Color cosmetics are behind accelerating gains at Ulta Beauty.
Both mass and prestige color cosmetics, as well as new products, contributed to the company’s growth in the second quarter, executives said on the company’s earnings call Thursday.
“Newness and innovation continue to drive the business,” Ulta chief executive officer Mary Dillon said on the call. “We’re seeing ongoing strength in both mass and prestige cosmetics with impressive growth in Urban Decay, IT Cosmetics, Anastasia Beverly Hills, Too Faced, Tarte, Clinique, Lancôme, Benefit, Maybelline, Real Techniques and the Ulta Beauty collection. The professional hair-care category was also strong.”
New items at Ulta contributed significantly to growth, Dillon said, calling out Anastasia Beverly Hills’ color cosmetics line, Soap & Glory, Becca Cosmetics and Essie’s Gel Couture nail polish. Estée Lauder recently launched on ulta.com and will rollout in 30 doors in September, while Clinique will continue to expand at Ulta, including in new beauty boutiques, the executives said.
Honest Beauty, the beauty segment of Jessica Alba’s The Honest Co., is also selling well, according to chief merchandising and marketing officer Dave Kimbell. “Honest has been a leader in a broader trend in natural and it’s great to bring that to the beauty segment,” Kimbell said on the call. “There are other brands that have been in that space for a while with us and we’re seeing a lot of growth across the area.
“It is something that is growing in awareness and more and more guests are looking for those kinds of products,” Kimbell told WWD, adding that Ulta’s pipeline includes more natural beauty brands.
Over in fragrance, rollerballs are selling well at Ulta, according to Kimbell.
“We are seeing a lot of growth in our rollerball business,” he said. “I think that is in part due to the convenience aspect, but also because increasingly, our guest is looking for something different and something fresh that gives her the ability to have several….She might switch it up every day, or mix them together.”
More broadly in fragrance, Kimbell told WWD that Ari by Ariana Grande and Dior Sauvage have done well in terms of sales. Coming up, he expressed excitement about the launch of Sarah Jessica Parker’s latest fragrance, Stash SJP.
“We are excited about [Stash SJP] and we think it will be big,” he said. The new scent comes with an elixir that gives the customer the ability to “really tailor the scent,” Kimbell said.
Kimbell spoke with WWD after Ulta reported sales and income increases for its second fiscal quarter ended June 30. Sales growth came from more transactions and a larger average ticket size, the company said.
Net income for the quarter rose 21.3 percent to $90 million, compared to $74.2 million for the prior-year period. Income per diluted share increased 24.3 percent to $1.43 year-over-year, compared to $1.15, and beating analyst consensus of $1.40.
Sales for the quarter ended June 30 increased 21.9 percent to $1.07 billion from $877 million in the prior year period.
Comparable sales, including e-commerce, increased 14.4 percent, versus 10.1 percent year-over-year. That growth was driven by 9.7 percent increase in transactions and a 4.7 percent gain in average ticket. Retail comparable sales increased 12.6 percent, including salon comparable sales gains of 8 percent. Salon sales grew 14.3 percent, to $59 million from $51.6 million in the prior-year period.
E-commerce sales increased 54.9 percent to $55.9 million from $36.1 million in the second quarter of fiscal 2015, accounting for 180 basis points of Ulta’s total company comparable sales increase of 14.4 percent.
For the six months ended June 30, Ulta’s net income increased 29 percent, to $182 million from $141.1 million. The retailer’s net sales also posted gains, growing 22.8 percent to $2.14 million from $1.75 billion in the prior-year period.
Ulta opened 24 stores in the quarter, ending with 907 outposts. The company is on track to increase net stores by 100 by the end of the fiscal year.
The company’s loyalty program grew 27 percent year-over-year to 20.6 million members. “It’s a big driver for us, it’s one where we’re working with our brand partners to deliver more customized and personalized experiences to our guests through samples and early access to offers or new items [and] communication that compels our guests to explore new things,” Kimbell said.
Ulta raised its previously announced fiscal 2016 guidance, saying it now expects to achieve comparable sales growth of 11 to 13 percent compared to previous guidance of 10 to 12 percent. The business anticipates EPS in the low to mid-20s percentage range, compared to previous guidance of EPS in the low 20s.
Ulta is planning to provide updates on growth strategies, category consumer trends, the loyalty program and how it is using data in relation to its rewards members, the pipeline of new brands and insight on product and services offering at its investor conference in Chicago on Oct. 13, Dillon said.