Dive Brief:
- Ulta Beauty continued its sales streak in the second quarter, with a 10% jump in net sales to $2.5 billion. Comps grew 8% thanks to increased transactions, according to a Thursday press release.
- Both operating and net income nudged slightly up in the quarter, with net income reaching just over $300 million. Ulta called out shrink again as a challenge to profit, but the retailer is taking action to prevent it.
- After indicating in May that it would put fragrances behind locked cases to combat theft, the retailer has rolled out those fixtures to about half of its stores and is seeing sales improve as a result, Chief Operating Officer Kecia Steelman said on a call with analysts.
Dive Insight:
Ulta executives discussed increased theft in detail this spring, saying incidents had become more violent and aggressive. Now, with locked fragrance cases in about 50% of its stores, the retailer said there hasn’t been a negative impact on shoppers yet.
“We actually saw sales improvement because we were in stock with the product and we had it available to the guests,” Steelman said on an earnings call Thursday. “We're also investing in labor because we don't want to be sales preventative from the guests being able to purchase … The bottom line is that we're pleased that we're able to maintain our in-stocks for our guests, and quite frankly, keep the bad actors from coming into our stores.”
CEO Dave Kimbell touted double-digit traffic growth in the quarter, and said the beauty retailer saw growth in every major category it sells. Exclusive partnerships with brands like LolaVie (founded by Jennifer Aniston in 2021) and Donna’s Recipe helped the hair care category in particular, Kimbell said.
Despite the impressive results, Ulta is now seeing a pattern of slower growth, GlobalData Managing Director Neil Saunders said in emailed comments. Second-quarter revenue is up 51.8% from 2019, Saunders said, and the retailer’s level of success in the past will likely mean more modest gains going forward.
“While a 10.1% uplift in overall sales is very solid, it is the lowest rate of growth in over two years,” Saunders said. “Some of this is down to normalization: it would be unreasonable to expect Ulta to punch out double digit growth ad infinitum. However, some of the moderation may also be down to an increasingly pressured consumer who, while still prioritizing beauty over other categories, is trimming spend at the margins.”
The retailer continues to expand its brick-and-mortar presence, opening three new stores in the quarter and 62 shop-in-shops at Target. Ulta is now located in 421 Target stores, Kimbell said.
