Ulta's Digital and AI Investments Are Translating Into Real Sales
Ulta turned Q3 into a case study on how digital, AI, and speed convert attention into revenue. App engagement climbed, eCommerce grew in the mid-teens, and loyalty membership hit a new high. That trifecta pushed conversion across channels and kept holiday momentum strong out of the gate.
The throughline: faster app, smarter recommendations, simpler checkout, and broader ship-from-store coverage. Three consecutive quarters of double-digit eCommerce comps say the playbook is working.
Headline Numbers Sales Leaders Care About
- Net sales: up 12.9% to $2.9B
- Comparable sales: up 6.3% (ticket +3.8%, transactions +2.4%)
- Gross margin: 40.4%, helped by lower shrink and higher merchandise margin
- SG&A: up 23.3% to $841M (incentives, store payroll, cloud tech)
- Inventory: up 16% to $2.7B (brand launches, Space NK, new stores)
- Loyalty: up 4% to 46.3M members
- Footprint: 1,500 Ulta Beauty stores and 84 Space NK stores at quarter end
What's Driving Conversion
- AI personalization: Recommendations, promos, and search tuned to member behavior increased conversion and average order value.
- App-led selling: App penetration reached 65% of online member sales (up from 63%) on the back of Replenish & Save, Wishlist, and Venmo at checkout.
- Speed as a feature: A faster app, streamlined checkout, and doubling ship-from-store to 1,000+ sites tightened delivery windows and boosted BOPUS (buy online, pick up in store) conversion.
- Social discovery: Viral prestige fragrance, K-beauty, and skincare trends pulled new traffic that converted online and in-store.
- Loyalty flywheel: With 46.3M members, targeted offers land harder and lift repeat purchases.
- Virtual adviser (AI): Early proof-of-concept shows guests using it for product guidance and operational info (inventory, returns, loyalty) - less friction, more confidence to buy.
- UB Marketplace: +120 brands and 3,500 SKUs expand assortment with limited inventory risk, keeping working capital lighter while testing demand.
Sales Plays You Can Borrow Now
- Make speed win deals: Prioritize SFS/BOPUS and one-tap payments. Every click and minute you remove shows up in conversion.
- Deploy "subscribe to save" on replenishable SKUs: Replenish & Save isn't fancy - it's recurring revenue with better retention.
- Turn wishlists into revenue: Auto-build retargeting audiences from wishlist activity and trigger price-drop or back-in-stock nudges.
- Let AI handle the pre-sale objections: A unified assistant that answers product fit, store info, inventory, and policy questions cuts support drag and increases checkout completes.
- Ride social proof, not hunches: Mirror content and promos to real trend data (fragrance, K-beauty, skincare) and refresh weekly.
- Segment by loyalty depth: Tie personalized offers to recency, category affinity, and predicted replenishment cycles.
- Use marketplace to test before you stock: Expand choice, validate winners, then scale buys with confidence.
KPIs to Watch (and Why)
- App penetration of member sales: Predicts LTV, repeat rate, and promo responsiveness.
- Personalization lift: Revenue per session and conversion by recommendation exposure.
- Checkout friction: Drop-off by step and payment method adoption (e.g., Venmo) - quick fixes here move dollars fast.
- Fulfillment speed: BOPUS/SFS share of orders, promise-to-door time, and impact on margin.
- Earned media value and UGC: Leading indicator for organic demand and lower CAC.
Holiday and Channel Health
Black Friday and Cyber Monday started strong, with steady demand across Q3. Traffic stayed consistent, and faster fulfillment supported conversion.
The signal is clear: beauty demand is resilient, and Ulta's digital stack is compounding it.
International Notes
New stores in Mexico and Kuwait, with continued strength at Space NK in the UK. Insights from these markets will inform assortment and digital moves heading into 2026.
Leadership Commentary in One Line
Kecia Steelman underscored that momentum in digital is real and ongoing, with no "finish line" on tech investment. Interim CFO Chris Lialios acknowledged near-term pressure from tech and cloud spend but positioned it as the price of scalable growth and future share gains.
If You Lead a Sales Team
- Audit your funnel for speed: page load, search, checkout, fulfillment promise. Fix the slowest link first.
- Ship an AI assistant for pre-sale questions, then iterate to a single, unified experience as usage patterns emerge.
- Launch a simple subscription on your top replenishable SKUs. Keep the discount modest; emphasize convenience.
- Tie promos to real trend data and loyalty depth. Don't spray offers - precision beats volume.
For a structured path to upskill your team on AI-assisted selling, explore curated programs at Complete AI Training.
Further reading on the mechanics behind these results: McKinsey's research on personalization and growth (link).
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