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Dive Brief:
- On the back of another strong year, where sales grew 9.8% to $11.2 billion, Ulta Beauty on Thursday announced it would expand into Mexico in 2025. The international move will take place through a joint venture with global brand operator Axo.
- “The Mexican beauty market is sizable, growing and has significant beauty opportunity,” CEO Dave Kimbell said on a call with analysts. “Our research suggests there is a healthy awareness of the Ulta Beauty brand with local beauty enthusiasts and we also see strong engagement in stores located in geographically adjacent markets.”
- For the year, Ulta saw comps rise 5.7% and net income grow 3.9%, reaching $1.3 billion. The beauty retailer had a strong holiday quarter as well, with Q4 sales up 10.2% and comps growing 2.5%, according to a company press release.
Dive Insight:
With continued strong sales growth, Ulta has set its sights on international expansion. While Kimbell did not give many details on the move, he noted that the partnership with Axo is an “asset-light” approach to growing the business that allows Ulta to “move quickly” on the initiative.
This isn’t the first time Ulta has considered international expansion. In 2019, the beauty retailer announced it would expand into Canada only to back out of those plans in 2020 in order to “prioritize growth of its U.S. operations.” The abandonment came at the height of the pandemic, which disrupted store opening hours and forced many retailers to close their doors for months. Asked why the retailer chose Mexico this time instead of Canada, executives said there are a few appealing things about Mexico.
“After careful evaluation of many market opportunities, we really felt like the Mexican market is the next step for Ulta Beauty,” Chief Operating Officer Kecia Steelman said. “Our border stores are performing really, really well and I just think it’s the next natural step for us as we continue to expand internationally.”
In addition to looking overseas, Ulta is also investing in its U.S. store fleet. The retailer ended the year with 510 Ulta Beauty at Target shop-in-shops, launched luxury beauty and expanded its wellness offering to nearly all of its fleet, Kimbell said.
The retailer’s strong performance, both for the year and the holiday period, is partially thanks to a strong beauty market, GlobalData Managing Director Neil Saunders said in emailed comments. But the retailer also curated a strong assortment of products for the holiday season that catered to a variety of price points and helped stimulate impulse purchases, Saunders noted.
Growth next year might not be as easy: Kimbell said the beauty market is expected to moderate next year, as is Ulta’s growth. The retailer in 2024 is projecting sales up to $11.8 billion, a roughly 5.4% increase, and comps of 4% to 5%.
“There is no doubt that the days of heady increases in beauty are behind us,” Saunders said. “Consumer spending is under more pressure and there is a lot more competition thanks to the expansion of rivals like Sephora and Target, as well as a raft of DTC specialists. Against this backdrop, Ulta’s forecast suggests it will more than hold its own in the year ahead which, in our book is a good result.”
via https://www.aiupnow.com
Cara Salpini, Khareem Sudlow
