Ulta on Thursday reported positive first quarter growth with net sales rising 22.5% to $1.31 billion from the year-ago quarter, beating the FactSet analyst forecast cited by MarketWatch of $1.27 billion. Same-store sales, including online sales, rose 14.3%, driven by 8.7% transaction growth and 5.6% growth in average ticket. That compares to a 15.2% increase in the year-ago period, according to a press release.
The company’s Q1 retail same-store sales rose 10.9%, including salon same-store sales growth of 9.9%. Q1 salon sales rose 16.7% from the year-ago period to $68.7 million. E-commerce sales grew 70.9% from the year-ago quarter to $104.3 million, representing 340 basis points of the overall company same-store sales growth.
Q1 net income rose 39.4% year over year to $128.2 million. Diluted earnings rose 31.7% to $1.91 per share, besting analyst expectations cited by MarketWatch for $1.80 per share.
Ulta’s stellar quarter demonstrates an unusual level of resiliency in retail, where even many off-price retailers, who have been stalwarts, are beginning to slow down a bit.
“We’re particularly proud of these results in light of the challenging environment many retailers are experiencing,” CEO Mary Dillon told analysts in a conference call Thursday, according to a transcript from Seeking Alpha. “Our differentiated increasing compelling assortment, the experience and nature of our stores, the strength of our loyalty program and CRM capabilities that help us drive traffic and manage promotional activity with greater precision. The supply chain investment we’ve made to support the acceleration of our e-commerce channel. All of these assets are contributing to our exceptional growth.”
Customers appear to be flocking to the beauty retailer, a particular challenge for department stores, which have long relied on the category to drive foot traffic and sales. “Cosmetics are the last bastion of the department stores, and Ulta is accelerating its store growth... This is the 30-year transfer of departments out of department stores,” Nick Egelanian, retail analyst and president of retail development consultants SiteWorks International, told Retail Dive earlier this year. “Department stores are under full scale assault, and this is just the beginning.”
Ulta’s membership program grew 26% in the quarter, and even as growth moderates, it expects to “see rapid growth in loyalty membership well above square footage growth,” Dillon said. “We continue to find ways to enhance the benefits with the program, particularly adding products for our most engaged platinum level customers, who spend more than $450 a year.”
While its e-commerce sales are surging, the beauty retailer is also expanding its brick-and-mortar footprint. The company opened 18 net new stores in the quarter, closing just two, compared to 13 net new stores in the year-ago period, ending up with 990 stores and square footage of 10,433,185, a 12% increase in square footage year over year. Ulta plans to open 100 new stores this year as well.
“We know that the beauty enthusiast wants to shop in person and our associates love that interaction with the guest as well,”[I] believe strongly that platform will continue to do what we do by just getting better at it all the time, is what we are focused on and why we feel confident about our ability to continue on the growth path.”
Like many retailers, e-commerce sales bring lower margins, and Dillon told analysts that the company sees the channel as an opportunity to provide customers with an additional, rather than an alternative, way to shop.
“[W]e understand our guest, especially our most engaged guest, she loves to buy a lot of offers from us,” Dillon said. “And so when somebody becomes an omnichannel shopper they end up basically being our best guest because they are spending 2.5 times amount of money of somebody who is just shopping in store.”