Strong Customer Demand Leads Ulta Beauty To A 21% Sales Increase

Ulta Beauty released its first quarter (Q1) earnings for the fiscal 2022 year with sales up 21% to $2.3 billion compared to the same quarter last year. Fiscal 2022 is starting off well for the beauty retailer with sales doubling from 2020, reaching 2.3 billion for Q1. Net profits soared 44% over Q1 2021 to $331 million. “The Ulta Beauty team delivered exceptional first-quarter results, with better-than-expected sales and earnings growth, supported by double-digit comparable sales growth across all major categories,” said Dave Kimbell, CEO of Ulta Beauty. “Solid execution of our strategies, paired with strong guest demand, fueled our financial performance and continued market share gains as we delighted our guests with exciting brand launches within our one-of-a-kind assortment and differentiated guest experiences.”

Consumer behavior remains strong

Kimbell discussed that despite tight labor markets, supply chain challenges, and operating cost pressures, the results showed strong continued consumer demand as more people are getting out and shopping in physical stores and traveling. “With the strong consumer demand and strong execution of the Ulta Beauty team, we were able to deliver excellent results for the first quarter.” More people are going back to work and attending more social events so there has been an increase in the make-up category, while at the same time beauty enthusiasts are continuing their strong skincare wellness routines. New trends in make-up favor glam and glitter, while the natural look from the pandemic remains relevant.

While the inflationary environment is being watched closely, the company has not seen a huge impact on shopping behavior or any type of trade-down behavior. Prestige beauty outperformed mass beauty and helped deliver stronger margins for the company. New brand expansions such as Mac being expanding into 233 stores and Chanel Beauty being introduced into 104 stores helped drive the category. Prestige brands such as Fenty Beauty, Olaplex and REM Beauty By Ariana Grande helped with driving gross margin as consumer demand was strong.

Gross margin higher than last year

The gross margin was 40.1% compared to last year at 38.9% which contributed to net income reaching $331 million. Increased make-up demand along with continued skincare purchases from beauty enthusiasts and high customer engagement contributed to stronger margins. Suncare was another category that performed well including the expansion of Black Girl Sunscreen into all stores. Ulta Beauty continues its effort to provide assortments that appeal to BIPOC customers by adding BIPOC-owned brands such as Beautystat, Fenty Beauty and Mielle Organics to the product assortment.

New sources of revenue

UB media was launched by Ulta Beauty as a retail media network that offers brand partners advertising and insights on consumer behavior taking advantage of the robust first-party data of its over 37 million loyalty members. Kimbell said, “UB Media helps our vendor partners to build relevant brand campaigns and creates an added revenue stream for Ulta Beauty.” Retail media networks are owned by retailers who sell advertising opportunities along with providing customer insights from their first-party data to brand partners which drive promotional efforts for both companies.

Full-year 2021 and outlook for 2022

Ulta Beauty released its full-year financial results in March showing a net sales increase of 40% for the fiscal year 2021. Net profit was $985.8 million compared to last full year at $175.8 million, up 461%.

The outlook for the full year 2022 was updated to include comparable sales increases of 6-8% (previously was 3-4%) reaching over $9.4 billion. At the end of the first quarter of fiscal 2022, Ulta Beauty operated 1,318 stores with over 25,000 products from more than 600 beauty brands across all price points. The company has 37.7 million Ultamate Rewards members who comprise 95% of the total sales which is 17% higher than Q1 last year.