Ulta Beauty posted sales and income gains for its third quarter, boosted by sales of key makeup brands, including Benefit, Clinique, MAC and Lancôme.
Ulta chief executive officer Mary Dillon said the retailer had “particular strength in prestige beauty” during its third fiscal quarter, and was growing share in prestige makeup, skin care and fragrance. Citing the NPD Group — Dillon said Ulta grew its prestige segment by 28 percent, while other retailers NPD tracks grew in the single digits.
Dillon also acknowledged “a bit of a lull in innovation across color cosmetics” and called out Clinique, Lancôme, MAC and Benefit as key brands for the retailer — making up almost a third of total comp growth — during the quarter.
MAC is the number-one brand in 80 percent of the stores it has gone into, according to Dillon. The Estée Lauder Cos. Inc.-owned brand is set to be in 120 Ulta doors by the end of the year. “We’re helping to recruit a new customer to the brand — 50 percent are new to MAC or lapsed MAC users who hadn’t purchased the brand in over a year,” Dillon said. MAC had slowed down in the U.S. market, in part because of placement in mid-tier department stores.
While some brands are standing out, Ulta executives acknowledged that prestige makeup has slowed.
“Color cosmetics, both mass and prestige, [was] strong during Black Friday weekend, which we believe bodes well for this category during the holiday season,” Dillon said. “Guests are just as engaged as ever in makeup….It’s about innovation.”
“Holiday is always a very promotional period,” said Ulta chief merchandising and marketing officer Dave Kimbell. “We don’t expect that to change this year. We’re only about a week into the heaviest part of the holiday period, so it’s hard to say exactly how it will shake out.…So far we’ve only see perhaps modest changes to promotional strategy or intensity, and we’ll be watching carefully.”
In skin care, Dillon called out Yes Too, Skinfood, Memebox, Mario Badescu and Juice Beauty as brands that are doing well, and noted the hair category was bolstered by the rollout of Bumble and bumble to more than 500 doors, and new brands such as Drybar. In the fragrance category, Chanel Gabrielle, Gucci Bloom and Carolina Herrera Good Girl did well, Dillon said.
Ulta is also planning a reset of its mass department, which will include new brands, according to Kimbell. “While we’re not announcing all the specifics yet, we see that as a growth driver of our business and an important element of our business,” Kimbell said.
For the third quarter, the beauty specialty chain posted $104.6 million in net income, a 19.5 percent increase from the prior-year period. Ulta posted an 19.6 percent uptick in net sales, with $1.34 billion for the third quarter. The business estimated that Hurricanes Harvey and Irma resulted in about $14 million in lost sales. E-commerce sales were up 62.9 percent to $119.8 million from the prior-year period. Salon sales were up 10.8 percent, to $66.9 million.
For the first nine months of the year, Ulta’s net income was $347.1 million, a 28.8 percent year-over-year increase. The business posted a 20.5 percent increase in net sales for the period, with $3.95 billion. E-commerce sales were up 68.2 percent, to $320.4 million, and salon sales were up 14.3 percent, to $203.7 million from the prior-year period.
Brands that are only sold online with Ulta — like LimeCrime, Little Barn Apothecary and Milani — contributed “accounted for a significant portion” of e-commerce sales, Dillon said.