It doesn’t seem that Ulta Beauty will be saving the mall.
When Goldman Sachs analyst Matthew Fassler asked the business’ executives Wednesday about being “cited as one of the great hopes for the mall community,” Ulta chief financial officer Scott Settersten acknowledged the store is seen as a “mini anchor” and said that while roughly 10 percent of the retailer’s fleet is next to or in a mall, it “avoids being in the interior corridor.”
“We like to be on the outside of the mall,” Settersten said. “Typically, you see these malls redeveloped, and they’ll put some larger boxes…on the outside of the mall, adjacent to that, to try to bring some of the power back to it. So that’s where we like to be, where we’re visible.”
And while Ulta has taken over some real estate abandoned by shuttered Border’s bookstores, for example, the retailer is not necessarily looking to execute that strategy broadly. “Sports Authority going out, for example, is not some huge opportunity for us,” Settersten said.
Settersten and Ulta chief executive officer Mary Dillon gave updates on the company at the Goldman Sachs Global Retailing Conference, shedding light on the retailer’s strategy as it brings in new products as well as its core customer.
Ulta just started stocking the Estée Lauder brand, but Dillon clarified the introduction does not indicate a shift away from mass-market beauty products.
“We’ve already launched it online and it’s off to a very strong start,” Dillon said of the Lauder brand. “We’re going to launch it in about 30 stores to start and then expand it over time..
“Very core to who we are is going to always be this mix of brands at various price points,” Dillon said. “We certainly have added prestige brands over the last few years, but we’ve also done a lot in mass, and mass is doing incredibly well for us. I mean Nyx is a great example of a mass brand, [or] our own Ulta Beauty collection.”
That private-label line is something Ulta is focusing on improving, Dillon indicated. It’s grown in the past few years, from around 3 or 4 percent or sales to about 6 percent of sales, the executives said. “Six percent of our sales are what we’d call private label-ish,” she said, talking about both the Ulta-branded beauty products and exclusive collaborations with brands such as brushes with IT Cosmetics.
“Ulta Beauty collection is under renovation,” Dillon said. “I would say it’s really getting stronger every day…we have a great opportunity for this private label to be bigger and better. Everybody loves margins. But also, it’s important that we use it to represent our brand in the best positive way.
“We’ve improved everything from the packaging, graphics, to the quality…the speed of trend and innovation that we launch into the line…we’re now evolving to something on the wall that just has beautiful graphics and great elevated perception of the brand,” she said.
Ulta’s customer doesn’t fit into an age demographic, Dillon said, but it does attract what she calls “beauty enthusiasts.” “We look at the beauty market as the large segment that we call the beauty enthusiast, sub-segment we call the beauty enthusiast on a budget,” Dillon said. “They love a mix of high and low price points. They’re very engaged. And they love to shop in person in a way and online. And that segment is about 50 percent of sales of beauty.
“As we’re studying Millennials and Hispanic women — Hispanics have been the fastest-growing segment of population in the U.S. — the beauty enthusiasts skew very heavily in those segments as well,” Dillon said.