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How Ulta Beauty Intends to Boost Its Sales Growth

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Strong position

Ulta Beauty (ULTA) has rapidly established itself in the retail beauty space. The company sells over 20,000 beauty products across multiple categories of prestige and mass cosmetics, hair and skincare, perfumes, bath and body products, and salon styling products. It also offers salon services. In fiscal 2017, which ended on February 3, 2018, Ulta Beauty’s sales grew 21.2% to $5.9 billion. However, the fiscal 2017 sales growth rate was lower than the 23.7% growth rate in fiscal 2016.

Ulta Beauty plans to increase its sales by expanding its store network, boosting its e-commerce sales, focusing on its loyalty program, and enhancing its merchandise offerings in growth categories.

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A strong loyalty program

Ulta Beauty’s loyalty program has been a vital component of its sales growth and has helped in deepening customer relationships. Ulta Beauty’s loyalty program (called Ultamate Rewards program) experienced a 17% rise in its active members to 28.6 million as of the end of the fiscal first quarter[1. Fiscal Q1 2018 ended on May 5]. In January 2018, Ulta Beauty launched a new diamond tier under its loyalty program, which extends more compelling offers to top customers who spend over $1,200 annually. The company intends to further strengthen its loyalty program by making personalized offers to members.

Expanding product offerings

Ulta Beauty continues to enhance its product offerings to attract more customers. The company added brands like Estée Lauder, NARS, Chanel Beauté, Popsugar, ColourPop, Morphe, and MAC to its stores. Some of these brands are currently available in some stores and the company intends to extend their presence to more stores. Aside from established brands, Ulta Beauty is also expanding its merchandise with new brands like Flesh in prestige cosmetics.

Ulta Beauty is also taking several initiatives to improve its services business. In the fiscal first quarter conference call, the company disclosed that it has rolled out its new skincare service model called “Skin Bar at Ulta Beauty” in 22 stores. The latest model offers quicker services and skin diagnosis and personalized recommendations by licensed skin therapists to customers. Ulta Beauty plans to have 180 Skin Bars in new and remodeled stores in fiscal 2018.

Let us discuss analysts’ earnings expectations for Ulta Beauty in the next part of this series.

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