Ulta Magnificence continues to be struggling to compete with Sephora

Ulta Beauty wants to compete with Sephora, but it’s still trying to figure out how.

“We’re in the midst of that, so TBD,” said Dave Kimbell, Ulta Beauty’s chief executive officer, during a fireside chat at J.P. Morgan’s 10th Annual Retail Round-Up investor conference on Wednesday.

Kimbell said Sephora is a “key competitor” when it comes to beauty companies that work with retailers.

In 2021, Sephora signed a partnership with Kohl’s. The agreement added about 850 Sephora stores to hundreds of the department store chain’s locations.

In 2022, Ulta Beauty looked to double down on its brand presence through a partnership with Target. At the time, Target said it would add over 250 Ulta Beauty stores, with the goal to eventually have 800.

Kimbell said in-store partnerships have been one of biggest changes in the beauty industry.

“What’s different [for Ulta] is scale and pace and how we cycle through that,” said Kimbell, who joined the company in 2014.

Outside of in-store partnerships, French multinational retailer Sephora has been relentless in its efforts to expand. “We’ve seen instances in which a Sephora opens up next door or within one or two miles from an Ulta location,” Kimbell added.

Nonetheless, Ulta is focusing on reaching consumers across income levels and said it plans to do so by incorporating new products, improving in-store experiences, and changing the layout of products.

The company said it previously featured more expensive, or prestige products, on the right of its stores, while more affordable products were placed on the left. Moving forward, at new and select locations, products will be placed together, with higher priced items at the top and lower priced items at the bottom.

Shares of Ulta Beauty were down 13% during early morning trading hours after the company warned that it expects sales to moderate during the 2024 fiscal year.

But even so, the beauty products retailer beat Wall Street forecasts after it released its latest earnings report. For the fourth quarter, the company reported revenue of $3.55 billion, about $8.08 earnings per share. Analysts had expected it would generate $3.52 billion, or $7.49 earnings per share.

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