Ulta Beauty Stock

Ulta Beauty, Inc. (Ulta Beauty) operates as a specialty beauty retailer in the United States.

The company operates a premier beauty destination for cosmetics, fragrance, skin care products, hair care products, and salon services. The company offers guests a differentiated assortment of more than 25,000 products from more than 600 well-established and emerging beauty brands across a variety of categories and price points. The company offers the widest selection of beauty categories, including prestige and mass cosmetics, fragrance, haircare, prestige and mass skincare, bath and body products, professional hair products, and salon styling tools.

The company operates stores predominantly located in convenient, high-traffic locations. With a bright and open store environment, the company makes it easy for guests to discover new products and services. The company offers beauty services in nearly every store, including a full-service hair salon and a Benefit Brow Bar. In addition to the company’s free-standing locations it has more than 350 Ulta Beauty at Target shop-in-shops which provide guests with a highly-curated, prestige beauty assortment in a unique and elevated presentation in 1,000 square feet of dedicated space within certain Target locations.

Through the company’s website, Ulta.com, and its mobile applications, it offers guests convenient, interactive and personalized digital experiences. The company’s digital channels enable always-on shopping and discovery, and its diverse fulfillment options, including buy online pick-up in store, buy online pick-up curbside, ship from store, ship from distribution center, and same-day delivery, provide guests with value and convenience. In addition to e-commerce platforms, the company offers guests a variety of unique digital experiences, including virtual try-on and skin analysis tools, which leverage augmented reality capabilities and artificial intelligence tools to provide guests with personalized experiences.

The company’s best-in-class loyalty program, Ultamate Rewards, enables members to earn points for every dollar spent on products and beauty services at Ulta Beauty, through purchases on its private label and co-branded credit cards, and purchases at Ulta Beauty at Target. In addition to unique membership benefits, members can redeem points for discounts on any product or service at Ulta Beauty. With more than 95% of total sales coming from members, the company is uniquely positioned with a deep understanding of its customers and their preferences, enabling it to personalize experiences, recommendations, and promotions through its Customer Relationship Management (CRM) platform and support its brand partners’ growth.

The company’s cultivate human connection with warm and welcoming guest experiences across all of its channels. The company’s knowledgeable and approachable store associates, its differentiated service offerings, and its efforts to create relevant, compelling digital content are competitive advantages and enable it to build strong engagement with guests.

The company developed a unique specialty retail concept that offers a broad range of brands and price points, select beauty services, and a convenient and welcoming shopping environment. The company defines its target consumer as a beauty enthusiast, a consumer who is passionate about the beauty category, uses beauty for self-expression, experimentation, and self-investment, and has high expectations for the shopping experience.

Strategy

The key elements of the company’s strategy are to drive breakthrough and disruptive growth through an expanded definition of All Things Beauty; evolve the omnichannel experience through connected physical and digital ecosystems, All In Your World; and expand and deepen its presence across the beauty journey, solidifying Ulta Beauty at the Heart of the Beauty Community.

The company empowers and inspires guests to make informed and sustainable product choices through its unique Conscious Beauty at Ulta Beauty platform, and it strives to protect the beauty of its natural environment and minimize its impact on the world around it by managing its stores’ energy, water, and waste footprints.

Market

The company operates within the large and growing U.S. beauty products and salon services industry. The company has full-service hair salons in substantially every store and operates brow bars in most of its stores, as well as makeup services through its salons. In addition, the company offers skin services in approximately 150 locations.

Retail Channels

The company is committed to meeting guests where and how they want to shop and strive to offer guests a compelling, personalized shopping experience through its stores, digital platform, and partnerships.

Stores

The company’s member data suggests its guests prefer to transact in physical stores, where they can discover and interact with products and other beauty enthusiasts.

The company’s retail stores are predominantly located in convenient, high-traffic locations, such as power strip centers. The company’s typical store is approximately 10,000 square feet, including approximately 950 square feet dedicated to its full-service salon.

The company offers a full range of beauty services in its stores, focusing on hair, makeup, brow, and skin services. The company’s Ulta Beauty store format includes an open and modern salon area, with most of its stores offering brow services on the salon floor. In addition, stores offering skin services include a skin treatment room or dedicated skin treatment area on the sales floor. The company continues to develop and add new website and mobile features and functionality, marketing programs, new products and brands, and omnichannel integration points.

Digital Platform

In addition to store expansion, the company continues to expand its digital capabilities as more of its guests choose to engage with it across physical and digital platforms. The company’s e-commerce platform has two key roles: generating direct channel sales and profits by communicating with its guests in an interactive, enjoyable way that reinforces the Ulta Beauty brand; and driving traffic to its stores, website, and native applications.

The company continues to improve its order fulfillment capabilities with increased speed of delivery through existing distribution centers, fast fulfillment centers (e-commerce only), and select retail stores, through more efficient processes designed for e-commerce order fulfillment, and starting in 2023, its first market fulfillment center. In addition to ship to home order fulfillment, the company offers guests ‘Buy Online, Pick-up in Store’, ‘Curbside Pickup’, and ‘Store 2 Door’, which provides the ability for customers to order in-store and have products delivered to their homes. In addition, the company offers same-day delivery for e-commerce orders in select markets.

Partnerships

To expand the company’s reach and introduce new guests to Ulta Beauty, it has formed a long-term partnership with Target Corporation to create Ulta Beauty at Target, a ‘shop-in-shop’ concept that offers a curated assortment of more than 60 established and emerging prestige brands across a variety of categories. Co-designed by Ulta Beauty and Target, the Ulta Beauty at Target shop is intended to reflect the Ulta Beauty experience with a unique and elevated presentation in 1,000 square feet of dedicated space separate but adjacent to Target’s core beauty department. Members in the company’s loyalty program, Ultamate Rewards, can earn points (but not redeem) for purchases made in the Ulta Beauty at Target shop. Loyalty points can only be redeemed in Ulta Beauty stores, on Ulta.com or through the company’s mobile applications.

Merchandising

The company offers one of the most extensive product and brand selections in its industry, including a broad assortment of branded and private label beauty products in cosmetics, fragrance, haircare, skincare, bath and body products, and salon styling tools. Across the company’s stores, Ulta.com and its mobile applications, it offers more than 25,000 products from more than 600 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.

Certain beauty enthusiasts are growing more interested in choosing products that support their own personal well-being and the well-being of workers, animals, communities, and the environment, and they are increasingly supporting brands whose products and actions align with their own values. The company offers Conscious Beauty at Ulta Beauty in all stores, on Ulta.com, and on its mobile applications. This holistic initiative provides transparency for guests to help them choose brands and products that reflect their personal values and individual needs. Through this initiative, the company certifies brands and products across four key pillars, Clean Ingredients, Cruelty Free, Vegan, and Sustainable Packaging, and recognize brands for their positive impact on its community. Displayed in stores on an endcap constructed of recycled and recyclable materials, the program launched with 187 brands. As of January 28, 2023, more than 300 brands participated in the program, with more than half certified in more than one pillar.

Based on internal proprietary research, approximately 65% of consumers see the beauty category as being significantly connected to wellness. In response to this trend, the company launched The Wellness Shop in select stores and online that offers an assortment of products across six platforms: everyday care, supplements and ingestibles, relax and renew, down there care, spa at home, and intimate wellness (online only).

During fiscal 2022 (year ended January 28, 2023), the company increased its assortment of Black-owned and Black-founded brands by 34% with the addition of 12 Black-owned and Black-founded brands, supporting its progress towards its commitment to dedicate 15% of its brand assortment to Black-owned, Black-founded and Black-led brands over time.

The company’s private label, the Ulta Beauty Collection, is a strategically important opportunity for growth and profit contribution. Ulta Beauty manages the full development cycle of these products from concept through production to deliver differentiated packaging and formulas that enhance the company’s brand image. The Ulta Beauty Collection has been certified in the Clean Ingredients and Cruelty Free pillars within the Conscious Beauty at Ulta Beauty program. The company also offers products, such as Tarte Double Duty Beauty cosmetics, IT Brushes for Ulta Beauty, and CHI for Ulta Beauty hair care appliances that are permanently exclusive to Ulta Beauty. Similarly, it offers a number of brands and products that are exclusive for a limited period of time or are offered in advance of the company’s competitors, such as Morphe, Colourpop, Juvia’s Place, Chanel and Florence.

Categories

The company offers a balanced portfolio across six primary categories: cosmetics; haircare products and styling tools; skincare; fragrance and bath; services; and accessories and other, which includes other revenue sources, such as the private label and co-branded credit card programs, royalties derived from the partnership with Target, and deferred revenue related to the loyalty program and gift card breakage.

Brand Partnerships

The company’s top ten brand partners, such as L’Oreal and Estee Lauder Companies, among others, represented 56% of its total net sales in fiscal 2022. The company’s brand partners view it as a significant distribution channel for growth and brand enhancement, and it works closely with them to market both new and existing brands.

Marketing and Advertising

The company employs a multi-faceted marketing strategy to increase brand awareness, drive traffic to its stores, website, and mobile applications, acquire new loyalty program members, improve guest retention, increase frequency of shopping, and increase spend per member. The company communicates with its guests and prospective guests through multiple vehicles, including print advertising, digital and social media, television and radio.

The Ultamate Rewards loyalty program is an important tool to increase retention of existing guests and to enhance their loyalty to the Ulta Beauty brand. The company’s CRM platform enables sophisticated analysis of the customer data in its loyalty member database, as well as greater personalization of its marketing campaigns and day-to-day communications. The company’s data demonstrates that loyalty members spend more per visit as compared to non-members. Ultamate Rewards enables customers to earn points based on their purchases at Ulta Beauty stores, through the company’s digital platforms, and at Ulta Beauty at Target. Points earned are valid for at least one year and may be redeemed on any product the company sells or services it provides in Ulta Beauty stores or through its digital platforms. To enhance its loyalty program, the company offers co-branded and private label credit cards. The credit cards drive higher wallet share and greater loyalty from the company’s rewards members, provide increased consumer insights, and offer attractive economics. Furthermore, the company continues to expand its gift card program to increase distribution in its store and online channels and to retail locations in store and online through partnerships with third parties.

The company is directing a growing percentage of its marketing expense towards digital, social media, and streaming advertising. The company’s marketing program has been effective in communicating with its existing online, mobile, and retail guests in a targeted and relevant way. The company’s digital marketing strategy includes search engine optimization, paid search, mobile advertising, social media, display advertising, and other digital marketing channels. Digital marketing, coupled with its national TV and radio advertising, has helped it increase brand awareness and consideration among those not familiar with Ulta Beauty, which has resulted in new guests.

Retail Media Network

As the company looks to elevate its position as the premier beauty retailer, in May 2022 the company launched its retail media network, UB Media, to transform the way its brand partners can connect with beauty enthusiasts. UB Media offers brands a suite of media capabilities that aim to personalize guest engagement and drive the acquisition of new guests.

Supply Chain

The company operates four distribution centers that support both stores and e-commerce demand, and two fast fulfillment centers that support e-commerce orders only. In addition, stores fulfill e-commerce orders as part of the company’s ship-from-store program. Starting in fiscal 2023, the company is introducing a fourth type of facility, a market fulfillment center, which will focus on the company’s most productive products and support ecommerce sales and store demand, enabling it to improve service and responsiveness, especially in markets with high store and population density.

Intellectual Property

The company has registered trademarks in the United States and other countries. The majority of the company’s trademark registrations contain the ULTA mark, including Ulta Beauty and two related designs, Ulta.com and Ulta Salon, Cosmetics & Fragrance (and design). All marks that are deemed material to the company’s business have been applied for or registered in the United States and select foreign countries, including Canada, Mexico and other countries in Latin America, Europe, and Asia.

The company’s trademarks, especially those related to the Ulta Beauty brand, ‘All Things Beauty. All In One Place.’, ‘The Possibilities are Beautiful’, ‘21 Days of Beauty’, and ‘Conscious Beauty at Ulta Beauty’ have significant value and are important to building brand recognition.

Seasonality

The company’s business is subject to seasonal fluctuation. Significant portions of the company’s net sales and profits are realized during the fourth quarter (year ended January 2023) of the fiscal year due to the holiday selling season. To a lesser extent, the company’s business is also affected by Mother’s Day and Valentine’s Day.

History

Ulta Beauty, Inc. was founded in 1990. The company was incorporated as a Delaware corporation in 1990.