Ulta Beauty's Q2 net sales totaled $2,552.1 million, a 0.9% increase compared to $2,529.8 million in the same period of 2023, while six-month 2024 sales totaled $5,277.9 million, compared to $5,164.1 million in the same period of the prior year. Notably, Q2 comparable store sales were down 1.2%.
The retailer's prestige market share has declined, particularly in hair and makeup, while mass beauty market share has remained steady.
Based on these results, Ulta has downwardly revised its 2024 net sales forecast from $11.5-11.6 billion to $11.0-11.2 billion.
Beauty is Still Growing, but So is Competition
As previously reported, Ulta Beauty's sales challenges have less to do with beauty's slowdown than with factors specific to the retailer. For instance, the power of the Sephora x Kohl's partnership has brought the LVMH-owned retailer closer in proximity with many Ulta locations.
During an analyst call, Ulta CEO Dave Kimbell noted, "[C]ompetitive intensity in the beauty category remains high. As we have shared previously, the strength of the beauty category, combined with an attractive margin profile, has drawn substantial and diverse competition to the category. Today, there are significantly more places to buy beauty, especially prestige beauty, with more than 1,000 new points of distribution opened in the last three years."
Kimbell added, "[W]e often see a short-term impact of new distribution points on an existing nearby store, whether it's a competitor opening or a new Ulta Beauty store. What is unique about the current environment is the scale and pace of change. More than 80% of our stores have been impacted by one or more competitive opening in recent years, with more than half impacted by multiple competitive openings. This significant portion of our store fleet is experiencing a prolonged sales impact."
In addition, while beauty market growth has slowed, it has done so unevenly. Per Circana, U.S. prestige beauty sales rose 8% in the first half of 2024, totaling $15.3 billion, while mass beauty remained flat year-over-year, totaling $30.4 billion.
Ulta's engagement in both mass and prestige gives it some insulation when there are downturns in either pricing tier, but it's clear the retailer is feeling the challenges in mass at the moment.
"[W]hile the beauty category remains resilient, growth is normalizing after three years of unprecedented gains," said Kimbell. "Additionally, consumer behavior is starting to shift as consumers increasingly focus on value and become more cautious with their spending."
Decoding Ulta Beauty's Comparable Sales Decline
Per Ulta, ecommerce and stores open for at least 14 months combined experienced a 1.8% decrease in transactions and 0.6% drop in average ticket size in Q2 2024.
“While we are encouraged by many positive indicators across our business, our second quarter performance did not meet our expectations, driven primarily by a decline in comparable store sales," says CEO Dave Kimbell. "We are clear about the factors that adversely impacted our store performance, and we have actions underway to address the trends. We are focused on driving stronger sales and traffic and continuing to exercise financial discipline. In light of our first half trends and a more cautious outlook, we have updated our full year expectations. I remain confident in the power of our differentiated model, the strength of our financial foundation, and our ability to deliver value for our shareholders over the long term.”
Ulta Beauty's Foot Traffic Remains Strong
While Kimbell focuses on a need to drive store traffic, a recent Placer.ai report stresses that, overall, Ulta foot traffic is strong:
Between January and July 2024, Ulta consistently outperformed the wider beauty segment, with monthly YoY visit increases ranging between 2.8% and 11.2%. On a quarterly basis, visits to the chain jumped 6.6% YoY in Q2 2024. Though some of Ulta’s visit growth can be attributed to the chain’s growing store count, the average number of visits to each Ulta location also increased 4.6% YoY in Q2 2024.
Per Ulta, the retailer plans to open between 60 and 65 stores by the close of fiscal 2024.
At the same time, Ulta Beauty has amassed 43.9 million active Ulta Beauty Rewards members, 5% more than in the same period of 2023.
