Ulta Beauty (ULTA)
Can this beautiful growth story continue?
Ulta Beauty ULTA 0.00%↑ is the leading US beauty retailer. It is an excellent and boring business with over 1,300 stores in the US and hundreds of smaller stores embedded into Target stores. The company was founded in 1990 as Ulta Salon, Cosmetics & Fragrance Inc. and has since conquered the US. Retailers have had a tough time in 2023, but Ulta has rebounded nicely and is making new highs. Let’s review the business model.
Ulta has a pretty basic business model, which has gotten more complex in recent years, especially with the pandemic. Ulta is expanding from a simple retailer to an omnichannel business. Besides the company-owned stores (well, they lease them), they also cooperate with Target to feature smaller Ulta Beauty stores in hundreds of Targets with a smaller product offering. Digital channels are the third channel that drives sales. Besides an E-Commerce offering (with same-day delivery capabilities), customers can also order and pick up the ready items at the store or curbside. Omnichannel means that a customer shops in-store and online. According to Ulta, the spend per member is three times higher for omnichannel customers who shop four times as frequently. Ulta is also the only retailer offering a full range of products at all prices. Customers who shop within different categories have basket sizes that are up to 10 times higher than customers who only shop in one category. This is a differentiator in a very fragmented industry with around a dozen different sales channels like e-commerce, grocery stores, specialty beauty, department stores, and drugstores.
