Byline: Faye Brookman

NEW YORK — Ulta is bucking the industry trend.
While both department stores and mass retailers had a lackluster Yule — and a less than sensational start to 2001 — Ulta is posting high single-digit growth, according to Lyn Kirby, Ulta’s president. Kirby believes a new, upscale-store format is attracting more customers to Ulta, a store that sells mass and class products under the same roof as a full-service salon. The so-called Level Four store design divides the store into a prestige area, a mass area and a larger, full-service salon with professional products available for sale. Kirby said the newer stores pump out three times the volume of older units. “It reflects our repositioning away from a discount beauty shop,” Kirby said.
As proof of the retailer’s success, she cites statistics revealing Ulta attracted 960,000 new members to its exclusive membership club in the last year. That adds to a base of more than two million members who receive a special magazine and exclusive deals.
Christmas was especially strong for Ulta’s 84 stores. “It was strong right out of the gates at Thanksgiving,” said Kirby who praised fragrance volume. The number one-selling scent was Lauren’s Romance, followed by Chanel, Aqua di Gio Homme and Eternity. And Kirby believes Christmas could have been even merrier if drastic weather hadn’t hit three of its major trade areas — Chicago, Dallas and Atlanta — in the third week of December. Ulta creates its own gift-with-purchase promotions. This year, shoppers spending more than $30 were treated to a trio of candleholders.
In addition to fragrances, a new department in Ulta stores is scoring with customers. Last year, the company started carving out more space for spa and holistic merchandise, such as soothing water fountains and vitamins. Kirby said the fountains, which retail at $30 and up, were big hits at Christmas. “And personal care was very strong, such as paraffin treatments,” she added.
To date in 2001, Kirby is seeing tremendous demand for products linked to yoga. The mix includes yoga tapes and yoga equipment.
Vitamins have been a bit slower to build, but Kirby thinks that will pick up as more shoppers discover Ulta sells vitamins and supplements. “And we continue to improve our training and product knowledge,” Kirby said.
Like competitor Sephora, Ulta is building a strong business in private label cosmetics and its house brand of bath products. To introduce shoppers to the house brand, private label cosmetics get a prominent display at the entry to Ulta’s sleek new prototype.
Kirby said that in addition to Sephora, Ulta has new competitors such as Victoria’s Secret. “However, our locations are different — not in malls. And, we offer 18,000 stockkeeping units of mass and prestige items in our stores,” Kirby said.
The portfolio of prestige brands sold in Ulta continues to grow. Although there are some high-profile brands Kirby still is seeking, she said the company is testing a few new brands she hopes to roll out within the year. She would not elaborate on the names, but said they are “major.”
New last year was Pupa, which has become the second-largest prestige color brand behind Elizabeth Arden. Pupa has helped court a slightly younger — 16 and up — customer than Ulta has traditionally served. “We had trouble keeping Pupa in stock,” she said.
In professional hair, Ulta has also signed up Artec and Fudge. “We’d also like to add more small and hip brands,” commented Kirby. Salon services are still dominated by hair cutting, but Kirby believes aging baby boomers will flock to other services, such as facials, in the years to come.
Some Ulta stores also have areas for searching the Web, a service Kirby believes will grow in importance, as Ulta’s own e-commerce site comes on line this month.
Ulta has its sights set on growth with plans to add 19 stores in 2001 and another 30 in 2002, bringing the count to 103. The company intends to stick with its “no-mall” strategy, looking instead for power strip centers. Growth continues to be financed by the same group of financial investors that helped start Ulta’s expansion. “I think that says something about our potential,” Kirby said. She added that Ulta doesn’t necessarily cannibalize from department or mass stores. Instead, Ulta attracts customers who might also shop those locales on occasion. “We continue to market to a 30-year old, college-educated consumer earning $60,000 plus. We have a bull’s-eye target and we feel we are hitting it.”