Ulta’s Q4 results showed continued strength across the business, with both sales and comps up nearly 10%. The biggest contributor to this growth was a marked improvement in store traffic that CEO Mary Dillon attributed to the retailer’s growing collection of digitally-native brands for which Ulta is one of only a few places (and sometimes the only place) where shoppers can try these products in person. The most buzzworthy brand, Kylie Cosmetics, sold out in December due to strong positive shopper response.

eCommerce also continued to accelerate in the quarter, growing sales 25% and contributing 240 basis points to the total company comp. More importantly, one of Ulta’s most valuable shopper groups — shoppers who shop both online and in stores — now accounts for 12% of its total shopper base, up from about 10% in Q4 2017. Digital initiatives with newly acquired QM Scientific and GlamStreet are just beginning to take off, with upgrades to its Glam Lab capabilities and new personalization and product replenishment recommendations rolling out to the site.

Services also continue to play an increasing role in Ulta’s growth story. Salon comps were up 6.2% as the retailer’s service optimization program continues to elevate the service experience. A new online booking tool will roll out this year, and competitive pay structures for stylists continue to attract and retain top talent.

Lastly, loyalty continues to be a significant part of Ulta’s strategy, with 31.8 million members (14.4% growth) accounting for the majority of total sales. Its newest Diamond Tier membership is also growing ahead of plan. At the beginning of fiscal 2019, members could start using points on all in-store services, a perk that has already garnered a strong response.

Looking ahead, Ulta has tempered its store growth program, focusing on portfolio management, store remodels and refreshes, and omnichannel integration. Its 80 planned store openings this year will be mainly in existing markets, an indication that it is beginning to approach targeted market saturation. On top of the opportunities of store and online growth, Ulta expects comps to range from 6%-7% for the year, showing no signs of slowing its impressive performance.

For more information, please contact:

Tiffany Hogan, Senior Analyst

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