Inside the location of the Ulta Store in New York.
Scott Millian | CNBC
Ulta Beauty is relying on new brand partnerships to boost lagging makeup sales.
Cosmetics accounted for 43% of Ulta’s total sales in fiscal 2021, the largest share in the sector to date, but it was down from the same period a year earlier. The company said during its fourth-quarter earnings report that brands like Olaplex, Fenty and Supergoop should help drive performance in its core segment.
Net sales were up 40% year over year in the year ended Jan. 30, to $8.6 billion, and rose 24% year-over-year during the fourth fiscal quarter to $2.7 billion, in line with Wall Street expectations for the two periods, according to Refinitiv estimates.
CEO Dave Kimble said that as sales recover from the 2020 slump, the company’s cosmetics segment has proven to be more volatile and lagging behind other categories. He said the beauty business has felt greater volatility from Covid-related changes in shopping and higher prices for consumers.
“When we look at the beauty category, even with these headwinds, we stay positive. The category is healthy. It’s growing. It’s emotionally significant and connected to our consumers,” Kimble said.
In August, the company opened its first convenience store through a partnership with Target. Ulta has opened more than 100 stores within its Target stores so far, and hopes to add another 250 this year.
Executives said the partnership helped spark growth in Ulta’s loyalty program, Ultamate Rewards, which added 4 million members during the fiscal year for a total of 37 million.
The company’s growing bonus base “lays a foundation for continued momentum as we reopen in 2022,” according to Barclays Capital analyst Adrienne Yih.
“The combination of increased brand awareness, targeted partnership, and additions of new brands such as Olaplex, N1 de Chanel and Fenty, leads to new customer acquisition,” Yeh said in a research note.
Ulta has also launched a diversified initiative to support beauty brands by and for Black, Native and People of Color consumers. Fenty, founded by pop star and entrepreneur Rihanna, is one of the many black-owned brands the retailer has introduced in recent months.
“We’re not just here to put these brands on the shelf,” Kimbell said on the company’s earnings call. “It’s one thing to hit our shelves — it’s another to thrive in. And that’s how we measure success.”
“We are doing this to drive engagement with our guests and we see that for our brands. So we are optimistic about beauty – about makeup, and BIPOC will be one of the elements that will help us drive growth in the future.”
Looking at fiscal year 2022, Ulta expects earnings per share of $18.20 to $18.70 on revenue of $9.05 billion to $9.15 billion. Analysts expected earnings per share for 2022 of $17.84 and revenue of $9.14 billion, according to Refinitiv.
Ulta shares fell about 3% Friday after the earnings announcement, it is up about 6% over the past 12 months.
Correction: Ulta shares fell nearly 3% on Friday. A previous version made a mistake in the movement of shares.