Ulta Beauty 2018 Analyst and Investor Day: Ultamate Rewards Loyalty Program Driving 95% of Revenue with 30 Million Members; Ulta Continues to ...
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November 20, 2018
Ulta Beauty 2018 Analyst and Investor Day: Ultamate Rewards
Loyalty Program Driving 95% of Revenue with 30 Million
Members; Ulta Continues to Diversify Beyond Mass Cosmetics
On November 8, Ulta Beauty hosted its annual Analyst and Investor Day in Itasca, Illinois.
The main themes of the day included customer loyalty, new brands, celebrity
collaborations, technology investments and the company’s mass-to-prestige assortment
model.
• More than 95% of Ulta’s sales go through the company’s Ultamate Rewards loyalty
program, which now has more than 30 million members. Membership in the
program grew by 64.8% from 2015 to 2018.
• Ulta has added more than 250 brands since 2016. The company is concentrating on
newness and on diversifying its product portfolio. Ulta’s focus is on exclusives (which
account for 9% of sales), independent brands and prestige brands.
• The company is partnering with celebrity Kim Kardashian West to sell four of her
fragrances in stores beginning November 25, and with her sister, Kylie Jenner, to sell
Jenner’s Lip Kit in stores beginning November 17. These collaborations will provide
customers the opportunity to try products that were previously available only
online. Both Kardashian West and Jenner have millions of social media followers.
• Ulta is investing in technology to build an innovation ecosystem, with the goal of
becoming the digital store of the future. The company is focusing on personalization
and connecting online and offline experiences in order to tailor its communications
and help consumers navigate the beauty space. Ulta invested in tech startup Spruce
to facilitate guest booking for its salon business and in digital workflow platform
Iterate. The company also acquired artificial intelligence (AI) startup QM Scientific
and AI and augmented reality (AR) startup GlamST.
On November 8, Ulta Beauty hosted its annual Analyst and Investor Day in Itasca, Illinois.
The day consisted of presentations from CEO and Director Mary Dillon, SVP of Brand
Marketing Shelley Haus, Chief Merchandising and Marketing Officer Dave Kimbell, SVP of
Merchandising for Prestige Beauty Tara Simon, CFO Scott Settersten, Chief Store
Operations Officer Kecia Steelman, SVP of Digital and E-Commerce Prama Bhatt and Chief
Supply Chain Officer Derek Hornsby.
The main themes of the day included customer loyalty, new products, celebrity
collaborations, technology investments and bringing newness to the product assortment
with a focus on exclusives, independent brands and prestige brands.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 1
Copyright © 2018 Coresight Research. All rights reserved.
November 20, 2018
The company announced that it will no longer provide quarterly guidance. Ulta will
provide specific annual guidance on its fourth-quarter earnings calls and update that as
needed throughout the year. Ulta also announced that it is retiring its “All Things Beauty,
All in One Place” slogan and replacing it with “The Possibilities Are Beautiful” as its new
brand expression.
Ulta’s Net Sales Grew by 120% from 2013 to 2017
As of November 8, Ulta operated 1,163 stores in 50 states as well as its Ulta.com online
store. Some 96% of Ulta stores are approximately 10,000 square feet in size. The company
is moderating its store opening plans, and now plans to open 80 stores in 2019, and 70–75
stores in each of the following two years, with a target of operating 1,399 stores in 2021.
The company’s previous estimate, as of August 30 this year, was to operate 1,400–1,700
stores in the US over the next few years. When asked about international expansion, CEO
and Director Mary Dillon said, “We’re studying; we don’t have anything to announce
today.”
Ulta grew revenues by 120% from 2013 to 2017, from $2.67 billion to $5.88 billion. The
company raised its fiscal year 2018 comp guidance from 6%–8% growth to 7%–8% growth
and reiterated its full-year EPS guidance of “low 20% growth.”
Slide from Ulta Beauty 2018 Analyst and Investor Day presentation
Source: Ulta Beauty
More than 95% of Ulta’s Sales Go Through the Ultamate Rewards Loyalty Program
Dave Kimbell, Chief Merchandising and Marketing Officer, said that membership in the
company’s Ultamate Rewards loyalty program has grown by 64.8% over the past three
years, from 18.2 million members in 2015 to 30 million members as of November 2018.
Kimbell said that more than 95% of the company’s sales go through the loyalty program,
which enables Ulta to track all of those items back to an individual, providing the company
with a deep understanding of purchasing behavior.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 2
Copyright © 2018 Coresight Research. All rights reserved.
November 20, 2018
Slide from Ulta Beauty 2018 Analyst and Investor Day presentation
Source: Ulta Beauty
Ultamate Rewards Loyalty Members Spend $200 Annually and Hold 30% Share of Wallet
Kimbell said that Ultamate Rewards loyalty program members spend an average of $200
per year at Ulta and account for 30% of all beauty spending at Ulta. They also represent
30% of all “beauty enthusiasts,” he said. Ulta’s loyalty program has three tiers, Member,
Platinum and Diamond. Its Platinum and Diamond members represent more than 40% of
beauty spending, while Regular members account for 30% of beauty spending.
Slide from Ulta Beauty 2018 Analyst and Investor Day presentation
Source: Ulta Beauty
Ulta Has Added 250+ Brands Since 2016 and Has Focused on Exclusives and Independent
Brands and on Introducing Customers to Prestige Brands
Ulta reported that it has added more than 250 brands since 2016, 100 of which are in
skincare. The company reported that it is seeing a blurring of the lines between mass
(drugstore brands) and prestige (premium) brands, with most Ulta guests shopping across
both brand segments. Tara Simon, SVP of Merchandising for Prestige Beauty, said that the
company’s customers are exhibiting “mass migration,” meaning they may start at Ulta
buying mass brand products and then, over time, begin buying prestige products, while
continuing to buy just as many, or more, mass brand items.
By introducing consumers to prestige brands, the company is gaining share of wallet.
Simon reported that Ulta currently holds 23% of the prestige beauty market, according to
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 3
Copyright © 2018 Coresight Research. All rights reserved.
November 20, 2018
The NPD Group, up from 15% in 2016, with the majority of the growth since 2016 coming
from cosmetics.
Slide from Ulta Beauty 2018 Analyst and Investor Day presentation
Source: Ulta Beauty
Simon said that over the past two years, Ulta has added more prestige brands and
increased penetration of its prestige portfolio, which includes Chanel, Clinique, Estée
Lauder, Kate Somerville, Kiehl’s, Lancôme, MAC, Mario Badescu, NARS and Peter Thomas
Roth.
The company is also focused on bringing independent brands in-store and is working with
digitally native brands. Ulta reported that it is seeing significant growth in brands that it
has introduced, including ColourPop, Dose of Colors, Juvia’s Place and Morphe. Simon said
that the company sees the expansion of all brands across its portfolio as an opportunity to
increase its share of wallet.
Ulta has increasingly focused on new and exclusive products to include in its Ulta
Collection. Exclusive products that are sold only at Ulta represent 9% of the company’s
portfolio. The Ulta Collection and products that were designed specifically for Ulta, such
as IT Brushes for Ulta and Tarte Double Duty Beauty products, represent about 6% of the
business. The remaining 3% of the exclusive portfolio includes partnerships with brands
such as Morphe and Kylie Cosmetics, where Ulta serves as the brand’s exclusive brick-and-
mortar retail partner.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 4
Copyright © 2018 Coresight Research. All rights reserved.
November 20, 2018
Slide from Ulta Beauty 2018 Analyst and Investor Day presentation
Source: Ulta Beauty
Ulta Announces Collaborations with Kylie Jenner and Kim Kardashian West
Simon announced that Kylie Jenner will launch Kylie Cosmetics at Ulta on November 17,
both in stores and online, beginning with the brand’s Lip Kit. Jenner has more than 118
million followers on Instagram and, in 2016, her Lip Kit sold out within one day of the
initial launch. This announcement followed news that Kylie Jenner’s sister, Kim Kardashian
West, is launching four scents in her KKW Fragrance line at Ulta for the holiday season.
The KKW Fragrances will be available in Ulta stores (but not on Ulta.com) beginning
November 25. Simon highlighted that these partnerships will provide customers with an
opportunity to try products that were previously only available online. She added that
Kylie Jenner “is super excited to be able to have a place for her fans to come and actually
touch the product and try it because she’s selling a whole lot of this online, and nobody’s
ever touched the stuff before they buy it. So, we couldn’t be happier. We think it is going
to drive a lot of traffic to the stores.”
Slide from Ulta Beauty 2018 Analyst and Investor Day presentation
Source: Ulta Beauty
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 5
Copyright © 2018 Coresight Research. All rights reserved.
November 20, 2018
Ulta Is Investing in Technology to Build an Innovation Ecosystem with the Goal of
Becoming the Digital Store of the Future
Prama Bhatt, SVP of Digital and E-Commerce, said that the company is creating a
commerce and content platform that connects its physical and digital guest journeys. The
company emphasized that its main focus is on personalization and connecting online and
offline experiences in order to tailor its communications and help consumers navigate the
beauty space. Bhatt provided an overview of the company’s technology partnerships and
acquisitions:
• Ulta invested in technology startup Spruce to develop a services system to facilitate
booking salon appointments. The system aims to increase consumer engagement.
Spruce is live in Ulta’s pilot store and Ulta plans to launch the new system in a
limited number of stores in 2018 and then roll it out to its entire fleet in 2019.
• In September 2018, Ulta acquired QM Scientific, an AI startup with capabilities in
computer vision, recommendations, natural language processing and visual search.
QM Scientific has been recognized by the National Retail Federation as a disruptor in
the retail space.
• Ulta also acquired GlamST, which it had partnered with to develop the GLAM LAB
virtual try-on experience, in order to help build out its capabilities for AI and AR.
GlamST combines AI, AR and machine learning capabilities with a focus on virtual
makeover solutions, image processing, graphics and effects.
• Ulta has made foundational investments in Iterate, a digital workflow platform that
tracks trends, provides research and curates technology partnership opportunities.
Iterate enables rapid prototyping and provides access to startups.
Slide from Ulta Beauty 2018 Analyst and Investor Day presentation
Source: Ulta Beauty
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 6
Copyright © 2018 Coresight Research. All rights reserved.
November 20, 2018
Deborah Weinswig, CPA
CEO and Founder
Coresight Research
New York: 917.655.6790
Hong Kong: 852.6119.1779
China: 86.186.1420.3016
deborahweinswig@coresight.com
Erin Schmidt
Research Associate
Hong Kong:
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888 Cheung Sha Wan Road, Kowloon
Hong Kong
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Coresight.com
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 7
Copyright © 2018 Coresight Research. All rights reserved.
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