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A rendering of the Ulta Beauty shop-in-shop at Target stores.

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12/06/2021

Ulta Beauty Delivers Record Sales and Earnings

Beauty is booming and Ulta expects to spend $80 million on supply chain and IT in fiscal 2021. Learn how the retailer is putting technology to use and what it expects for the holiday season.
Jamie Grill-Goodman
Editor in Chief
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Ulta Beauty's Q3 Fiscal 2021

  • Net sales increased 28.6% to $2.0 billion compared to $1.6 billion in the third quarter of fiscal 2020 due to the favorable impact from stronger consumer confidence and fewer COVID-19 restrictions compared to the third quarter of fiscal 2020.
  • Comparable sales (sales for stores open at least 14 months, including stores temporarily closed due to COVID-19, and e-commerce sales) increased 25.8% compared to a decrease of 8.9% in the third quarter of fiscal 2020, driven by a 16.8% increase in transactions and a 7.7% increase in average ticket. Compared to the third quarter of fiscal 2019, comparable sales increased 14.3%.
  • Gross profit increased to $789.5 million compared to $545.5 million in the third quarter of fiscal 2020. As a percentage of net sales, gross profit increased to 39.6% compared to 35.1% in the third quarter of fiscal 2020, primarily due to leverage of fixed costs, favorable channel mix shifts, leverage of salon expenses, and improvement in merchandise margins.

 

Beauty is booming.

Ulta Beauty CEO Dave Kimbell said cycling last year's disruption from COVID, product newness, and strong performance from promotional events drove all major categories to deliver double-digit comp growth in its Q3 2021compared to Q3 of fiscal 2020.

For the quarter, net sales increased 28.6% to a record $2 billion, he noted on the company’s earnings call, and operating profit increased to 14.2% of sales.

“We delivered record sales and earnings, increased our market share, and expanded our Ultamate Rewards loyalty program to nearly 36 million members,” Kimbell said in a press release. “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.”

The retailer also launched Ulta Beauty at Target in 92 stores and online during the quarter. [See more: Target & Ulta Ready Joint Shop-in-Shops]

"We are excited about this innovative partnership and how, together with Target, we will change the way guests experience beauty," Kimbell said. "While it will take time for us to understand what role this new distribution point will play for our guests, we are incredibly pleased with the ongoing customer excitement and encouraged to see Ultimate Reward members linking their accounts with Target Circle, as well as new members signing up through the shop."

The beauty retailer expects to spend between $200-$225 million in capex in fiscal 2021, including approximately $80 million for supply chain and IT. Capital expenditures were $51.1 million for the quarter, driven by investments in new stores, remodels and relocations, supply chain, and IT systems. 

Our teams are excited, engaged, and ready to support our guests from proactively managing inventory flow and anticipating supply chain challenges to stress testing our IT systems and digital platforms to successfully accelerating our holiday hiring,” said Kimbell.

Kimbell noted Ulta’s holiday season is off to a strong start and he’s confident the retailer is well-positioned to deliver another successful holiday season.

“We are excited about the strength we are seeing in our business,” he said. “Our third quarter performance exceeded our initial expectations, and we are encouraged by the early holiday trends. The beauty category is recovering, and our teams are executing well.

Looking ahead, Ulta expects to invest $160 million to $180 million in capital over the next three years, with most of the investment planned for fiscal 2022 and 2023. Project SOAR, Ulta Beauty’s multiyear effort to upgrade its enterprise resource planning (ERP) platform, is expected to provide a more flexible and scalable operating environment, as well as support future growth and innovation. Ulta believes it will begin to see operational benefits from this investment in fiscal 2023.