Largest US Beauty Retailer Continues Rollouts in 250 Target Stores
Ulta Beauty plans to continue to expand its physical footprint this year, opening 50 new brick-and-mortar sites, even as it joins the ranks of retailers that are debuting small-format stores.
The Bolingbrook, Illinois-based company, the largest U.S. beauty retailer, closed the fiscal year ending Jan. 29 with 1,308 stores totaling 13.8 million square feet. During a fourth-quarter earnings call, CEO Dave Kimbell outlined the firm's growth plans this year and a new initiative to test a small-store format. It will have "an optimized assortment and service offering in a handful of small markets," according to Kimbell.
He didn't offer any other details on that particular strategy, but retailers — ranging from Macy's to Target to Kohl's — have rolled out or are piloting small-format stores as a lower-cost way to expand their physical presence across the nation. And Ulta has a fairly ambitious target for adding to its store fleet, telling investors last fall that it saw the potential to have 1,500 to 1,700 U.S. brick-and-mortar retail sites long term.
Like a number of other retailers recently who've rebounded after the peak of the pandemic, Ulta posted a strong final quarter. Net sales increased 24% to $2.7 billion compared with $2.2 billion in the year-ago quarter due to the favorable impact from stronger consumer confidence and fewer coronavirus-related restrictions. Comparable sales rose about 21%.
“In fiscal 2012, the beauty category recovered earlier and faster than we expected," Kimbell said, as consumers spruced up their appearances after returning to their workplaces and socialized more in the wake of the worst of the COVID-19 outbreak.
In the fourth quarter, Ulta opened six new stores, in Carrolton, Georgia; Hesperia, California; Olive Branch, Mississippi; Rocky Mount, North Carolina; Rome, Georgia; and Tacoma, Washington. In addition, the company relocated three stores and remodeled one. During full fiscal 2021, Ulta opened 48 new stores, relocated seven, remodeled nine and closed four, netting 44 more stores.
The company spent $89 million last year opening new retail sites and refreshing or relocating existing stores.
Ulta opened beauty shops within 100 Target stores last year, part of its new partnership with that retailer. More than 250 will debut at Target stores this year, Kimbell said. The companies last year said they are planning for these experiential shop-in-shops to reach a total of 800 Target stores in the coming years.
The rollout so far is pacing neck-in-neck with a similar partnership that rival beauty retailer Sephora has implemented with Kohl's. Earlier this week, Kohl's reiterated its plan to have a minimum of 850 Sephora-branded shops opened in its stores by 2023 through that partnership, with 200 already debuting last year.
Overall, Ulta has said it is looking to optimize its rent and lease allowances, with 500 lease renewals slated through 2024. The store relocations are part of its effort to improve its sites.