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The beauty retailing industry was rocked for the second time in a week when Chuck Rubin, Ulta Beauty’s president and chief executive officer, said Thursday he will leave his post for the top job at Michaels Stores Inc., effective Feb. 21.
Rubin is the second top-tier merchant to flee the beauty space. On Monday, Walgreen Co.’s Joe Magnacca, the architect of Duane Reade’s upscale and ground-breaking beauty concept Look Boutique, assumed the ceo role at RadioShack Corp.
Both Rubin and Magnacca, formerly executive vice president and president of Daily Living Products and Solutions at Walgreens, were widely seen as two of the most impactful executives within the industry, and were frequently touted by vendors and Wall Street for their ability to foster bold change within well-established organizations.
“They are both rock stars and it is sad to see them leave the industry,” said Ido Leffler, cofounder of Yes To Inc., which distributes its personal care products to both Ulta and Walgreens. As for who might replace Magnacca and Rubin, Wendy Liebmann, founder, ceo and chief shopper at WSL Strategic Retail, said the candidates must have special skills in dealing with the new emerging realities of contemporary retailing. “Both of these retailers live in this new, emerging and blurring beauty world. They need to be able to continue to build credibility with brands at every price point,” she said.
Rubin took over the top post at Ulta in September 2010, four months after joining the company as president and chief operating officer from Office Depot, where he last served as president of the North American retail division.
He continued the vision mapped out by his predecessor, Lyn Kirby, of housing mass, prestige and salon products under the same roof, but then stepped on the gas when it came to strategy.
Rubin aimed to more than double Ulta’s current door count of 550 units to 1,200, up from the previous target of 1,000. And while the chain’s same-store sales continued to gain at a steady clip — comps rose 8.4 percent for the quarter ended Oct. 27 — Rubin increased Ulta’s square footage at a rate of about 20 percent a year (or more than 100 doors a year).
While Rubin molded Ulta into a challenger of the dominant Sephora, Magnacca has been credited with single-handedly changing the face of drugstore cosmetics merchandising. A native of Canada, Magnacca arrived in the U.S. in 2010 from Shoppers Drug Mart to take on the top-to-bottom overhaul of the metro-New York drugstore chain Duane Reade. He was a central figure in the bold transformation of Duane Reade, where he served as chief marketing officer and later as president, and helped revamp the retailer from a overstocked, uninviting chain into a fleet of sleeker stores with wider aisles, natural light and a more focused and upscale assortment. Its flagship locations are outfitted with sushi bars, frozen yogurt bars and manicure bars. The changes helped to attract the attention of Walgreens, which acquired Duane Reade in 2010 and promoted Magnacca to executive vice president and president of Daily Living Products and Solutions. In that role, he oversaw marketing and merchandising operations across more than 8,000 stores. Magnacca received the executive vice president title on Feb. 1.
“He’s hot,” said industry consultant Allan Mottus of Magnacca. “When you turn things around you get offers. I think he could write his own ticket. He took Walgreens at a time when they were cutting stockkeeping units in beauty. He had to stabilize cosmetics and bring it back. With the Look Boutiques, he’s taken the store back to being a viable alternative to Ulta — a great option. Walgreens can no longer compete with Wal-Mart and Target on a price basis. I think Joe’s departure will hurt.…I don’t know who could replace him.”
As for the impact he may have on RadioShack, Mottus said, “He is shrewd and he could turn it around with merchandising and cosmologist-like trained people. That’s in his wheelhouse.”
At Ulta, Rubin sought to make cultural changes, favoring a meritocracy over consensus building. Earlier this month, he told WWD, “At Ulta, we reach across lines and deep into the organization, top down and bottom up, and have some really good collaborative, direct conversations about what we can do better and congratulate ourselves on what we do well already. People who continue to get invited into those discussions have demonstrated that they have the intellectual capacity, the drive and the passion to contribute. That is meritocracy. That’s how people get a seat at the table, and that’s how they get acknowledged and rewarded.”
Given the momentum Rubin had built at Ulta, his plans to leave surprised both venders and analysts.
“He is phenomenal at motivating and he was a leader who added great discipline [to Ulta].…There are few retailers posting the gains Ulta has,” said Barry Shields, managing partner of the Innovative Beauty Group, which launched its Red Carpet Manicure line at Ulta. “Under Chuck, Ulta set a new standard in beauty retailing. Their culture is just better and different than many companies.”
However, RBC Capital analyst Jason Gere warned that investors may not welcome the recent executive changes at Ulta. “The fundamentals [at Ulta] and the story is still quite solid, but the consistent change in management is a little surprising,” said Gere, noting that Ulta has had two different ceo’s and two chief financial officers since 2006. Bruce Hartman took over as cfo in September, replacing Gregg Bodnar who had held the post since 2006. “Investors may be quite skittish until a new ceo is in place,” said Gere.
Ulta’s shares declined 11.75 percent to close at $87.80 Thursday, following the company’s morning announcement.
Rubin joins Michaels at a pivotal time for the arts and crafts chain, which has ambitions to go public. Michaels — owned by private equity firms Bain Capital Partners and The Blackstone Group — filed a registration statement with the Securities and Exchange Commission on March 30. According to the filing, in fiscal 2011, Michaels had revenues of $4.2 billion and 1,196 stores.
The job requires Rubin to relocate for the third time in three years, as Michaels is based in Irving, Tex. Prior to moving to Illinois to join Ulta, Rubin lived in Florida while at Office Depot.