Ulta Beauty entered the holiday season on solid footing, and its plan to attract new customers seems to be working.
The Bolingbrook, Ill.-based retailer, which reported third-quarter results late on Thursday, said its net income gained 30.1 percent to $59.1 million, or 91 cents a diluted share, from $45.4 million, or 70 cents, in the year-ago period. Sales for the three months ended Nov. 1 gained 20.5 percent to $745.7 million from $618.8 million. Comparable sales increased 9.5 percent, driven by 5.4 percent growth in transactions and a 4.1 percent gain in average ticket size.
“Continued strength in prestige and mass color cosmetics, the successful introduction of new products and brands, double-digit comps in our salon business, a more effective and well-executed marketing strategy and rapid growth in e-commerce all contributed to our performance,” Ulta chief executive officer Mary Dillon told analysts during the company’s earnings call on Thursday evening.
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Ulta’s e-commerce business continued to expand at a rapid clip, gaining 46.7 percent in the quarter as the retailer moved toward more targeted offers. Dillon said e-commerce sales are on track to account for about 5 percent of Ulta’s total sales by year-end. Ulta expects its online sales to account for 10 percent of the business over the next five years. She said Ulta has enhanced the online experience with “shoppable videos” that allow consumers to click and buy products featured in the online segments.
The retailer also expanded its loyalty program by 16.1 percent to end the quarter with 14.5 million active participants.
The beauty retailer has continued to add more brands to the offering, including Algenist and Becca Cosmetics. “We’re really thrilled with the brands we’ve been adding to the mix,” said Dillon, who added that Ulta has created a custom fixture for an exclusive makeup-brush assortment from IT Cosmetics. “We think we are a great place to grow,” said Dillon.
Ulta is also sharpening its service component by allowing salon patrons to book appointments online and by expanding Benefit Cosmetics Brow Bars to a total of 600 doors.
Its store base continues to expand. During the quarter, Ulta added 50 stores to end the three-month period with 765 units, which translated to a 15 percent increase in square footage compared to the year-ago quarter.
For the first nine months, Ulta’s net income gained 28.5 percent to $169.9 million, or $2.63 a diluted share, from $132.2 million, or $2.05 a share. Sales for the period increased 21.7 percent to $2.19 billion from $1.8 billion. Comparable sales gained 9.3 percent.
The company raised its previously announced targets for the year. It now plans to achieve comparable-store growth of approximately 8 to 9 percent, including its e-commerce business; increase total sales in the 20 percent range and expand square footage by 15 percent.