Behind Ulta’s Sales Boost Strategy in Fiscal 2017
Ulta Beauty (ULTA) impressed investors with strong sales growth of 23.7% in fiscal 2016 (ended January 28, 2017). The company’s extensive merchandise offerings, strong customer loyalty program, strong relationships with more than 350 vendors, and enhanced customer service have boosted its sales growth.
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Ulta plans to continue enhancing its beauty product offerings. In fiscal 2016, Ulta Beauty added 69 new brands and implemented over 500 prestige brand expansions. One key addition to Ulta’s product offerings in fiscal 2017 will be Estée Lauder’s (EL) MAC brand. The company plans to roll out the popular MAC brand to its stores this spring and aims to offer it in 100 stores by the end of fiscal 2017.
Ulta will also continue to attract more store traffic with enhanced services. For instance, Ulta Beauty plans to offer MAC makeup services at all the stores where the brand will be made available in fiscal 2017. Ulta has meanwhile strengthened its e-commerce business by ensuring speedy delivery through improved supply chain capabilities. It opened a new distribution center in Dallas in fiscal 2016 and expanded distribution capabilities at its Greenwood, Indiana, distribution center, which opened in 2015.
Store growth plans
Ulta Beauty was operating 974 stores at the end of fiscal 2016. The company plans to open 100 new stores in fiscal 2017. About 60% of the new stores will be opened in large- and medium-sized markets and 40% in small and single store markets.
In the company’s 4Q16 conference call, Ulta’s CFO (chief financial officer) disclosed that the company plans to open about five stores in urban locations like Manhattan, Michigan Avenue in Chicago and Santa Monaca California. The company also plans to complete the remodeling of 13 major stores in fiscal 2017.
By comparison, JCPenney ended fiscal 2016 with 577 Sephora stores within JCPenney locations. The company plans to open 70 new Sephora stores in fiscal 2017. Sephora is owned by the luxury group LVMH Moet Hennessy Louis Vuitton SE (LVMUY) (MC.PA).
Continue to the next and final part of this series for a close look at analysts’ recommendations for Ulta Beauty’s stock.