Ulta Beauty, Inc. (ULTA) had a very good Friday. The beauty retailer's shares surged more than 14% after reporting third quarter results that blew past Wall Street's expectations and raising full-year guidance with confidence heading into the critical holiday shopping season.

The Numbers Tell a Pretty Story

Ulta delivered earnings per share of $5.14, comfortably ahead of the $4.54 consensus estimate. Revenue came in at $2.85 billion, beating expectations of $2.72 billion. Those aren't just modest beats—they're the kind of numbers that get investors excited.

Management said third quarter results exceeded even their own internal expectations, driven by stronger comparable sales, fresh product assortment, improved shopping experiences both in stores and online, and expanded marketing efforts. Comparable sales climbed 6.3%, supported by gains in both average ticket size and transaction volume. Overall net sales grew 12.9%, getting a boost from the Space NK acquisition and new store openings.

Under the Hood

Gross profit improved from the prior-year period, helped by lower inventory shrinkage and better merchandise margins. Operating expenses did increase, reflecting higher incentive compensation (apparently people hit their targets), payroll costs, store expenses, and amortization related to cloud-based software investments. Operating income totaled $309.4 million.

The company closed the quarter with $204.9 million in cash and cash equivalents. Merchandise inventories increased year-over-year, which makes sense given new brand launches, the addition of Space NK, and 63 net new Ulta stores. Short-term debt ticked up as the company tapped its credit facility to support working capital needs and capital allocation priorities.

Speaking of capital allocation, Ulta repurchased 426,914 shares during the quarter at a cost of $224.7 million. The company operated 1,500 U.S. stores at period end, plus 84 U.K. and Ireland locations operated by Space NK.

Looking Ahead

Management highlighted that momentum continued across all categories and channels, with particularly strong performance in ecommerce. That strength gave them enough confidence to raise full-year guidance substantially.

The company lifted its full-year GAAP earnings per share guidance from a range of $23.85 to $24.30 up to between $25.20 and $25.50, well above the consensus estimate of $24.40. Revenue guidance also got bumped up from between $12.00 billion and $12.10 billion to approximately $12.30 billion, versus the consensus of $12.13 billion.

Wall Street Responds

Analysts wasted no time adjusting their price targets following the strong report. JP Morgan analyst Christopher Horvers maintained an Overweight rating and raised his price target from $606 to $647. Piper Sandler analyst Anna Andreeva kept an Overweight rating while lifting her target from $590 to $615. Telsey Advisory Group analyst Dana Telsey maintained an Outperform rating and increased the price target from $610 to $640. Baird analyst Mark Altschwager, maintaining an Outperform rating, raised his target from $600 to $670.

At the time of writing, Ulta shares were trading 14.09% higher at $608.87, suggesting investors are buying into management's optimistic outlook for the holiday season ahead.