Ulta Beauty third quarter earnings (Q3) delivered a record performance with sales up 28.6% over last year totaling $2 billion. Net profits for Q3 grew 188% and represent 10.8% of total sales as compared to last year’s 4.8%. The strong performance was partly attributed to the higher margins that the company has been able to achieve this year. In Q3, margins were 40% compared to the same period last year at 35%. Dave Kimbell, CEO of Ulta Beauty stated, “This strong third quarter performance reflects the strength and resiliency of the Beauty category, the power of the Ulta Beauty differentiated model, and the impact of our winning culture and team.”
Ulta Beauty on track for a stellar year
Year-to-date Ulta Beauty is on track to have significantly improved margins, profits and total revenue. Through nine months ending in October 2021, the company has increased sales by 49% over last year with net profits at 11.8% of sales (during the pandemic net profits for the same period dropped to 1% of net sales). Gross margins for the company year-to-date remain strong at 40% which is 10 percentage points higher than last year.
During the earnings call, Kimbell discussed the continued strength of its Ultamate Rewards program, stating that, “Member spend is at an all time high.” The company has 35.9 million members which is 13% more than last year. The recently launched Ulta Beauty at Target
Combined digital and physical shopping is a key growth driver
Kimbell discussed the importance of a unique combination of online and physical shopping that work synergistically with each other: “Shopping both digital and physical is what our customers are telling us is important.” Ulta Beauty’s buy-online-pick-up-in-store represented 20% of all ecom sales and the company recently announced its Beauty to Go promise providing same day delivery of beauty products within two hours or less with partner DoorDash.
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The company also discussed a new digital feature to help shoppers find gifts by using a QR code at the store or in the Ulta Beauty app which allows for easy exploration of beauty gifts by category. Kimbell said that another key element for digital and online growth comes from the direct-to-consumer beauty brands who look to Ulta Beauty for distribution and access to a large market of beauty enthusiasts across U.S. markets. While the company did not disclose financial numbers for e-commerce sales, it did say that the moderate growth this year is on top of the 90% growth in 2019.
Beauty is a strong category going into 2022
Kimbell discussed the beauty industry’s strength going into 2022, “Beauty will be healthy next year plus Ulta Beauty’s differentiated product assortment, strong loyalty program and unique combination of physical and digital positions the company for strong performance heading into the new year.”
Placer.ia data indicates that the beauty category is performing better than other categories over Black Friday weekend.The Placer.ai report, showed a 10.3% increase in visits on Black Friday compared to Black Friday 2019 for Ulta Beauty whereas the other categories were well under last year. Ethan Chernofsky, VP of Marketing of Placer.ai, said, “The beauty sector is enjoying a combination of forces that all privilege the products they sell. A focus on health and wellness remains a significant force and most beauty retailers have a significant spectrum of goods within those spaces including everything from bath products to creams and moisturizers.” Chernofsky discussed the willingness of beauty retailers to push the agenda and try new things with a more expansive approach on where and how to meet customers adds to the excitement of shopping in this category, “Additionally, the return of professional routines and events have reinvigorated a makeup market that had been flat because of the pandemic.”
Scott Settersten, CFO of Ulta Beauty, projected that 2021 annual sales performance for Ulta Beauty to come in at between $8.5 to $8.6 billion with comparable store sales up between 36-37%.
Settersen ended the call with a positive outlook for 2022 and comp store growth of between 3-5%. Ulta Beauty operates 1,302 retail stores across 50 states and also distributes its products through its website, which includes a collection of tips, tutorials, and social content.