Ulta Salon, Cosmetics & Fragrance wants to be every woman's ultimate beauty stop. The company operates some 450 stores in 43 states. About a third of its locations are in Illinois, Texas, and California. Ulta stocks more than 20,000 prestige and mass-market products, including cosmetics, fragrances, skin and hair care products, salon styling tools, and accessories. Stores also offer hair salon services, as well as manicures, pedicures, massages, waxing, and other beauty treatments. In addition to its bricks-and-mortar presence, the company markets more than 11,000 products and more than 500 brand names through its e-commerce site. Ulta was founded in 1990 by Terry Hanson and Dick George.
Ulta's strategy is to benefit from a change in where women -- especially younger generations -- purchase their beauty products. As department store operators have consolidated and slumped in recent years, specialty stores (such as rival Sephora) have been looking to capture a bigger share of the market for prestige beauty products. To that end, Ulta is focused on expanding its range of higher-priced "prestige" products, such as Estée Lauder fragrances, Frédéric Fekkai hair care products, and Smashbox cosmetics. It is also working to drive more customers to its revenue-generating salon areas for hair, nail, and facial treatments. A cornerstone of the Ulta business is its work to build customer loyalty. The beauty retailer maintains an ULTAmate Rewards program (for purchase-based points) and a nationwide program that offers certificates for free beauty products.
Ulta's strategy seems to be paying off. In fiscal 2012, the beauty retailer logged impressive sales increases. Sales rose more than 22% in 2012 vs. 2011. It attributes the revenue boost to several successes, including an uptick in salon services (up about 14% vs. 2011), the opening of 60 new stores, and an 11% surge in comparable store sales primarily due to a 10% increase in store traffic. In tandem, Ulta's profits rose some 27% in 2012 vs. 2011, thanks to increased sales activity, promotional pricing, a shift to higher-margin products compared to those in 2011, and supply chain efficiencies with regard to automating product handling.
Since its IPO in 2007, which raised more than $150 million, Ulta has aggressively expanded its retail footprint, opening hundreds of stores. With a goal of growing its stores network to 1,000 locations, Ulta's expanding its distribution capacity. The company operates two distribution facilities -- located in Illinois and Arizona -- that support both its retail and e-commerce businesses. To keep pace with its expansion plans, Ulta's building a third 370,000-sq.-ft. distribution facility in Pennsylvania in 2012.
The retailer fills its stores with help from some 300 product vendors. Its top 10 vendors include the likes of Bare Escentuals, Farouk Systems, Procter & Gamble, Coty, and L'Oréal. The group represents about 53% of Ulta's total annual sales.
Investment firm Netherlands-based Doublemousse B.V. (led by director Charles Heilbronn) owns about 18% of the company's shares. – less