- Ulta has officially reached its goal of opening more than 100 Target shop-in-shops in 2021 after launching the concept in 92 stores and online in Q3, CEO Dave Kimbell told analysts on a conference call Thursday.
- The retailer brushed off last year's disruption in a number of ways, with net sales up 28.6% from last year and 19% from 2019, to reach a record $2 billion. The beauty company also returned to pre-pandemic member penetration numbers, Kimbell said, ending the quarter with 35.9 million active members, up 6% from 2019.
- Salon capacity is back up to 100% except where limited by local mandates, and Ulta also relaunched skin services in 100 of its locations with new offerings.
Net sales weren't the only metric up double digits at Ulta in Q3. Comps grew 25.8%, operating income surged nearly 181%, and net income grew almost 188%. The beauty retailer updated its outlook on the strong performance, expecting between $8.5 billion and $8.6 billion for the full year, along with a 36% to 37% comps increase.
What was perhaps most of interest, though, was Ulta's partnership with Target. Ulta declined to comment too much on how the shop-in-shops are performing during the call, except to say that they think things are going well so far. Chief Operating Officer Kecia Steelman said customers are shopping the entire assortment at the shop-in-shops, which was the intention, but the retailer will need a few more purchase cycles to make judgments about specific purchase behavior.
"We like what we're seeing so far," Steelman said.
Whether or not Target will benefit from some of Ulta's newest exclusives is unclear. Ulta has plans to roll out haircare brand Olaplex, which is No. 1 in prestige haircare according to Kimbell, to all of its stores and online in January, but he shied away from saying whether Target would receive the brand. Instead, Kimbell said simply that Ulta would "continue to evolve" the Target assortment over time.
The Olaplex deal will also be used to expand Ulta's salon services. The beauty retailer will soon offer a bond repair service in partnership with the brand aimed at reversing damage caused by hair color and heat, in addition to a new root touchup service in partnership with Redken. Ulta also expanded MAC to 200 stores in the quarter and continued growing its conscious beauty and BIPOC brands.
While Ulta's made it part of the company's strategy to bring in up-and-coming brands and land more exclusive deals, it's an unavoidable fact that brands are increasingly seeing the beauty of DTC sales. Asked about the threat of brands selling more products on their own — Olaplex, for example, makes 27% of its sales through DTC channels — Kimbell said it wasn't a serious threat.
"That's not new this year. That's been building for a while. We really look at that as something that we're monitoring and watching, but also see as a development in the competitive landscape that we can manage through," Kimbell said. "In fact, many of the DTC brands have found the importance of physical retail and many of them have chosen to partner with Ulta Beauty."