Ulta raises guidance on the back of glowing beauty sales

Despite consumer pullback on discretionary spending, beauty sales continue to sparkle for Ulta, whose net sales rose 10.1% YoY to $2.5 billion in the second quarter, prompting the retailer to increase its full-year guidance.

The beauty retailer boasted double-digit traffic growth as well as growth across all major product categories, CEO Dave Kimbell said. Both prestige and mass skin care grew in the double digits, with help from brands like Drunk Elephant, Supergoop!, La Roche-Posay, and CeraVe.

• Hair care secured mid-single-digit growth, while mass cosmetic brands like E.l.f. and NYX drove makeup’s low single-digit growth.
• Prestige makeup was “challenged,” particularly in makeup and hair, Kimbell said. He also noted the retailer is making a push into luxury; it debuted Luxury at Ulta Beauty in 200 stores and online in Q2, and launched Pat McGrath Labs in July.

“Our proprietary insights suggest consumers are becoming less focused on product pricing tiers and are trading around, choosing to engage with brands that offer on-trend newness and compelling social media content,” Kimbell said.

Ulta also expanded same-day delivery to nearly all stores in the quarter, and its store teams fulfilled 31% of e-comm sales and 39% of digital orders, though more than 75% of shoppers shopped solely in brick and mortar.

Theft in stores contributed to a dip in gross margin, which the retailer is addressing by locking up fragrances. It’s installed the security fixtures in 50% of stores, and aims for 70% by year’s end. COO Kecia Steelman said the effort has improved sales by ensuring inventory is in stock for shoppers, though it required a greater investment in labor.

Looking ahead, the company bumped up its annual earnings outlook, and now anticipates $11.05 billion to $11.15 billion in net sales, up from $11 billion to $11.1 billion, though Kimbell expects “moderating growth” in US beauty sales due to economic factors like lower consumer spending and higher credit card debt, settling into mid-single digits for the rest of the year.