Beauty and the Bot: How Ulta and UiPath are Winning the Tariff Wars

The global trade landscape is a minefield of uncertainty, yet some consumer stocks are proving they can dance through the chaos. Tariffs, supply chain disruptions, and inflation have sent many retailers scrambling, but companies like Ulta Beauty (ULTA) and UiPath (PATH) are leveraging innovation and agility to turn headwinds into tailwinds. Meanwhile, laggards like Gap (GPS) are left gasping. Let's dissect the strategies working today—and where to park your money.

Ulta Beauty: The Beauty Retailer Outsmarting Tariffs

Ulta's Q1 2025 earnings were a masterclass in resilience. Net sales rose 4.5% to $2.85 billion, with comparable sales up 2.9%, despite a 6.7% spike in SG&A costs. How's this possible? Let's break it down:

1. Tech-Driven Inventory Management:
   Ulta's inventory jumped 11.3% to $2.1 billion, but this isn't hoarding—it's strategic. The company is using AI to forecast demand and optimize stock placement, ensuring they're never caught short on hot items like prestige skincare or exclusive brands. Imagine a system that knows exactly when to stock up on holiday hair color or summer SPF. That's how you dodge tariff-driven shortages.
   

2. Exclusive Brands and Pricing Power:
   Ulta launched 19 new brands in Q1, many exclusive to its stores. This not only boosts margins but also reduces reliance on tariff-hit mass-market products. When competitors are sweating over import duties, Ulta's exclusives let them charge a premium without guilt.

3. Aggressive Share Buybacks:
   With $359 million spent on repurchases in Q1, Ulta's proving it's not just about surviving tariffs—it's about thriving. The $2.3 billion remaining in its buyback program is a bullish signal.

Action Item: Ulta's Q1 EPS of $6.70 beat estimates by 16.5%, and guidance was raised. This stock isn't just resilient—it's a growth machine. Buy the dips.

UiPath: The AI Play That's Automating Around Trade Chaos

While Ulta's winning offline, UiPath's doing it online. Despite a rocky start to 2025—lowering guidance due to macroeconomic headwinds—the company's long-term bets are paying off.

1. AI-Driven Efficiency:
   UiPath's DocPATH and CommPATH tools automate document processing and communication, reducing reliance on costly human labor. For clients facing tariff-driven cost inflation, this is a lifeline.

2. Industry-Specific Solutions:
   UiPath is verticalizing its sales strategy, targeting sectors like healthcare and finance. Their agentic automation (think self-reasoning bots) could future-proof their platform against any supply chain shock.

3. Strong Retention, Steady Cash Flow:
   With a 98% gross retention rate and $145 million in Q4 free cash flow, UiPath isn't just surviving—it's scaling. The $500 million buyback program is a confidence booster.

Action Item: UiPath's stock is down 30% from 2023 highs, but its AI edge and cash flow make it a bargain. Hold for the long game.

Gap: A Cautionary Tale of Tariff Sensitivity

Not all retailers are this agile. Gap's Q1 sales fell 2% to $3.4 billion, with inventory piling up. Why? They're stuck in a commodity trap, reliant on mass-market apparel vulnerable to tariff spikes and shifting consumer tastes. Without Ulta's pricing power or UiPath's tech moat, they're easy prey for inflation.

Bottom Line: Go Agile, Avoid the Commodity Trap

The tariff war isn't over, but the winners are clear: companies that innovate faster than tariffs can disrupt. Ulta's tech-driven inventory and exclusives, UiPath's automation, and their shared focus on margin preservation make them must-haves.

Investment Thesis:
- Buy Ulta Beauty (ULTA) for its growth and defensive fundamentals.
- Hold UiPath (PATH) as an undervalued AI leader.
- Avoid Gap (GPS)—it's stuck in the past.

Trade uncertainty? Let's use it to our advantage.