Ulta Beauty Ecommerce Sales Up 38% in Q2

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Ulta Beauty saw a 37.9% increase in ecommerce sales in the second quarter, representing 9% of revenue. Total sales grew 15.4%, with comps up 6.5%, on top of 11.7% growth in the year-ago quarter.

“This moderation relative to the first quarter was expected as we’re comping over 72% growth last year when we benefited from the MAC launch and high-growth from several online-only brands,” said Ulta Beauty CEO Mary Dillon in an earnings call.

Ulta.com contributed 2.5% of the total company comp, driven by transaction growth. Online traffic rose nearly 40%, with mobile traffic up 50%.

“We continue to drive significant growth with online-only brands and online-only promotions,” said Dillon.

Ulta Beauty’s store-to-door program, which allows guests to order online in its stores and have products shipped to their homes, continues to exceed expectations, particularly with brands that aren’t available in every store.

“Ulta.com recently launched foundation finder,” said Dillon. “We’re continuing to see success from enhanced content programs like our monthly fragrance crush as we just launched a new program focusing on key skincare trend each month called Skinfatuation.”

Omnichannel customers now represent 10% of Ulta’s loyalty members and the shopping behavior of these customers continues to reinforce the view that ecommerce sales are largely incremental.

“The guest shopping on Ulta.com continues to shop more frequently in stores than retail-only customers,” said Dillon. “This guest is our most engaged loyalty member, demonstrating interest in new brand and products and a low incidence of replenishing exact items.”

Ulta Beauty grew its rewards loyalty program to 29.5 million active members at the end of the quarter, representing a 15.5% year-over-year increase.

“As we’ve seen over the past few quarters, we expect the absolute growth in members to continue to moderate but still exceed square footage growth,” said Dillon.

Dillon said Ulta Beauty expects to increase average sales per member to complement member growth. She said it will come from multiple sources including the maturation of loyalty members buying more over time; the addition of new brands; benefits of its platinum and diamond tiers to increase share of wallet; higher penetration of its credit card program; and greater personalization of its communications and offers to customers.

“This combination is expected to drive continued healthy revenue growth,” said Dillon. “Our guests continue to respond to the powerful combination of loyalty, credit card and gift card programs.”

Dillon said sales from gift cards grew more than 40% in the quarter, driven by expanding distribution in other retailers this year, as well as strong growth in its stores.

Ulta Beauty continues to grow awareness through digital partnerships utilizing influencers, social media and high-impact placement in various news and fashion media outlets.

In the quarter Ulta opened 19 new stores, compared to 20 last year, and closed two, ending the quarter with 1,124 retail locations.

“Our growth and development team has done a great job getting stores opened earlier in the year with 53 stores opened in the first half compared to 38 last year,” said Dillon.

Ulta Beauty opened its first store in Hawaii on Maui in the second quarter with plans to open another there plus two more on Oahu during the third quarter. There are also plans to enter Vermont later this year, giving it stores in all 50 states.

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