Some Thoughts on Ulta Beauty

Ulta Elegance Inc. (NASDAQ:ULTA) is a top specialty retailer in the United States. The company, which was founded in 1990, gives a mix of status and mass splendor items as a result of 1,257 stores, as nicely as on the internet as a result of its site and cell application (e-commerce accounted for twelve% of Ulta’s gross sales in 2019). The company also gives a comprehensive support salon in its stores, which meets a need for some customers and can travel business to the other facet of the household (advertising splendor items). As shown under, the device rely has virtually quadrupled about the earlier ten years – throughout a time period where by numerous brick-and-mortar vendors have been battening down the hatches as they confronted a transforming aggressive landscape, mainly at the fingers of e-commerce huge Amazon (NASDAQ:AMZN).

In addition to including around 900 new stores, Ulta has also described powerful identical-keep gross sales (comps): about the earlier 10 yrs, comps have enhanced by around 10% for each annum, with the worst efficiency about the time period at up five% in 2019. (Note that new stores, as they perform their way to a hundred% productiveness about the course of a number of yrs, have been a materials contributor to identical-keep gross sales expansion for Ulta.) The stop final result has been a around 65% maximize in gross sales for each common keep about the earlier ten years, from $ million for each device in 2009 to $6.1 million for each device in 2019. Collectively, these aspects have pushed a 6-fold maximize in profits about the earlier ten years.


Income expansion, combined with an advancement in gross margins and slight running leverage, has resulted in a 30% compounded once-a-year expansion price for running revenue about the earlier ten years. Diluted earnings for each share has followed suit, climbing from 70 cents for each share in 2009 to $twelve.two for each share in 2019 – a CAGR of 34% (with enable from a lessen helpful tax price and a increasing emphasis on repurchases, with the share rely down 10% about the earlier four yrs).

Ulta competes in a fragmented market that gives distribution as a result of numerous channels, which include specialty retail (like Ulta), drug stores, office stores and e-commerce. As famous in the once-a-year report, management estimates that it holds around 8% market share of the $89 billion splendor solution marketplace. Most notably, the company has doubled its share in cosmetics about the earlier 5 yrs (this is also its most significant category at fifty% of profits). Those people gains also arrived throughout a time period when status make-up led the category’s expansion by a extensive margin, benefiting Ulta. The mixture of these two aspects has been the most important driver of the company’s extraordinary profits expansion. (It is a scaled-down participant in categories like skincare and fragrances, with small one-digit share.)

As famous earlier, Ulta has significantly expanded its footprint about the earlier ten years. As a final result,