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Is It Sally Beauty’s and Ulta Beauty’s Turn to Get Amazoned?

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Sally and Ulta

Yesterday, there was a selling spree in beauty retailer companies’ stocks. Sally Beauty Holdings (SBH) fell almost 17% while Ulta Beauty (ULTA) saw a negative price action of 2.6%. Amazon (AMZN) has announced its entry into beauty products used by professionals like barbers, licensed stylists, and beauticians.

Time to get Amazoned

This is not the first time that we’ve seen markets turning bearish on stocks after Amazon announces its entry into their sector. Last year, something similar happened with pharmacy retailers when Amazon brought PillPack, an online pharmacy. Thus, it’s not without reason that markets dread Amazon’s entry into a sector. The wholesale closures and bankruptcies in the retail sector are a testimony to how Amazon has conquered markets. While companies like Walmart have been a tough competitor, others like Sears had to file for bankruptcies. Margins in the retail space were already wafer-thin, and the advent of e-commerce has made life even tougher for brick and mortar retailers.

Beauty products

Now, Amazon’s entry into professional beauty products suggests tough times for companies like Ulta Beauty and Sally Beauty. According to Reuters, quoting Jefferies, “We expect Amazon to quickly become an important enough channel for brands to carry their top offerings on the platform.” It also reported citing DA Davidson analysts that Sally Beauty is likely to be hit more from Amazon’s move as compared to Ulta Beauty.

Meanwhile, while Ulta Beauty and Sally Beauty Holdings fell sharply yesterday, Amazon closed only marginally higher. Notably, Berkshire Hathaway announced in May that it had taken a stake in Amazon. However, the position was taken by a different investment manager and not Warren Buffett. Last year, Buffett admitted to missing out on stocks like Amazon and Alphabet.

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