Looking to The Future
The brand will launch KKW Fragrance and Kylie Cosmetics for the holiday.
Ulta enters M&A with investments,
acquisitions.
Ulta Beauty is now doing M&A.
For the first time, the beauty retailer has made two investments and two acquisitions as it works to ramp up personalization. The business has invested in digital workflow partner Iterate and online booking tool Spruce, and acquired two businesses — QM Scientific and GlamST — which will allow Ulta to better build out its augmented reality and artificial intelligence capabilities, especially as it relates to personalization.
“Both GlamST and QM Scientific bring technology leadership, guest experience, focused capabilities and the right cultural fit,” said Prama Bhatt, Ulta’s senior vice president of digital and e-commerce. “We now own the technology assets to support our digital experience roadmap.”
She spoke at Ulta Beauty’s investor day on Thursday, where the acquisitions were unveiled. “We may continue to look at M&A as a way to acquire capabilities,” said Scott Settersten, chief financial officer, though he noted the company does not anticipate M&A will be an enormous part of the overall strategy.
Personalization was one of the big themes of the day, as was the expansion of digitally native brands with Ulta and the company’s digital initiatives.
Ulta has long talked about its customer as a beauty enthusiast, but going forward, is working to segment out that concept further. The idea is to determine a shopper’s orientation toward service, spending, means of influence and preferred shopping tools, said Ulta chief executive officer Mary Dillon.
She expects shifting demographic trends in the U.S. — more Millennial and Gen Z shoppers, as well as more Hispanic and multicultural ones — to benefit Ulta in the long term. “The growing segments in the U.S.…allover-index in beauty,” Dillon said.
Targeted messaging through things like e-mail marketing and views of the Ulta Beauty web home page are also part of the company’s plan.
“When we look big-picture at the future, personalization is where we’re headed,” said Dave Kimbell, Ulta’s chief merchandising and marketing officer. “By understanding what’s important to our guests, we can tailor [their experience].”
Ulta is able to create that personalization in large part due to the data it has from its 30 million loyalty program members. Those shoppers make up about 95 percent of the retailer’s total sales, and because Ulta is price point and category agnostic, it has broad data with which to target shoppers, Kimbell noted.
That personalized service will run through the company’s digital initiatives, including things like predictive analysis and conversational commerce.
Ulta Beauty executives also focused on core products Thursday, noting that exclusives — which make up 9 percent of its assortment — are particularly crucial.
Tara Simon, senior vice president of merchandising, prestige, at Ulta Beauty, detailed the anticipated launches of KKW Fragrance and Kylie Cosmetics.
“Much like the conversations with these other digitally native brands, nobody can smell these fragrances…so [Kim’s] really excited to be partnering with us and we couldn’t be more thrilled,” Simon said.
On Nov. 17, Kylie Jenner is planning to launch a lip-oriented collection from Kylie Cosmetics with Ulta.
“Kylie chose it herself,” said Simon. “She chose her best-selling and favorite lip kits.” They will hit all Ulta stores and online the same day, though the in-store assortment will carry more products, Simon said. “Ulta. com has an edited assortment.”
“She’s really cute and she’s super excited…her words — ‘super excited’ — to be able to have a place for her fans to actually touch the product and buy it,” Simon said. “We think it’s going to drive a lot of traffic into the stores.”
In the past two years, since the company’s last investor day, Ulta has launched about 250 more brands in the stores, with a particular focus on digitally native brands that are seeking expansion that Ulta executives say can come from partnering with a retailer. The business is continuing to build more stores, and “studying” international expansion with no imminent plans, Dillon said.
On Thursday, Ulta released preliminary third-quarter results. The company’s comparable sales were up 10.3 percent, with e-commerce growth of 42.2 percent, for the quarter. The business also said it was implementing a $150 million to $200 million multiyear cost-savings program that should allow it to make investments in future growth initiatives.
Wall Street responded well to Ulta’s plans — the shares rose nearly 5 percent to $304.76 in midday trading.