Ulta Beauty, a leading beauty retailer, recently announced plans to boost sales and gain market share following a slowdown in first-quarter sales. Comparable sales, which track Ulta stores and online sales, saw a year-over-year increase of 1.6%, a significant drop from the previous year’s growth of 9.3%. Ulta’s finance chief, Paula Oyibo, expects growth to accelerate in the second half of the year, projecting a 2-4% increase due to sales-driving initiatives.
CEO Dave Kimbell had previously warned of cooling demand in the beauty category, and while the slowdown was anticipated, it hit the company harder and earlier than expected. Kimbell acknowledged that market share had been challenged, particularly in the prestige beauty category. To combat this, Ulta plans to take concrete action in five key areas: strengthening their assortment by introducing 25 new brands, including Ulta-exclusives with celebrities like Serena Williams and Bella Hadid; scaling its creator network to enhance social relevance; improving the consumer digital experience; leveraging its loyalty program; and evolving promotional strategies.
Ulta also aims to expand its partnership with delivery service DoorDash to offer same-day delivery from its stores and increase app adoption. The Ulta app accounted for 57% of e-commerce sales in the quarter. Additionally, the company is testing new gamification platforms and will introduce new marketing technology later this year to personalize the shopping experience for guests.
Despite the challenges, Ulta reported better-than-expected earnings per share of $6.47 and revenue of $2.73 billion for the quarter. Net income stood at $313.1 million compared to $347.1 million the previous year. However, Ulta lowered its guidance for the fiscal year, expecting net sales in the range of $11.5 billion to $11.6 billion and comparable sales of 2% to 3%. This is a revision from the previous guidance of $11.7 billion to $11.8 billion in net sales and 4% to 5% in comparable sales. The company also revised its full-year earnings per share guidance to a range of $25.20 to $26.
Ulta Beauty’s performance is significant in a retail landscape facing consumer pullback due to higher costs. While the industry is experiencing a transformation, with consumers moving online and prioritizing high-efficacy products, Ulta remains resilient. Analysts believe that despite reduced spending on discretionary items, consumers continue to prioritize beauty products, leading to significant growth in this category.
The Wall Street view of Ulta has been cooling, with analysts lowering their price targets. However, analysts at Jane Hali & Associates view the beauty category as resilient and see the wellness category as a key strength. They remain cautious about the makeup category.
Ulta Beauty’s market value stands at approximately $18.5 billion, reflecting its position as a strong performer in the beauty retail sector. As the company continues to implement its sales-driving initiatives and adapt to changing consumer preferences, it aims to regain market share and accelerate growth in the coming months.
