Thanks to its omnichannel efforts, cosmetics retailer Ulta Beauty Inc. grew its online sales 20-30% for the full fiscal year 2019 ended Feb. 1. The retailer did not reveal exact sales numbers for ecommerce.
“Our enhanced omnichannel capabilities, combined with our merchandise exclusives, cross-category marketing events and great execution by our store teams, enabled us to expand our market share and deliver a successful quarter,” said CEO Mary Dillon in the earnings report release.
Ulta completed the rollout of its buy online pick up in store services at all of its stores, Dillon said on an earnings call transcribed by Seeking Alpha. It opened up 86 new stores, remodeled 12 stores, relocated eight and refreshed 240 stores—all of which now have buy online pick up in store capabilities.
Comparable sales—sales for Ulta retail stores open at least 14 months and ecommerce sales—increased 4.0% in the fiscal fourth quarter ended Feb. 1, compared with an increase of 9.4% in the fourth quarter of fiscal 2018. A 1.8% transaction growth and 2.2% growth in average ticket, helped drive the 4.0% comparable sales increase, Ulta reported.
For full-year fiscal 2019, comparable sales increased 5.0% compared with an increase of 8.1% in fiscal 2018. The 5.0% comparable sales increase was driven by 3.3% transaction growth and 1.7% growth in average ticket, Ulta reported.
Ulta noted that its average ticket for buy online pick up in store orders is “somewhat” lower than regular ecommerce orders. The retailer believes this is happening because shoppers want to avoid shipping costs if their order does not meet the $50 free shipping threshold.
Because of launched its omnichannel services in 2019, “Ulta Beauty was well-positioned for shifting consumer preferences this holiday season and delivered strong double-digit growth in ecommerce sales,” Dillon said.
In addition to omnichannel efforts at its stores, Ulta “refreshed” its mobile app and launched Afterpay as a new payment option online, Dillon said. Afterpay is a service that allows shoppers to split their payment for an online purchase into four smaller payments.
The makeup retailer also made improvements at its Romeoville, Illinois, distribution center that allowed for better productivity, faster ecommerce order processing and more consistent on-time deliveries to its retail stores, Dillon said. But she did not reveal the specific improvements.
The coronavirus’ impact on Ulta
Ulta is not feeling a strong impact from the coronavirus (COVID-19)—yet. Although it did see some impact on its store traffic depending on the markets in which stores are located, its ecommerce business continues “to perform strongly,” Dillon said.
“We’ve been [working] to improve the overall experience for our guests, from the app to the platform to the offerings as well as investing in our supply chain capabilities, which has put us in a good place, as well as BOPIS,” she said on the call.
On Wednesday, Ulta sent an email to its customers regarding the coronavirus. It noted its increase in sanitization measures in its retail stores, but it is also encouraging shoppers to try on makeup using its virtual try-on feature GLAMlab via the Ulta mobile app. And on Thursday, it suspended all in-store makeup, skin, brow and hair services for the time being.
Although the retailer’s 2020 plans do not reflect the coronavirus’ potential impact, Ulta plans to open approximately 75 new stores, remodel or relocate 15 stores and complete about 42 store refreshes. It also hopes to increase its total sales by 7-8% and grow comparable sales 3-4% this year.
Ulta’s fiscal fourth quarter and full-year earnings
For the fiscal fourth quarter ending Feb. 1, Ulta reported:
- Net sales increased 8.5% to $2.305 billion compared with $2.124 billion in the fourth quarter of fiscal 2018.
- Operating income increased 2.3% to $287.8 million, or 12.5% of net sales, compared with $281.2 million, or 13.2% of net sales, in the fourth quarter of fiscal 2018.
- Net income increased 3.7% to $222.7 million compared with $214.7 million in the fourth quarter of fiscal 2018.
- Gross profit as a percentage of net sales increased to 35.0% compared with 34.9% in the fourth quarter of fiscal 2018. This increase is because of improvement in merchandise margins driven by marketing and merchandising strategies, partially offset by investments in salon services, Ulta reported.
For the full fiscal year 2019 ending Feb. 1, Ulta reported:
- Net sales increased 10.1% to $7.398 billion compared with $6.716 billion in fiscal 2018.
- Operating income increased 5.5% to $901.1 million, or 12.1% of net sales, compared with $854.1 million, or 12.7% of net sales, in fiscal 2018.
- Net income increased 7.2% to $705.9 million compared with $658.6 million in fiscal 2018.
- Gross profit as a percentage of net sales increased to 36.2% compared with 35.9% in fiscal 2018. This increase is because of improvement in merchandise margins driven by marketing and merchandising strategies and leverage of fixed store costs, partially offset by investments in salon services, Ulta reported.
Ulta is No. 91 in the 2019 Digital Commerce 360 Top 1000.
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