Dive Brief:
- Ulta is back on track after the lows of the pandemic, posting a record second quarter that included $1.97 billion in net sales (up 60.2%), a comp sales increase of 56.3% and net income of $251 million (a more than 3,000% increase). CEO Dave Kimbell said on a call with analysts Wednesday that the retailer is "focused on playing offense."
- A return to pre-pandemic trends was visible across the business, from traffic trends in stores improving, e-commerce declining, hair and brow services surging 60%, and plans to return testers to stores and roll out more services.
- This report also comes just as Ulta's Target shop-in-shop experience is launching. So far, the retailers have opened the concept in 58 stores, with plans to open 100 by the end of the third quarter, Kimbell said.
Dive Insight:
As Ulta lapped the pandemic-dominated Q2 of last year, the retailer posted understandably large gains in many categories, but it also made strides on some of its largest initiatives of late.
Ulta's Conscious Beauty program has seen over 270 brands certified in at least one of the pillars, according to Kimbell, and the retailer plans to increase its reach by putting out a Conscious Beauty sampler kit with products from brands like Tarte and Tula, and also revamping its digital search capabilities so consumers can more easily find brands associated with the program.
The company is on track to double its Black-owned brands by the end of the year, and has rolled out a textured hair training series across its salons to make that experience more inclusive.
Makeup as a category is still lagging behind 2019, but "momentum is building" as mask wearing decreases and events open back up. The retailer's loyalty program has also recovered, with a record 34.6 million active members in the quarter, an 8% increase over 2020.
"The beauty category is recovering faster than we expected, and the investments we've made over the last year to adapt to the market disruption and strengthen our leadership position are delivering results," Kimbell said.
The star of the earnings call, though, was Ulta's update on the Target partnership, which began opening this month. Eventually set to scale to 800 stores, the partnership is starting with 100 shop-in-shops, and execs were already delighted with how they're performing.
"We are just thrilled with the partnership, the launch, the guest response," Kimbell said. "We feel really confident how we've come out of the gate operationally, working really well, and most importantly, as I mentioned, consumers are thrilled by this. They're really excited about the idea of bringing together two great retailers in a unique experience that nobody else is doing. This is totally new to beauty."
The experience includes over 50 prestige and emerging brands, according to Kimbell, and the two retailers have been working together for the past nine months to ensure the 1,000-square-foot shop-in-shop experience reflects both companies.
"Each aspect of the shop was thoughtfully designed to make the space feel authentic to Ulta Beauty, Target and the featured brands within the assortment," Kimbell said. "From the unmistakable Ulta Beauty orange pop canopies and vivid graphics that weave into the existing Target store, everything was designed to create an inspiring and unique beauty experience for guests."
