Online sales grow more than 56% for Ulta in Q3

December 7, 2015 06:00 AM

Email marketing and social media ads have Ulta Beauty’s online sales looking good in the third quarter and through the first nine months of 2015.

Ulta, No. 196 in the Internet Retailer 2015 Top 500 Guide, reported online sales of $46.2 million, up 56.1% from $29.6 million during the same time last year. Online sales accounted for 5.1% of the company’s revenue during the quarter, compared to 4.0% last year, while online sales growth accounted for 10.1% of the company’s growth during the quarter.

Results for the quarter are indicative of how things have been trending all year for the company. Ulta reported online sales of $126.3 million through the first nine months of the year, up 50.2% from $84.1 million during the same time last year. Web sales accounted for 4.8% of Ulta’s sales for the first nine months, compared to 3.8% last year, and e-commerce accounted for 9.1% of the company’s growth.

Ulta CEO Mary Dillon told analysts on the call that omnichannel customers have proven to be far more lucrative for the company than the average shopper, spending 2.5 times more than the average shopper, with email being a key revenue driver.

“Traffic to ( was very strong, benefitting from continued digital marketing channel growth including email, paid search, and affiliate, display retargeting and paid social media, including Facebook, Twitter and YouTube,” Dillon said on the call, according to a transcript from Seeking Alpha. “Our data shows that more targeted email offers lead to higher open rates and significant increases in online sales per email sent.”

While online sales are growing at a rapid clip, Dillon told analysts she’s noticed something in particular about that growth:

“We have yet to see e-commerce shifting any volume away from bricks and mortar,” she told analysts. “As a result we feel e-commerce purchases (are) largely incremental in providing a path to trial and discovery versus primarily replenishment.”

For the third quarter ended Oct. 31, Ulta reported:

  • Net revenue of $910.7 million, up 22.1% from $745.7 million during the same time last year.
  • Net income of $71.1 million, up 20.3% from $59.1 million.
  • Comparable sales, including e-commerce, up 12.8%, compared to a 9.5% increase in Q3 2014.

For the first nine months of 2015, Ulta reported:

  • Net revenue of $2.656 billion, up 21.1% from $2.194 billion during the same time last year.
  • Net income of $212.2 million, up 24.9% from $169.9 million.
  • Comparable sales, including e-commerce, up 11.4%, compared to a 9.3% increase

Hakon Helgesen, retail analyst at Conlumino, said Ulta’s strong sales growth has been matched by a consistent uptick in operating performance, “mainly thanks to very strong productivity growth from existing stores and the online operation. Indeed, despite the fact the business is now fairly mature, this quarter’s comparative numbers were the best in its history.”

Ulta benefits from an intuitive, easy-to-use website that lets customers search by product, price range, brand, and by beauty “problems” or “issues,” Helgesen wrote in an analysts’ note. “Aside from products, the salon services offered by Ulta help it defend against the onslaught of online players which have moved into the beauty space,” he said. “In our view, the company is a great case study of how to make stores work in the digital era of retail.”



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