Ulta Beauty Sales Grow 12.3% Although Theft Is A Serious Concern
Ulta Beauty CEO Dave Kimbell discussed the company’s first-quarter results, with sales up 12.3% compared to last year. Same-store sales were up 9.3% over the previous year. While many retailers have been pulling back and are concerned with a slowdown in consumer demand, Ulta Beauty
Loyalty programs in higher tiers are up 30%
Kimbell discussed how the membership loyalty program grew to 41 million members, 9% higher than the previous year for the same period. “Diamond and platinum membership increased 30% in the first quarter compared to last year.” Marketing awareness about the membership program online and in stores drove new acquisitions to Ultamate Rewards. Loyalty members spend higher per store visit and shop more frequently. There was a rise in members using more services, which positively impacted revenue.
Organized retail crime takes a bite out of profit
“The rise in violence and aggressive behavior during organized retail crime thefts is concerning,” said Kimbell. The company has experienced higher levels of theft and is challenged to address the issues collaboratively. Retailers in other sectors have similarly raised concerns about increased organized retail crime (ORC) — professional, large-scale theft conducted as a business with goods resold on the black market for financial gain.
The National Retail Federation (NRF) reported that the annual merchandise shortage (shrink) amounted to $94.5 billion, and nearly half of the shrink is attributed to ORC. The NRF showed that, on average, retailers experienced a 26.5% increase in ORC compared to last year. “ORC theft put a pretty meaningful drag on our financial performance and will remain a challenge the rest of the year,” said Scott M. Settersten, CFO
“Protecting our associates and keeping our employees safe is our main concern,” said Kimbell. The company plans to work with law enforcement, government agencies, and retail communities to help reduce the number of incidents and drive down theft across the company.
Retail workers can experience threats and acts of violence during a theft, an obvious safety concern of the highest magnitude for employees. The NRF noted that eight in ten retailers noted increased customer violence against workers in 2021. “Large-scale theft impacts our associates and our guests, and despite our investment, it is getting worse, not better,” shared Kimbell. The company has increased its employee training and education, plans to use locking fixtures for fragrance, and continues investing in staffing and security personnel. “ORC is a macro problem and needs a macro answer. I am personally involved in this issue,” said Kimbell.
Economic downturn is not a concern for Ulta Beauty
When discussing possible economic downturns, Kimbell discussed how beauty traditionally is not as impacted by a drop in the economy, as beauty is a very personal and almost indispensable consumer segment. Ulta Beauty can shift along with the consumer demand with various price points offered from mass to luxury. “We are very confident that we can navigate with whatever comes our way,” assured Kimbell.
New products continued to engage shoppers, and social media continued to drive traffic to specific brands within the store. New brands drove sales for the first quarter, and the expansion of the Mac beauty line into more stores positively impacted overall revenue. “As more and more consumers learn how beauty is essential to one’s overall wellness, we will continue to grow,” Kimbell said. Luxury brands expanded into 200 locations. “The stores continue to provide unique experiences, and combined with the addition of luxury products as a category, it will drive more customers to the stores,” said Kimbell. The company is very confident that the full-year revenue will show 4 to 5% growth over last year.