Ulta Beauty sees brand tie-ups as makeup sales boost after Covid slump

Within an Ulta store spot in New York.

Scott Mlyn | CNBC

Ulta Attractiveness is banking on new manufacturer partnerships to strengthen lagging makeup sales.

Cosmetics accounted for 43% of Ulta’s whole revenue in fiscal year 2021, the most important phase share by far, but they dipped from the 12 months-previously time period. The company stated through its fourth-quarter earnings report that models like Olaplex, Fenty and Supergoop should really assist force efficiency in its flagship phase.

Net profits rose 40% year about year in the calendar year finished Jan. 30, to $8.6 billion, and rose 24% calendar year over yr in the course of the fiscal fourth quarter to $2.7 billion, matching Wall Street expectations for both equally periods, according to Refinitiv consensus estimates.

CEO Dave Kimbell said as income have recovered from a 2020 slump, the company’s makeup segment has verified far more risky and lagged at the rear of other classes. The make-up business felt higher fluctuations from Covid-connected alterations in purchasing and rising costs for people, he said.

“As we appear at the splendor class, even with these headwinds, we remain good. The category is balanced. It is growing. It is really emotionally vital and connected to our individuals,” Kimbell stated.

In August, the firm opened its initially mini-shop locations through a partnership with Goal. Ulta has opened a lot more than 100 retailers within of Goal shops to date, and hopes to add one more 250 locations this year.

Executives mentioned the partnership has assisted spark advancement in Ulta’s loyalty software, Ultamate Benefits, which extra 4 million users in the course of the fiscal year for a complete of 37 million.

The firm’s increasing benefits base lays a “basis for ongoing momentum as 2022 reopens,” in accordance to Barclays Capital analyst Adrienne Yih.

“The mix of growing brand awareness, the Goal partnership, and new model additions these as Olaplex, N1 de Chanel and Fenty, are driving new shopper acquisition,” Yih said in a exploration take note.

Ulta also has released a range initiative to help beauty manufacturers by and for buyers who detect as Black, indigenous and persons of shade. Fenty, established by pop star and entrepreneur Rihanna, is a single of many Black-owned brand names that the retailer has released in recent months.

“We are not below just to get these brands on the shelf. It can be a single factor to arrive on our shelves — it is really an additional detail to prosper. And which is how we are measuring accomplishment,” Kimbell reported on the company’s earnings connect with.

“We are undertaking this to travel engagement with our company and we are looking at it for our brand names. So we’re optimistic about elegance — about makeup, and BIPOC will be 1 of the components that will help us drive progress likely forward.”

Searching forward to fiscal 2022, Ulta expects earnings for each share of concerning $18.20 and $18.70 on profits of amongst $9.05 billion and $9.15 billion. Analysts had forecast 2022 earnings for each share of $17.84 and revenue of $9.14 billion, in accordance to Refinitiv.

Shares of Ulta fell nearly 3% Friday adhering to the earnings release and are up approximately 6% more than the previous 12 months.

Correction: Shares of Ulta fell almost 3% Friday. An previously variation misstated the inventory shift.