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C+CT

Ulta’s new store productivity is skyrocketing, CEO says

December 11, 2018

Ulta Beauty posted strong third-quarter same-store sales of 8 percent. Healthy traffic, new-store productivity and e-commerce growth helped drive the increase, said CEO Mary Dillon, on an earnings call with analysts.

“Sales of gift cards grew 35 percent in the quarter, driven by expanding distribution at other retailers,” Dillon said. The retailer’s service business is growing as well, she added, noting also that comp sales in the store salons grew by 3.5 percent, on the strength of average-ticket increases and with the benefit of increased store traffic. 

Ulta opened 42 stores in the third quarter (versus 48 a year ago) and closed three, to end the quarter with 1,163 stores. “New stores continue to deliver sales ahead of expectations, and we recently updated our new-store model to reflect the strength of the new-store portfolio, with year-one stores achieving sales of $3.5 million, on average, and ramping [up] to $5 million by the fifth year of operation,” Dillon said.

The company has a large number of store leases coming up for renewal over the next several years and is set to be as focused on repositioning the portfolio over that time period as it has been on opening new stores for these few years past, she said. “We’ll slightly moderate new store openings in the next few years, with plans to open 80 stores in 2019, 75 stores in 2020 and 70 stores in 2021,” she said.

Ulta.com sales shot up by 42.5 percent during the quarter and accounted for nearly 11 percent of total company revenue. The retailer is driving the online traffic into its stores by testing out buy-online, pickup in-store services at 47 physical shops.

By Brannon Boswell

Executive Editor, Commerce + Communities Today

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