Beauty sales were down for its third fiscal quarter, as the company continues to navigate the fallout of the COVID-19 pandemic.
For the quarter ending Nov. 2, the company posted a net sales decrease of 7.8 percent to $1.6 billion, compared to $1.7 billion in the third quarter of fiscal 2019. Net income was $74.8 million compared to $129.7 million in the third quarter of fiscal 2019.
The company said its decline in net income was due to asset impairment and restructuring costs related to the suspension of its expansion into Canada, which has been put on hold due to the pandemic. Net sales declined due to the pandemic.
“Today, we reported financial results that exceeded our expectations as we continue to navigate a year of uncertainties with agility and strength,” said Mary Dillon, chief executive officer, in a statement. “I am proud of how well our teams are responding and leading throughout this difficult period, and I want to thank all of our Ulta Beauty associates for their continued commitment to serving our guests and taking care of each other during this unprecedented time.”
“We know guests are changing how they shop beauty, but importantly, their engagement with the category remains strong,” she continued. “As the prevalence of COVID-19 increases across the country, we will continue to monitor closely and adjust operations as needed to ensure the safe delivery of beauty essentials.”
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Sales declines were also impacted by a pull-back on promotions, as the company tries to refine its sale strategy. Certain promotions from last year were discontinued or scaled back, and a “We Love Our Members” event during the quarter was instituted to welcome back rewards members to in-store shopping. Ulta’s loyalty program, which includes its most engaged consumer set, counts 37.1 million, and did not grow this quarter, so the company is turning its attention to membership retention and acquisition.
While the makeup category — Ulta’s biggest, comprising 45 percent of total sales — was challenged, certain “above the mask” segments including lashes and brows performed well. Skin care is up from last year, driven by new brands such as The Ordinary, Tula and Beekman 1802, and existing brands such as Cerave, First Aid Beauty and La-Roche-Posay. Hair tools, color care, Black-owned hair brands, self-care and bath products also drove growth. Fragrance also grew, thanks to the launch of R E M by Ariana Grande, and newness from YSL ad Marc Jacobs.
E-commerce sales were down 8.9 percent from the second quarter, which the company said was “expected” after an initial bump during store closures in the spring. “Although the pandemic has accelerated channel shifts, our insights and results continue to confirm that members prefer to shop in physical stores, even through increased online shopping,” said Dillon.
For the first time in several years, Ulta Beauty in 2020 has faced significant sales declines due to the pandemic. Net sales in the first nine months of fiscal 2020 decreased 22.4 percent to $4 billion, compared to $5.1 billion in first nine months of fiscal 2019. Net income was $4.3 million compared to $483.2 million in the first nine months of fiscal 2019.
In March, the company withdrew guidance for fiscal 2020 and is continuing to not provide an outlook for the year. Dillon has increased sales expectations for the fourth quarter due to holiday shopping. The company expects comp-store sales to decline between 12 and 14 percent year-over year.