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Investing.com -- Barclays upgraded Ulta Beauty (NASDAQ:ULTA) to Overweight from Equal Weight in a note on Friday, citing improving fundamentals and a stronger outlook under new leadership.
“We are highly encouraged by a series of rapid and decisive changes since CEO Kecia Steelman took the helm in January 2025,” Barclays (LON:BARC) analysts wrote.
The bank pointed to several drivers for its upgrade, including “return to sustainable positive comps and margin expansion,” better promotional trends, and a streamlined retail strategy.
One key move is the decision not to renew the Ulta x Target (NYSE:TGT) partnership in August 2026.
Barclays said the company is “slowing own-brand stores as well as the non-renewal of the ULTA x Target partnership” to optimize points of retail distribution.
The bank also noted Ulta’s limited exposure to tariffs compared with other retailers.
“Only ~1% of its merchandise was direct imported in FY24, suggesting minimal direct-cost tariff risk,” the note said, adding that reliance on China imports is limited to select hair care tools and store supplies.
Barclays described Ulta’s FY25 guidance as “initially conservative” and argued that the company has room for “beat and raise quarters for the rest of the year.”
It added that the broader beauty industry, which has been normalizing since its 2022 peak, is stabilizing with mid-single-digit growth.
Despite an 18.8% year-to-date rally in Ulta shares versus a 9% gain in the S&P 500, Barclays believes consensus earnings estimates can still move higher.
“With Ulta’s wide range of price points and category offerings, it is a vital distribution channel for both mass and prestige beauty brands,” the analysts wrote.