Chanel Beauty is coming to Ulta.
The luxury beauty business is launching an edited assortment of its “most iconic items” in Ulta Beauty this month, Ulta executives said on the company’s earnings call Thursday. The lineup will include Chanel Rouge Coco lipstick, as well as blush, foundation and skin-care items in a small number of stores. Chanel’s first store opening will be in the Ulta Beauty in Westport, Conn., in a few weeks, according to Ulta chief executive officer Mary Dillon.
Ulta’s executive team spoke to Wall Street analysts after the company reported gains in sales and profits for its fiscal year.
The retailer’s sales for the fiscal year were up 21.2 percent, to $5.88 billion, which includes a 53rd week. Without that additional week, which represented $108.8 million in net sales, sales were up 19 percent for the year. Net income was up 35.5 percent to $555.2 million, from $409.8 million for the prior year. Earnings per diluted share were up 37.4 percent, to $8.96.
For the year, Ulta’s comparable sales gained 11 percent, driven by growth in transactions and average ticket size. Ulta’s salon business was up 15 percent, to $277.4 million. E-commerce sales gained 64.7 percent to $568.7 million for the year. Ulta ended the fiscal year with 1,074 stores.
The company’s rewards program grew 19 percent, to about 27.8 million members, Dillon noted.
While U.S. makeup in mass and prestige dipped for 2017, MAC, Clinique, Lancôme and Benefit Cosmetics “drove the best growth rates” in the portfolio, Dillon said, noting that in mass makeup Ulta “just completed a major mass cosmetics reflow” intended to differentiate the retailer’s offering. That included adding or increasing the rollouts of brands like E.l.f. Beauty, Makeup Revolution, Milani, Flower, Wet ‘N Wild, Color Pop and Morphe, she said.
The Ulta team also said they thought makeup would pick up again in 2018. “First and foremost, it is about strengthening the performance of our biggest brand partners, our established brands,” said Kimbell. In mass, he called out Ulta Beauty’s own makeup collection, as well as L’Oréal Paris and Maybelline as strong partners, and in prestige, he noted Tarte, Anastasia Beverly Hills, IT Cosmetics and Too Faced drove makeup growth.
“We’re confident about both mass and prestige,” Kimbell siad. “They both slowed down in 2017, but we’re seeing through some of the items I talked about, early strong signs within our portfolio, of growth. We’re confident…makeup trends will improve.”
On the salon side, Ulta has invested in stylist training and simplified salon menus. It has also designed the Skin Bar at Ulta Beauty, which will feature a full-time skin expert in charge of prestige retail sales and skin-service sales.
“The need to evolve any retail business — it’s out there for all of us,” said Dillon.
For Ulta’s fourth quarter, ended Feb. 3, Ulta posted $1.94 billion in net sales, up 22.6 percent from the prior-year period. Excluding the 53rd week, Ulta’s net sales were up 15.7 percent. Net income was up 48.5 percent year-over-year to $208.2 million for the quarter. Earnings per diluted share increased 51.8 percent to $3.40. Ulta opened 16 stores in the quarter.
Comparable sales were up 8.8 percent, driven by increases in transactions and average tickets for the fourth quarter. Salon sales were up 17.2 percent to $73.7 million for the quarter. E-commerce sales gained 60.4 percent, to $248.3 million.
For fiscal 2018, Ulta expects to increase total sales in the low-teens percentage range, grow comparable sales between 6 percent and 8 percent, including the impact of e-commerce, grow e-commerce sales in the 40 percent range, open 100 stores and remodel or relocate 17 others.
“Looking ahead to 2018, we are deploying a portion of the tax reform benefits to invest in our people and accelerate investments to drive growth and innovation,” said Mary Dillon, chief executive officer. “We also recognize operating margin headwinds from various cost pressures facing all retailers, our higher than expected mix of e-commerce, and the new revenue recognition accounting standard.”
She continued, “To help offset these pressures, we are implementing a cost optimization program to deliver benefits in the areas of indirect procurement, end-to-end operational efficiency, real estate costs and merchandise margin improvement. We plan to increase operating profit margin rate over the long term, but this measure is expected to decline modestly in 2018.”
Dillon also addressed a recent lawsuit that alleges Ulta repackaged and resold used cosmetics, saying, “We are vigorously defending against these lawsuits and taking actions to ensure our guests continue to have the highest confidence in the integrity and the quality of Ulta Beauty’s products and packaging. Let me be clear. We do not sell used damaged or expired products and have zero tolerance for any actions that would compromise the integrity of the products we sell.”