Thank you, Layla. Good afternoon everyone and thank you for joining us for a discussion of Ulta Beauty's results for the second quarter of fiscal 2025. Hosting our call today are Kecia Steelman, Chief Executive Officer, and Chris Lialios, Interim Chief Financial Officer. Before we begin, I'd like to remind you of the company's safe harbor language. Many of our remarks today will contain forward-looking statements. We refer you to our earnings release and our SEC filings where you will find several factors which could cause actual results to differ materially from these forward-looking statements.
We caution you not to place undue reliance on these forward-looking statements which speak only as of today, August 28, 2025. We have no obligation to update or revise our forward-looking statements except as required by law and you should not expect us to do so. Following our prepared comments, we'll open the call for questions. To allow us to accommodate as many questions as possible during the hour scheduled for this call, we respectfully ask that you limit your time to one question. If you have additional questions, please requeue. As always, the IR team will be available for any follow-up questions after the call. Now I'll turn the call over to Kecia.
Thank you Kiley and good afternoon everyone. I'd like to start by welcoming Chris Lialios to our call. As you know from our announcement in June, Chris is a 25-year veteran of Ulta Beauty and is serving as our Interim CFO. In addition to his responsibilities as the company's Controller, he's a trusted leader across our organization and I want to express my gratitude to Chris for his partnership and leadership during this important time for our business. While our CFO search is in progress, today I'd like to spend a few minutes highlighting what drove our strong performance, the progress we're making against our Ulta Beauty Unleashed strategy, and where we're headed. The Ulta Beauty team delivered significantly better than planned sales performance and continued to successfully execute our strategic priorities for the quarter. Net sales increased 9.3% to $2.8 billion.
Operating profit was 12.4% of sales and diluted earnings per share was $5.78. Our Ulta Beauty Unleashed strategy continues to gain traction and we're building on our momentum. I am pleased with how our team has incorporated key learnings to strengthen our performance as we lap the impact of the operational disruption and promotional effectiveness challenges we experienced in the second quarter of 2024. Customers are responding favorably to the actions that we've taken to sharpen our business and our teams have made solid progress in advancing our long term initiatives.
Highlights from our quarterly results include comp sales growth of 6.7%, positive comp growth in both channels and all major categories, continued market share gains during a highly competitive quarter, loyalty member growth of 4% year-over-year to a record 45.8 million members, and ongoing improvement across several key performance indicators including brand engagement, earned media value, in store conversion, and app engagement. We're encouraged by the visible progress underway and see continued opportunities to strengthen our operating model to ensure that Ulta Beauty delivers sustainable, positive performance and attractive shareholder returns. Before I dive into the key drivers of our performance, I want to touch on what we're seeing across the beauty and consumer landscape. Engagement with beauty and wellness remains healthy.
The growth of the U.S. beauty category has been fairly stable with low single-digit growth in mass and mid single-digit growth in prestige beauty during the second quarter, according to Circana. Our insight suggests consumers continue to prudently manage their day to day spending and are watchful of pricing trends in response to tariffs. At the same time, beauty enthusiasts tell us that they're prioritizing their beauty regimens and remain strongly engaged within the category while we continue to manage the business thoughtfully amid ongoing macroeconomic uncertainty. We believe beauty and wellness offer a unique sense of comfort and escape, which we expect will continue to support the beauty category resilience. Turning to the key drivers of our performance, let me begin with our efforts to drive core business growth.
Performance in the second quarter was fueled by the strength of our core business, reflecting our commitment to getting back to the basics, improved in-store execution, and elevating our go-to-market approach through operational excellence, marketing leadership, and compelling merchandising and innovation. Tighter collaboration and planful coordination across our field, marketing, and merchandising teams is having a tangible impact. We continue to make progress in advancing our brand building and digital and personalization efforts. In stores, our teams build on our successes in Q1, maintaining their focus on elevating the store experience and delighting our guests with every interaction. Our thoughtful go-to-market planning, paired with strong execution in stores, delivered comp growth across all categories and supported strong execution of key events and holidays like Mother's Day and Father's Day, our newly created Only at Ulta event, and our big Summer Beauty sale.
I am incredibly proud of our store and field teams who have passionately embraced our Ulta Beauty Unleashed strategy and are enhancing the in-store experience for our guests. In addition to sales growth, these collective efforts drove improved in-store conversion and guest satisfaction. From a category perspective, our comp growth in the quarter reflected balanced contribution from in-demand newness and core assortment growth. Fragrance continues to lead the way as our strongest performing category, delivering robust double-digit growth in the second quarter. Performance was fueled by successful Mother's Day and Father's Day activation, compelling newness, and continued strength in gift sets and men's fragrances. New and exclusive brands, including the launch of our first men's exclusive fragrance, Drake’s Summer Musk, as well as newness from YSL Beauty, Gucci, Chanel, and exclusive brands Snif and NOYZ, supported strong category performance.
Sales in the skincare and wellness category increased in the high single-digit range, led by strong growth in body care and wellness. Our trends in mass and prestige skincare grew and improved, with both segments delivering low single-digit growth for the quarter. New brands, including Tatcha and Saltaire, as well as trend-relevant brand Maelove, resonated with guests, while product expansions of Sol de Janeiro, Le Monde Gourmand, and Touchland also contributed to category growth. In addition, our robust and expanded K beauty assortment continues to contribute with new brand Anua and exclusive brand Peach & Lily leading the way. Wellness performance benefited from the launch of new brands like Honey Pot and Armra along with newness from supplements and ingestibles favorite Lemi. The makeup category delivered mid single-digit comp growth driven by positive performance in both mass and prestige makeup.
Compelling newness from existing brands including Hourglass, MAC and Nyx drove excitement and category performance. Mass makeup grew in the high single-digit range reflecting the strength of trend across eye, face and lip and the benefit from lapping the sell down of our Ulta Beauty Collection in association with our Q3 relaunch last year. Prestige makeup increased in a low single-digit range supported by newness and key brand expansions. Comp sales in the hair care category increased in the mid single-digit range supported by growth in professional hair care, accessories and hair tools. Performance also reflected the benefit of the timing shift of a key promotional event. Redken and our exclusive brand Sacred continued their momentum and contributed to comp performance for the quarter while the brand new launches including exclusive brand isima by Shakira built engagement and contributed to sales growth.
Care tool performance benefited from strong innovation from Shark and Conair. Finally, services delivered a low single-digit comp driven primarily by the strength of cut and color services. We continue to bring beauty to life in our stores through our events, salon workshops and salon brand features. During the quarter we hosted more than 30,000 events across our fleet and guests and brands love our new digital tools that enable guests to see and sign up for these fun and educational opportunities. We also hosted three unique salon experiences including our Father's Day Daddy and Daughter Day Out workshop which educated guests and drove trial and salon sales. Our eventing and workshop strategies are powerful ways in which we're supporting our go to market strategy and successfully activating key events, brand launches and promotions.
Moving to marketing, we are elevating our marketing efforts to spark excitement and awareness, drive engagement and attract and retain loyalty members. During the second quarter, we reimagined our events and activations to be more relevant and differentiated for our guests. This included kicking off summer with our Here We Glow sun event, which replaced last year's Member Love event, and launching a new Only at Ulta event to highlight and support our exclusive brands. In addition, we applied lessons learned last year to our big summer beauty sale and back to school events, including shifting timing to better align with consumer shopping behavior.
We are driving connection with the beauty enthusiast by strengthening Ulta Beauty's cultural relevance with unique activations at Coachella and Lollapalooza and serving as the official beauty retail partner of the Cowboy Carter Tour, a powerful collaboration featuring curated beauty looks, exclusive product assortments, and merch brand experiences across Beyoncé’s tour markets in the U.S. As beauty continues to move at the speed of culture, we're keeping pace with strong social media engagement and trend-forward content that is engaging and relevant to our consumers, resulting in meaningful growth in unaided awareness, brand engagement, and earned media value. At Ulta Beauty, we celebrate the transformative power of beauty and wellness, inspiring self-expression, empowerment, well-being, and connection. We believe that beauty goes beyond the surface; it's really what radiates from within. This belief fuels our purpose to unlock the possibilities within each of us through beauty and wellness.
We've been on a journey to bring this purpose to life, creating emotional connections, building trust, and shaping a brand that truly champions and celebrates every guest, all ages and life stages. This fall, we will take the next bold step with our multi-year brand platform Beauty Happens Here, celebrated by the debut of our new brand campaign. It begins with a powerful declaration: we are beautiful. An inspiring way to share that Ulta Beauty is where beauty lives, and when we inspire our guests and connect with our guest, beauty spreads to others, making the world a more beautiful place. Stay tuned for more in the coming weeks. Turning to our long-term strategy to enhance our assortment and brand-building capabilities, we are focused on launching, building, scaling, and globalizing brands to strengthen our position as the partner of choice for beauty and wellness brands.
Chris, thanks Kecia, and good afternoon everyone. I'm honored to serve as Interim CFO, and I'm grateful to Kecia and the board for their trust and confidence. I'll begin my comments with a discussion of our second quarter results and then share how we are thinking about the rest of the year. Before we discuss the results, I want to remind you that we acquired Space NK on July 10. Our second quarter results include financial results for Space NK for the week since the transaction closed and preliminary estimates of the purchase consideration and fair value of Space NK's net assets. The acquisition was funded with cash on hand and borrowings under our existing credit facility and is not material to our consolidated financial statements.
Turning now to the second quarter financial results, the Ulta Beauty team delivered strong performance this quarter, reflecting better than expected growth from comp sales, favorable shrink results, and merchandise margin expansion. Consolidated net sales for the quarter increased 9.3% to $2.8 billion compared to $2.6 billion last year. During the quarter, we opened 24 new stores, relocated two stores, remodeled five stores, and closed two stores. Comparable sales increased 6.7%, driven by a 3.7% increase in transactions and a 2.9% increase in average ticket. Other revenue was approximately flat versus the second quarter last year. Looking at the cadence of comp sales through the quarter, growth was strongest in May and July, primarily reflecting shifts in the timing of key promotional events.
From a channel perspective, both store and digital channels contributed to comp growth, with e-commerce sales increasing in the low double-digit range and comp sales delivering mid single-digit growth for the quarter. Consolidated gross margin increased 90 basis points to 39.2% of sales compared to 38.3% last year. The increase was largely due to lower inventory shrink and higher merchandise margin, which was partially offset by the deleverage of supply chain fixed costs and other revenue. Our team's collective focus on reducing inventory shrink while also improving merchandise in-stock levels continues to deliver results. Fixture investments, process improvements, associate training, and specific store-level actions are driving improved trends, and I'm pleased to share that we've experienced shrink reductions across every category in every region. Merchandise margin increased primarily due to the impact of more effective promotional strategies. Similar to Q1, we continued to strengthen our go to market strategies.
We optimized key events and offers to align with relevant shopping moments and provide guests with value. We eliminated unproductive and overlapping offers to drive increased clarity, and we implemented new functionality such as Replenish & Save to drive greater engagement. As a result, the gross margin impact from promotional activity was lower than last year. Supply chain fixed costs increased, reflecting higher wage rates and higher depreciation and implementation costs associated with our ongoing supply chain optimization efforts. Moving to expenses, consolidated SG&A increased 15% to $742 million, including approximately $7 million of one-time transaction expenses related to the acquisition of Space NK. As a percentage of sales, SG&A increased 130 basis points to 26.6% compared to 25.3% last year, driven in large part by higher incentive compensation, store payroll and benefits, and corporate overhead.
Incentive compensation deleveraged for the quarter, reflecting our better than planned second quarter performance as well as the lapping of a benefit from lower incentive compensation last year. Store payroll and benefit expense increased primarily due to higher healthcare costs and additional selling hours to support the guest experience, and the growth of corporate overhead largely reflects investments to support our Ulta Beauty Unleashed strategy. Operating profit increased 4.8% to $345 million compared to $329 million last year. As a percent of sales, operating margin decreased 50 basis points to 12.4% compared to 12.9% last year. Wrapping up the P&L, diluted EPS increased 9.1% to $5.78 per share, including $0.03 of benefit due to income tax accounting for stock-based compensation. Moving to highlights from the balance sheet and cash flow statement, we ended the quarter with $243 million in cash and cash equivalents and $289 million in short-term debt.
During the quarter, we drew on a revolving credit facility primarily to support the acquisition of Space NK. Total inventory increased to $2.4 billion compared to $2 billion last year, primarily reflecting additional inventory to support new brand launches, the impact of 62 net new stores, and the acquisition of Space NK. Capital expenditures were $77 million for the quarter, mostly driven by investments in new and existing stores. Depreciation increased 9% to $71 million compared to $65 million last year, largely reflecting supply chain and store investment. In the quarter, we repurchased 245,000 shares, bringing the year-to-date total for our share buyback program to 1.2 million shares or $468 million. At the end of the quarter, we had $2.2 billion remaining under our current $3 billion repurchase authorization.
Turning now to our updated outlook for 2025, we have increased guidance for the year to reflect our strong first half performance and the impact of Space NK, which was not contemplated in our previous forecast. Reflecting the momentum we saw in the first half, we have increased our sales expectation for the second half, but we continue to believe it is prudent to take a cautious approach given continued uncertainty around consumer spending. We now expect consolidated net sales for the year will be between $12 billion and $12.1 billion with comp sales growth in the range of 2.5%-3.5%. This outlook reflects our expectation that comp sales will be in the range of flat to up low single-digits in the second half.
We now expect operating profit for the year will decrease in the high single-digit range and operating margin will be between 11.9% and 12% of sales, reflecting our updated sales expectations, higher incentive comp, and how we are forecasting the flow of investment spend. We expect operating margin will be between 10.7% and 10.9% of sales for the second half of the year. For modeling purposes, we continue to expect gross margin for the year will deleverage, primarily driven by store occupancy and supply chain costs, partially offset by lower shrink. We've updated our expectations for SG&A growth and now expect SG&A will increase between 13% and 14% for the year, driven largely by higher incentive compensation, our strategic investment including increased advertising, and the addition of Space NK.
We expect SG&A growth will be elevated in the second half, reflecting both the shift of investment spending initially planned for the first half as well as the lapping of last year's expense trend. As a reminder, SG&A grew 1% in the second half of fiscal 2024 as we proactively reduced planned spend in response to lower than expected revenue growth. Reflecting these assumptions, we now anticipate diluted EPS for the year will be between $23.85 and $24.30 per share. These EPS estimates include the impact of share repurchases and assume a tax rate of approximately 24%. In closing, we remain focused on executing our Ulta Beauty Unleashed strategy and committed to invest in our operating model to position sustainable growth. We are encouraged by our first half performance but remain cautious about how consumer demand may evolve in the second half of the year.
As we look to the rest of fiscal 2025, we intend to invest to strengthen our competitive position to deliver long term profitable growth while also continue to be thoughtful about pacing and prioritization as the environment evolves. I'll turn the call over to our operator to moderate the Q&A session.