Ulta Beauty, the largest beauty retailer in the U.S., has announced its third-quarter results for fiscal 2023, which show that the company has achieved record sales and earnings despite the challenges posed by the COVID-19 pandemic and inflation. The company attributes its success to its loyal customer base, its omnichannel capabilities, and its diverse product offerings across mass and prestige segments.
According to the company’s press release, some of the key highlights of Ulta Beauty’s third-quarter performance are:
- Net sales increased 15.8% to $2.4 billion, compared to $2.1 billion in the third quarter of fiscal 2022.
- Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 10.8%, compared to a decrease of 8.9% in the third quarter of fiscal 2022.
- E-commerce sales grew 23.4%, representing 16.4% of total net sales, compared to 15.1% in the third quarter of fiscal 2022.
- Diluted earnings per share increased 32.6% to $4.23, compared to $3.19 in the third quarter of fiscal 2022.
- The company opened 28 new stores, ending the quarter with 1,397 stores and square footage of 13,140,000, representing a 4.8% increase in square footage compared to the third quarter of fiscal 2022.
- The company repurchased 1.1 million shares of its common stock for $375 million, leaving $1.1 billion remaining under its current share repurchase authorization.
Ulta Beauty’s Competitive Advantages
Ulta Beauty’s CEO, Mary Dillon, expressed her satisfaction with the company’s results, saying that they reflect the strength of the beauty category and the company’s competitive advantages. She said, “We are pleased to report another quarter of strong sales and earnings growth, driven by our highly engaged guests, our differentiated business model, and our talented associates. We continue to execute our strategies to drive market share gains and create long-term value for our stakeholders.”
One of the main competitive advantages that Ulta Beauty has is its loyal customer base, which is supported by its Ultamate Rewards program. The program has 40.2 million active members as of the end of the third quarter, representing a 9.6% increase from the same period last year. The program offers members various benefits, such as points for every dollar spent, free birthday gifts, exclusive offers, and access to the Diamond and Platinum tiers, which provide additional perks. According to Dillon, the program is a key driver of the company’s growth and retention, as well as a source of valuable data and insights.
Another competitive advantage that Ulta Beauty has is its omnichannel capabilities, which enable the company to serve its customers across multiple touchpoints, such as stores, online, mobile, and social media. The company has invested in enhancing its digital platforms, such as its website, app, and virtual try-on tools, to provide a seamless and personalized shopping experience. The company also offers various fulfillment options, such as buy online, pick up in store (BOPIS), curbside pickup, and ship from store, to cater to the different preferences and needs of its customers. According to Dillon, the company’s omnichannel strategy has helped it to increase its reach and frequency, as well as to drive incremental sales and traffic.
A third competitive advantage that Ulta Beauty has is its diverse product offerings across mass and prestige segments, which provide customers with a wide range of choices and price points. The company carries over 25,000 products from more than 600 brands, including its own private label brands, such as Ulta Beauty Collection, Morphe, and Kylie Cosmetics. The company also partners with exclusive and emerging brands, such as KVD Beauty, Rare Beauty, and Keys Soulcare, to offer customers new and innovative products. Additionally, the company offers salon services, such as hair, skin, and brow services, to provide customers with a complete beauty experience. According to Dillon, the company’s product and service assortment has enabled it to attract and retain customers across different demographics and occasions.
Ulta Beauty’s Outlook and Future Plans
Ulta Beauty has raised its guidance for fiscal 2023, based on its strong performance in the third quarter and its expectations for the fourth quarter. The company now expects:
- Net sales in the range of $9.7 billion to $9.8 billion, compared to its previous guidance of $9.4 billion to $9.6 billion.
- Comparable sales growth in the range of 24% to 25%, compared to its previous guidance of 22% to 24%.
- Diluted earnings per share in the range of $16.75 to $17.00, compared to its previous guidance of $15.50 to $16.00.
The company also announced its plans for fiscal 2024, which include:
- Opening approximately 80 new stores, remodeling or relocating approximately 20 stores, and refreshing approximately 200 stores.
- Investing approximately $450 million in capital expenditures, primarily for new stores, remodels, store maintenance, information technology, and supply chain.
- Repurchasing approximately $1.1 billion of its common stock, subject to market conditions and other factors.
Ulta Beauty’s COO, Kecia Steelman, said that the company is confident in its ability to continue to grow and deliver value to its customers, associates, and shareholders. She said, “We are excited about the opportunities ahead of us as we execute our strategies to expand our brand awareness, increase our market share, and enhance our guest experience. We believe we are well-positioned to capitalize on the favorable trends in the beauty industry and the changing consumer behaviors, and we look forward to building on our momentum in the fourth quarter and beyond.”