We look at the leading US beauty retailer’s performance in 2020, highlight its strategy to win in 2021 and its leadership changes.
2020 was a challenging year for Ulta Beauty
- Total sales declined by 16.8% to US$6.2 bn (2019: US$7.4 bn) for the year ending 30 January 2021 due to the impact of COVID-19
- Comparable sales decreased by 17.9%, versus an increase of 5% in 2019
- By the end of fiscal 2020, it operated a total of 1,264 stores
- Ecommerce sales grew by 70% in Q4 2020 with buy online, pickup at store and curbside initiatives making up 15% of the ecommerce sales
Plan to strengthen the business in 2021
- To achieve net revenues of between US$7.2 bn and US$7.3 bn
- To drive comparable sales growth of about 15% to 17%
- To open around 40 new stores, remodel 11 and relocate 10 more
Mary Dillion, Ulta’s chief executive commented on the business’s plans,
“We are encouraged by the momentum we are seeing in store traffic trends. Although our visibility as to when demand will fully recover is limited, we are confident our business will continue to strengthen in fiscal 2021, as COVID-19 vaccines become more accessible.”
Focusing on five key trends moving forward
- Strengthening its omnichannel presence: while it was noted that omnichannel initiatives are not new to the business, Ulta Beauty is looking to invest further resources to win in an ‘increasingly competitive omnichannel world’. It is committed to being wherever shoppers are making their purchases, whether it is in physical stores or online. In line with this strategy it recently announced plans to partner with Target to launch Ulta Beauty at Target in more than 100 Target locations across the US. The strategic partnership will help boost Ulta’s current store footprint and enable it welcome new customers to the brand.
- The balance between safety and experiential beauty: as safety concerns remain relevant, Ulta recognises that human connection and a hands-on experience play a major factor in beauty sales. In response to this, it is looking to ‘safely reintroduce testers’ in selected stores in 2021 by working with brands to come up with innovative sampling programmes. It will also invest in training its associates to offer an elevated customer experience and focus on key categories, such as skincare.
- Winning in key categories: backed by the rise in the trend towards self-care that has boosted skincare and hair categories, Ulta Beauty reported a growing customer interest in new skincare brands like The Ordinary, as well as established brands like CeraVe and First Aid Beauty, in 2020. In 2021, it will further strengthen its assortment in key categories and introduce a new wellness shop that will focus on self-care of the mind, body, and spirit. It is aiming to double the number of Black-owned brands and it will invest to raise awareness and champion those brands.
- Focus on storytelling to drive engagement: Ulta Beauty saw success in the power of storytelling to drive customer engagement. Adopting a content-forward approach in its ‘Love Your Skin’ and ‘Jumbo Love Event’ in 2020 helped deliver significant improvements to its margin. Its focus in future will be around creating culturally relevant content and building on its latest platform that seeks to celebrate and amplify the voices from the Black community.
- The launch of conscious beauty: in October 2020, Ulta Beauty launched ‘Conscious Beauty’ across all stores and online. It certified more than 230 brands across four areas: clean ingredients, cruelty-free, vegan, and sustainable packaging. It plans to raise the visibility of the platform as more customers look to understand the environmental and social impact brands have.
Change in leadership: Dillion to step down as CEO
Separately, Ulta announced Mary Dillion will step down after serving for eight years as CEO and transition to her new position of executive chair of the board. Dave Kimbell, president of the company, will succeed Dillion as its new CEO, effective from June 2021. In addition, Kecia Steelman who currently serves as chief store operator will become chief operating officer.
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