Ulta Rises, As Beauty Spending Remains Strong

Americans may be cutting back on other discretionary purchases, but they aren’t denying themselves lipstick and hairspray.

Comparable sales at Ulta Beauty climbed 8% in the second quarter of its fiscal year, and net sales rose 11% to $2.5 billion, compared to $2.3 billion in the year-ago period. Net income rose 11% to $300.1 million, versus $295.7 million in the second quarter of 2022.

Those results, achieved as many retailers posted sales declines and gloomy forecasts, topped expectations.

The Bolingbrook, Illinois-based retailer says the gains came from all major categories and that the number of people in its loyalty program grew 9% to 41.7 million.

“The beauty category has continued to deliver healthy growth, as consumers maintain their post-pandemic routines and expand their definition of beauty,” said Dave Kimbell, chief executive officer, in Ulta’s announcement. “Our proven business model, diverse assortment, best-in-class loyalty program, and outstanding teams have enabled us to deliver stronger-than-expected results for the first half of fiscal 2023. I remain confident we can deliver against our updated expectations for the rest of the year.”



Ulta also continued the expansion of its partnership with Target, opening 62 new Ulta Beauty at Target shops, bringing the total to 421.

As the partnership scales, the company says it’s continuing to learn which assortments best reflect the preferences of Target shoppers.

Observers say the retailer has done better than competitors by focusing on customer experience.

While Ulta “faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other ecommerce,” writes David Swartz, an analyst who follows Ulta for Morningstar.

Industry sources estimate Ulta’s share of U.S. specialist beauty retail at 29.3% in 2022, he writes, up from 12.8% in 2012. “We believe teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation,” he says.

But there are signs that industrywide, beauty sales began to slow in August, writes Krisztina Katai, an analyst who follows Ulta for Deutsche Bank. “We observed a sequential deceleration across all categories per Nielsen data,” she says. Other sources, including Circana and SpendTrend, also show some negative trends.

She also noted slightly elevated promotional activity at both Ulta and Sephora.

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