Dive Brief:

• Ulta Beauty announced on Thursday that its quarter two net sales rose 20.6% to $1.29 billion, just past the Zacks Consensus estimate for $1.28 billion, and up from $1.07 billion in the year-ago quarter. Same-store sales (in stores open at least 14 months and through e-commerce) rose 11.7%, down from the increase of 14.4% in the year-ago period, driven by 5.5% transaction growth and 6.2% average ticket growth. Retail same-store sales rose 8.3%, including salon same-store sales growth of 7.7%. Salon sales rose 15.3% to $68 million from $59 million in the second quarter last year.

• E-commerce sales rose 72.3% to $96.3 million from $55.9 million last year, representing 340 basis points of the total company same-store sales increase, with total online traffic growth up 73%. Mobile traffic was also up 104%, driven by investments in digital marketing, pay channels — including pay search affiliate display re-targeting — and paid social, including Facebook, Twitter and YouTube. Mobile traffic through its app rose 450% year over year with 41 million visits during the quarter.

• Earnings in the quarter were $1.83 per share, besting the Zacks Consensus Estimate of $1.78 per share. Q2 net income was $114 million. The company said that for the third quarter it expects net sales to range between $1.33 billion and $1.35 billion and same-store sales to increase 9% to 11%.

Dive Insight:

There are few retailers demonstrating the longevity of brick-and-mortar retail better than Ulta. During the second quarter the retailer opened 20 stores, ending the period with 1,010 stores and square footage of 10,631,474, an 11.3% increase in square footage compared to the same period last year. CEO Mary Dillon told analysts that the retailer is therefore on track with its plans to open 100 net new stores this year, according to a conference call transcript from Seeking Alpha.

That has set the retailer’s same-store sales number back a bit, but that’s not a concern considering its comparable growth of nearly 12% and the fact that Ulta is grabbing market share, according to GlobalData Retail analyst Anthony Riva.

"Part of this comes down to customer acquisition, particularly from failing department stores," Riva said in a note emailed to Retail Dive. "Despite the recent rise in promotional and pricing activity, we continue to see beauty shoppers defect from department stores, and one of the main beneficiaries is Ulta. Ulta has also had some success in pulling customers away from the beauty propositions of mass merchants and supermarkets."

The retailer is operating on all cylinders. Its marketing efforts, including an amped-up social media strategy, are seeing traction, its merchandising (including new, better brands) is resonating with customers, and its loyalty program is reaching both new and existing customers. Plus, the company is managing to beef up its online sales along with sales in its physical stores and salons.

Dillon told analysts that the company has never been complacent, despite its ongoing success. "[There are] over 70,000 physical points of distribution where guests can buy beauty in the U.S., as well as online retailers," she said. "This is not new... Our rapid share gains, however, show that our guests love beauty and Ulta Beauty. But we don't rest on our laurels, we all know that shopping behaviors and expectations consumers have for retail are evolving rapidly and we've been on that from the start. Our business model today and our continued focus on innovation in the areas that are relevant and differentiating to our guests provide me with the utmost confidence in our ability to gain share across multiple categories for many years to come."

That sets up Ulta for further gains, Riva said.

"One of the most fortunate things for Ulta is that online margins are reasonably strong and the gap with physical is much smaller than it is for many other retailers," he said. "This means online growth makes a steady contribution to the bottom line. Looking ahead, there are no significant weaknesses that make us concerned about Ulta. Certainly, comparable growth will come in lower than it has done in past years, but this is to be expected as the business matures."