Ulta Beauty Has Strong Q4 Online, Responds to Coronavirus Threat

An Ulta Beauty store in New York (photo credit: Shutterstock)

Ulta Beauty saw ecommerce sales increase 20% to 30% during its fiscal Q4 2019 that ended Feb. 1, 2020, aided by a store pickup rollout chain-wide, while also taking steps in store to address the growing coronavirus threat.

Just this week, Ulta announced reduced hours of operation, the temporary closing of some stores and discontinuing hair services.

“With increased distribution center shipping capacity, buy online, pickup in store options available at every store and enhanced app and mobile platforms in place, including a new virtual waiting room to improve the guest experience on Black Friday, Ulta Beauty was well-positioned for shifting consumer preferences this holiday season and delivered strong double-digit growth in ecommerce sales,” CEO Mary Dillon told analysts on an earnings call.

Dillion said one boost to ecommerce was the transition of a distribution center in Romeoville, IL to a fast fulfillment center, while Ulta also improved the productivity of its full-service (retail and online) facilities. “This resulted in faster ecommerce order processing for our guests and more consistent on-time deliveries to our stores as well as better in-stocks during the holiday season,” she said.

On the coronavirus impact, Dillion said Ulta Beauty has seen less store traffic, varying by market. “On the flip side, our ecommerce business has continued to perform strongly,” she said. “And I’d say that’s true broadly really even including affected areas. So, we’re keeping a close eye on all of this. It’s really too early to tell how it’s going to play out, but so far that’s our assessment of the situation.”

Scott Settersten, CFO of Ulta Beauty, put things in perspective by noting that a comparison to Q4 2018 definitely made ecommerce look better, as store traffic was enhanced in Q4 that year by a “reverse channel shift” where customers flocked to stores to “see and experience high-profile launches from several digitally native brands.”

“This year, the rollout of buy online, pickup in store and enhancements made to our app were also contributors to the ecommerce channels outperformance,” Settersten said.

Dave Kimbell, president of Ulta Beauty, said management was “thrilled with the performance” of store teams in executing on the BOPIS strategy, which was rolled out in Q2 2019.

“We’re really excited about being able to offer this to our guests because they responded very favorably to it,” Kimbell said. “Our guests were interested across small markets, big markets and everything in between. Despite the success we had over the end of last year, it’s still relatively small part of our ecommerce business. And we’re trying to understand the incrementality of BOPIS.”

Kimbell added Ulta Beauty has seen a “nice attachment rate” for BOPIS from customers that buy additional items in store when picking up their online orders. “So overall we’re pleased, but it’s early,” he said. “And we’re looking forward to learning even more about ways to leverage this with our guests through 2020.”

For the quarter, Ulta Beauty reported $2.31 billion in revenue, $12.42 million over the Seeking Alpha analyst estimate, while EPS was $3.89, compared to the estimate figure of $3.73. For the full year, revenue was $7.39 billion, up 10.1% from $6.72 billion in 2018, and net income rose 7.2% to $705.9 million.