Ulta Bucks Retail Trend, Plans New Stores, Lifts Outlook
14 October 2016 - 6:20AM
Dow Jones News
Ulta Salon Cosmetics & Fragrance Inc. has been on a tear
opening new stores and plans to keep it going, a rare
brick-and-mortar expansion as beauty retailers buck retrenchment
elsewhere in retail.
On Thursday, the Bolingbrook, Ill.-based company said it plans
to increase its store locations to between 1,400 to 1,700, from
about 900 now. That is beyond Ulta's previous target of having
1,200 storefronts in the U.S. by 2019. Ulta Chief Executive Mary
Dillon said she aims to double the company's market share over the
next several years and increase online sales to $1 billion. The
company also raised its financial forecasts for the year.
Shares in the beauty-products seller, which were up 29% so far
this year before its announcement, gained 11% by midday Thursday to
$265.98.
"Our focus is not just all women but the beauty enthusiast. When
I say enthusiast, I mean really enthusiastic," she said at a
meeting with investors, citing that 77% of Ulta customers own more
than 11 lip products.
Ulta, which offers hair-care services and sells beauty products
ranging from cheaper drugstore brands to more high-end labels, has
been expanding its chain that is largely based in strip malls as
other retailers have been closing locations. Wal-Mart Stores Inc.
said last week that it would slow new store openings. Macy's Inc.
is in the process of shutting 100 stores.
Specialty beauty retailers like Ulta and Sephora have stood out
in a sector hurt by dwindling foot traffic. On Monday, French
luxury giant LVMH Moë t Hennessy Louis Vuitton SE, which owns
Sephora, said its nine-month revenue rose 4% from a year earlier.
Cosmetics and perfumes were the strongest division in the
period.
Ulta has been adding about 100 new stores a year for the last
five years, while revenue jumped to $3.9 billion last fiscal year
from $1.8 billion in the fiscal year ending January 2012.
Founded 26 years ago, Ulta has been working to increase its
brand awareness. It launched a national TV ad for the first time in
September 2015. As YouTube and Instagram celebrities exert more
influence in the beauty space, Ulta has moved a larger share of
marketing dollars away from print and toward television, radio and
digital channels.
The retailer has also been shifting away from broad discounting
and toward more loyalty-focused promotions. Its Ultamate Rewards
loyalty program, which gives members perks for shopping at the
retailer, represents more than 90% of sales.
Stifel analysts estimate that Ulta will double its current 3%
share of beauty retail by fiscal 2023, in part due to its expanded
assortment of high-end products, growth of its hair salon business
and its loyalty program.
In addition to boosting its earnings forecasts for the third
quarter and the full year, Ulta also said comparable-store sales,
including e-commerce, will come in higher than anticipated, up 14%
to 15% in the third quarter compared with a 12.8% increase in the
same quarter a year ago.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
October 13, 2016 15:05 ET (19:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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