Ulta Beauty Says Makeup Category ‘Challenged’ Amid Coronavirus

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    Coronavirus store closures have caused sizable declines in Ulta Beauty sales, and now the company is looking to new categories and e-commerce for growth.

    Makeup still accounts for 43 percent of Ulta’s business, but during the pandemic, growth ramped up in skin, bath and body, and hair, executives said on the company’s earnings call Thursday afternoon.

    “The makeup category continues to be challenged,” Ulta chief executive officer Mary Dillion told analysts, citing changes in consumer sentiment and a lack of newness. Overall, she said, however, the company has been “gaining share in prestige beauty.”

    Together, skin, bath and fragrance sales make up 28 percent of total sales, while hair and styling tools make up 21 percent, executives said. Ulta plans to continue deepening skin and hair assortments with new brands, and in hair, the focus will be on textures and color. Ulta is also planning to modify floor plans to more prominently display skin-care products.

    The business is also “working to grow [its] roster of Black-owned brands,” Dillon said. Just 13 of Ulta’s 624 brands are Black-owned.

    For the quarter ended Aug. 1, Ulta’s net sales dipped 26.3 percent to $1.2 billion, down from $1.7 billion in the prior-year period. Net income was $8.1 million, down from $161.3 million in the same quarter last year.

    For the six-month period, net sales dipped 29.6 percent, falling from $3.4 billion to $2.4 billion year-over-year. Net loss was $70.5 million.

    Going forward, Ulta is working to expand the ship-from-store capabilities to 100 of its shops. The company will also look to expand omnichannel offerings, including app-based virtual makeup try-on and skin analysis services.

    The COVID-19 pandemic and related store closures, according to Dillon, had a significant impact on sales, but trends have improved as stores reopen.

    “Comparable sales trends improved significantly throughout the quarter, from decreasing 37 percent in early May, as we began reopening stores, to decreasing 10 percent in July, when most of our sales were reopened,” she said. “Notably, sales trends have continued to improve, with comparable sales down in the midsingle-digit range for the first three weeks of August.”

    After closing all stores in March, Ulta gradually reopened, starting with curbside pickup and moving to full retail openings. Roughly 88 percent of stores now have salon services available, and brow services are available in about 85 percent of stores, the company said. So far, Ulta has brought back roughly 17,000 of 33,000 furloughed associates.

    But not all furloughed associates will come back as the company works to manage costs. Ulta also permanently closed 19 stores and paused new store openings as part of that cost management plan. Promotions will also be limited to help maintain margins. Ulta’s 21 Days of Beauty event is still on, but other promotions will be scaled down as the company prioritizes profitability, executives said.


    SOURCE: https://www.w24news.com

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