Wall Street is clearly embracing Ulta Beauty.

This story first appeared in the August 5, 2015 issue of WWD. Subscribe Today.

The beauty retailer — with a market capitalization of around $10.62 billion — is currently trading in the $165-a-share range on the Nasdaq, or about a 488 percent jump from its close of $28.89 on Oct. 25, 2007, the day it completed its initial public offering. The shares are in range of a 52-week high, compared with its 52-week low of around $91. While the shares once traded as low as $4.11 on March 6, 2009, during the last economic downturn, Wall Street analysts believe the long-term outlook remains bright.

For the first quarter ended May 3, the company posted a 34 percent jump in net income to $66.9 million, or $1.04 cents a diluted share, on a net sales increase of 21.6 percent to $868.1 million. Comparable sales, which include e-commerce revenue, gained 11.4 percent on top of the 8.7 percent increase a year ago. Comp sales were driven by 7.2 percent growth in transactions and a 4.2 percent rise in the average ticket. Retail comparable-store sales rose 9.7 percent, which included salon comparable sales growth of 10 percent.

With those results, Ulta is one company that seems to be defying the odds at a time when many of its apparel and accessories counterparts are barely maintaining market share.

What’s so special about Ulta?

Think service, loyalty program and accessibility. That’s the word from Dana Telsey, founder and chief executive officer of Telsey Advisory Group. According to Telsey, “Ulta has strong growth prospects. There are not a lot of other [firms] outside of the department stores that do what Ulta does. They offer customers service, a loyalty program and a hair salon on the premises. Many of the stores are in strip centers, which makes them more accessible for many consumers.”

While Sephora is a competitor in the beauty retail space, in Telsey’s opinion, the two shouldn’t be compared with each other. That’s because Sephora has more higher-end products, and correspondingly higher price points, she explained.

Ulta’s ability to grow its customer base hasn’t gone unnoticed by developers of malls and shopping centers. CBL & Associates Properties Inc. said this month that Ulta will be a new anchor at Randolph Mall, a 400,000-square-foot site in Asheboro, N.C. It will be part of the mall’s anchor redevelopment project. Construction at the former J.C. Penney location will begin in October, with a store opening set for 2016.

Another area of growth is its e-commerce business, according to Telsey.

“There’s a ton of opportunity for them on the e-commerce side. Their loyalty program helps them with the conversion rate for their customer base in all the different channels of distribution. Their goal for e-commerce is to grow that business to 10 percent of sales,” she said.

E-commerce represents less than 5 percent of total sales. As for demographics, the company targets a wide base. It counts 15.5 million members in its loyalty program, with purchases through the program representing 80 percent of total sales.

While most of Ulta’s locations average 10,000 square feet in primarily strip centers, the company is testing a smaller footprint — 5,000 square feet — for sites in smaller markets. That is another possible area for growth, Telsey said.

Carrying more than 20,000 products and 500- plus brands, the company has a new distribution center in Greenwood, Ind., that it is testing so it can soon begin filling orders for e-commerce customers and fulfilling inventory for the stores during the third quarter. The capacity for the Greenwood center is expected at 400 stores and 45,000 e-commerce orders per day.

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