Will Target's beauty category report negative comparable sales growth in Q3 FY2026 (first full quarter post-Ulta exit)?

The Ulta exit removes a proven traffic driver from 1/3 of Target stores. Q3 FY2026 compares against Q3 FY2025 when Ulta was present, creating an unfavorable year-over-year comparison for the ~600 affected locations. If Ulta stores see a 15-20% beauty decline from losing the halo effect, the 1/3 weighting produces a -5% to -7% drag on overall beauty comps, which would need to be offset by the unaffected 2/3. With Target losing market share in 60% of categories and E0 evidence on organic beauty demand, the probability of the 2/3 generating enough growth to offset is uncertain.

The committee's E0 rating on beauty attribution is the crux — the entire +18.7% growth period overlaps with the Ulta partnership, and no store-level attribution data exists. If beauty growth was 70%+ Ulta-driven, removal causes overall comp decline. If only 30% Ulta-driven, Target's organic strength may sustain flat or positive growth. With E0 evidence, the distribution of possible attribution levels is wide. The competitive landscape intensifying (Sephora at Kohl's, Amazon beauty) could cause weakness across all stores, not just former Ulta locations, but beauty remains a secular growth category in retail.

Q3 FY2026 is the FIRST full quarter post-exit, and Target has had since the 8-K announcement to prepare with 45 internal beauty brands. Management would be incentivized to ensure a strong showing — front-loading marketing, promotions, and assortment optimization. This 'launch quarter' effect may temporarily boost performance. However, 600 physical shop-in-shop removals create real shelf-space disruption. The partnership was 'mutually' non-renewed, suggesting Target may have believed they could do better independently, which provides a slight positive signal on organic capability.

The Black Swan Beacon estimated a 30-45% base rate for beauty comp decline, which provides a direct committee-derived estimate. The E0 attribution rating means the committee could not determine how much beauty growth was organic vs. Ulta-driven. The Ulta exit affects 1/3 of stores and removes a proven traffic driver. Target has a replacement plan but it is completely untested. Beauty is the only growth category, and Target is losing share in 60% of other categories, indicating systemic competitive weakness.

The Ulta exit affects only 1/3 of Target stores — 2/3 continue without change. For overall beauty comps to go negative, the decline in Ulta-exiting stores must overwhelm any growth in the unchanged stores. Even a sharp decline of 20% in 1/3 of stores yields a -6.7% drag, which requires the other 2/3 to decline as well for a total negative comp. Beauty is a secular growth category in retail, and the unaffected 2/3 of stores have no reason to decelerate. The structural math of the partial-store impact provides a meaningful buffer against total category decline.

The entire beauty growth trajectory overlaps with the Ulta partnership period — the Bullet Hole persona identified this temporal coincidence, causing both analysts to revise their assessment. Target is losing market share in 60% of tracked categories, and beauty was the sole exception. Removing the differentiating factor (Ulta) leaves a retailer whose organic category management has failed to hold share broadly. The 45 internal brands replacement is corporate optimism until proven otherwise. However, the one-third store limitation and management preparation time provide some downside protection.

BSB base rate of 30-45% for beauty comp decline provides the anchor. Ulta exit only affects 1/3 of stores, creating a structural buffer. Beauty is a secular growth category and Target has a replacement plan with 45 internal brands. But E0 attribution and competitive pressure from Sephora at Kohl's and Amazon add uncertainty.

Beauty growth period entirely overlaps with Ulta partnership — the committee identified this as a critical gap. Target loses share in 60% of categories elsewhere, and its replacement plan is untested. But only 1/3 of stores are affected, and beauty is a growing retail category overall. The competitive landscape with Sephora at Kohl's adds pressure beyond just the Ulta exit.

BSB estimated 30-45% probability, and the lower end is more appropriate given the 1/3 store limitation, management's 10 months of preparation time, and beauty being a secular growth category. The competitive landscape is intensifying but Target's internal brands have some drawing power. The E0 attribution uncertainty cuts both ways.