticket, which were +3.7% and +2.9% respectively. In terms of the cadence of comps, growth was strongest in May and July, primarily reflecting shifts in the timing of key promotional events, with both store and digital channels contributing.
• Strength was broad based across all of its categories. Fragrance continues to stand out, delivering robust double-digit growth, driven by Mother's day and Father's Day events, as well as new product launches. Its skincare and wellness category also continued its momentum, growing in the high-single digit range, led by growth in body care and wellness, with improving trends across its mass and prestige segments. Encouragingly, makeup and haircare categories accelerated in the quarter, both delivering mid-single digit comp growth.
• Another item worth highlighting was the late acquisition of Space NK, a specialty beauty retailer based in the UK. Only one week was included in this report, but it gives ULTA an entry point into international markets. Management noted this was a less capital-intensive way to tap one of the largest beauty markets while gaining learnings in high street retail. 
• Moving on to what we think is causing the negative reaction. While management emphasized that beauty engagement remains healthy and continues to provide a sense of comfort to consumers in a dynamic macro environment, its outlook for comps shows a moderation in the back half. Management described the guidance as prudently cautious, so there could be some conservatism embedded in the guide. 

Overall, we thought ULTA's Q2 was impressive across the board, but the cautious tone around 2H26, particularly in comps, is driving today's weakness. With the stock having rebounded strongly off April lows and setting a new 52-wk high yesterday, it's also possible investors are taking their profits and stepping aside to see how the second half plays out.