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Ulta Beauty Sales Drop 32% From Coronavirus Closures

"We have seen stronger-than-expected sales in reopened stores," chief executive officer Mary Dillon said.

E-commerce sales did not offset coronavirus-related store closures for Ulta Beauty this quarter, but it did help.

Ulta Beauty chief executive officer Mary Dillon said on a call with Wall Street analysts on Thursday that pre-coronavirus, Ulta had more than 80 percent of its sales coming from retail doors. But during the pandemic, online sales doubled, and Ulta rolled out curbside pickup that resulted in “a nice acceleration in the number of orders per store,” Dillon said, as well as “a fun and convenient way to come back to Ulta Beauty” for consumers.

“We expect to have a vast majority of stores re-opened in some capacity by the end of June,” Dillon said.

Ulta has now reopened more than 840 stores for curbside pickup, with 333 stores open to shoppers. “We have seen stronger-than-expected sales in reopened stores, and we’re seeing great engagement with our salon services, where available,” Dillon said.

Ulta started buy online, pick-up in store in late April.  “We’re seeing great guest engagement with our salon services with many appointments booked several weeks out,” Dillon added.

The COVID-19 pandemic has changed the way beauty shoppers are shopping, Dillon said, noting that wellness categories like skin and bath and body, as well as DIY categories like hair color, care and removal have seen strong gains. 

“The rapid escalation of COVID-19 resulted in significant disruption to our operations. For much of the first quarter, Ulta Beauty operated as a digital-only business, and while e-commerce sales exceeded our expectations, it was not enough to fully offset the impact of our store closings,” Dillon said.

The retailer posted a 32.7 percent net sales decline, to about $1.2 billion for the quarter, with a net loss of $78.5 million. Diluted loss per share was $1.39. It’s a big hit for Ulta, which in recent years had become the darling of the specialty beauty retail world, opening stores and landing big-name prestige and digitally native brands as growth continued.

The COVID-19 pandemic has “exacerbated” category trends — like the decline of makeup — Dillon noted, adding that the frequency of video meetings may wind up altering that downturn at some point, but that hair, skin and wellness are the main focuses right now.

“The beauty category, while not recession proof, has fared better than many other discretionary categories in economic downturns, reflecting the relatively low price point and the connection with the product,” Dillon said. “Engagement with the beauty category remains strong, despite the uncertainty many guests are experiencing today.”

Dillon predicted COVID-19 would have a lasting impact on consumer behaviors. “Despite our universal desire to return to normal, COVID-19 will likely have sustained effects on consumers, the competitive environment and how we operate and work. We’re thinking through all of these changes and what they may mean for our business model going forward,” Dillon said.

To shore up finances, Ulta has drawn down $800 million on its $1 billion revolving credit facility, suspended new hires, deferred merit pay increases, reduced marketing and other expenses and reduced planned new store openings, among other efforts.

For more from, see: 

Ulta Beauty Plans to Reopen 180 Doors

Ulta Beauty Plans 75 More Store Openings in 2020

Sephora Revamps Loyalty Program, Includes Cash Rewards

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