Ulta Beauty Plans Canada Launch, Its First International Move

Ulta Beauty is going international.
The Bolingbrook, Ill.-based business said Thursday it has plans to open its first non-U.S. locations, in Canada. “Our first step in becoming a global beauty retailer will be to prepare to launch operations in Canada,” said chief executive officer Mary Dillon in a statement.
“While we have years of attractive domestic growth ahead of us, we’ve been evaluating the potential for growth beyond U.S. borders for some time,” Dillon told Wall Street analysts on the company’s earnings call. “International expansion represents an attractive and incremental long-term growth platform, which extends our core capabilities and leverages our value proposition…we believe that the Ulta Beauty value proposition is very relevant and differentiated in multiple geographies around the globe.”
The company has plans to launch stores and e-commerce in Canada, and start small with the ability to scale quickly, but Dillon but did not provide details “for competitive reasons.”
The expansion news came at the same time as the company’s first-quarter earnings, which showed significant growth in every category except prestige makeup.
Brands like Clinique, Estée Lauder, Lancôme, Nars and MAC are growing with Ulta, Dillon said, but it wasn’t enough to “offset the continuing softness in several large, established prestige cosmetics brands.”
“Prestige cosmetics is still quite a bit softer than the rest of the portfolio with spring newness generally underperforming our expectations,” Dillon said, calling out launches of Urban Decay’s "Game of Thrones" collection, MAC’s Disney "Aladdin" collection and Tarte’s new mascara as “promising.”
“Many of them, including some of the biggest brands…are continuing to struggle. There’s a transformation in the makeup business right now. The category remains healthy but there’s a shift in consumer preference on brands,” said Dave Kimbell, Ulta’s president and chief merchandising and marketing officer. “As we look forward on our business, we’re not anticipating that some of the big brands that have been a drain turning around immediately, but we’re confident over time that these brands will regain their footing and get back to growth.”
Going forward, Ulta expects to expand Clinique, Lancôme, Benefit and MAC into more stores in various formats, most of which will be “presentations without dedicated payroll” for Ulta, Dillon said.
Kylie Cosmetics, which is exclusive to Ulta, continues to do well, and more products — including blushes, highlighters, bronzers and a birthday palette — are headed into Ulta stores. Morphe, Revolution Beauty, ColourPop and E.l.f. Cosmetics are also doing well in the store, Dillon said.
While prestige makeup struggled, other categories did well at Ulta. In fragrance, new scents from Ariana Grande and Versace led growth. In skin care, growth was driven by brands including Tula, and Ulta expects to expand Kiehl’s into more doors with more stockkeeping units. Hair-care sales were boosted by a “reflow that improved the assortment and shopping experience for color and texture,” Dillon said. Ulta is also launching wellness — the assortment is expected to be in 700 doors by the end of the year, with products from eight brands.
For the quarter, Ulta’s net sales increased 12.9 percent to $1.74 billion, up from $1.54 billion in the prior-year period. Net income was up 16.9 percent year-over-year, to $192.2 million, from $164.4 million. Diluted earnings per share were up 20.7 percent, to $3.26.
Ulta plans to open 80 stores in 2019. The company said it expects sales to increase in the low double-digits percentage range.
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