Ulta Beauty — The #Makeup Addicts with #NoFilters

Dear Readers,

Ready to play a Truth or Dare game?
Men, I dare you to utter these words to your missus — “That’s a lot of money to spend on a lipstick”!
And ladies, how about “I’m gonna use up all my perfume, before I buy a new one” No women I know ever agreed to this dare!

Beauty is a beast of a business, with some estimates saying Americans spend approx. $135 billion annually on beauty and cosmetics products alone. And with the rising Instagram generation which Snapchats every hour, and hangs out in timelines/feeds on Facebook, Millennials are embracing cosmetics and hair because they know they’re going to be photographed every other minute in their shiny new iPhones. 
Tapping on to this beauty conscious fairer sexes is the country’s biggest beauty retailer Ulta Beauty Inc., (till last year known as Ulta Salon, Cosmetics & Fragrance, Inc.). Also, this is one retailer that has blended its offline stores (with in-store beauty salon) and online sales (with rewards program) so well that it can proudly call itself Amazon-proofed. Mary Dillon, ULTA’s CEO who joined in 2013 with a five-year plan has really spurred this boutique retailer into the big leagues with1000+ stores, double-digit comp store sales, and 92% of its employee base consisting of females.

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ULTA’s growth in the 10 years since its IPO has been spectacular and has given 600% return till date for those who believed in their story and held on to the stock. The stock hit an all-time high earlier this year in June and has consistently beaten Wall St. estimates until the recently reported quarter.

Though both net income (up 19.5%) and net sales (up 18.6%) increased for 3Q, it’s usually double-digit comp store sales took a beating and came in at 10.3% vs. last year’s comparable 16.7%, mainly due to hurricane disruptions and moderate growth in its makeup business.

ULTA’s online sales, which were just about $30 million in 2010, has now grown to a whopping $120+ million and is poised for more growth as its omni-channel initiatives bring in more loyal customers.

With an impressive 25 million rewards program members; forays into big metropolitan areas (recently opened a flagship store in NY); a full-service in-store salon that drives customers into the stores, something Amazon cannot offer (yet?); a strong leadership team led by Mary Dillon; and with just 4% market share of the $135 billion US beauty market, ULTA Beauty is one stock that needs to be on your watchlist.