Ulta’s web sales balloon 55% in Q2

September 17, 2014 01:10 PM

Ulta Salon, Cosmetics & Fragrance Inc. reported strong growth in second quarter web and total sales, which CEO Mary Dillon attributed to revamping its strategic plan earlier this year. In addition to acquiring new customers, personalizing the shopper’s experience across all channels, focusing on innovative products, providing exceptional services for hair, skin health and brows, Ulta is growing its e-commerce shopper base. The retail chain also is investing in infrastructure to serve its overall growth strategy, Dillon told Wall Street analysts on the company’s earnings call last week.

E-commerce is at the center of Ulta’s near-term growth plan, and accounted for 3.4% of second quarter sales. The web is expected to contribute significantly more to sales growth, however.

“We anticipate that e-commerce will grow to represent about 10% of our sales,” Dillon told analysts, according to a transcript of the call by Seeking Alpha. “This model is expected to deliver earnings per share growth in the low 20% range over the next five years, excluding the impact of the supply chain investment. As you know, we're making significant investments in systems and supply chain, including a multiyear supply chain transformation designed to improve our inventory productivity, in-stocks, and to free up labor and stores to be more customer-facing.”

Earlier this year Ulta, No. 227 the Internet Retailer 2014 Top 500 Guide, said it planned to invest $50 million in I.T. systems, including e-commerce, and $45 million in supply chain projects in 2014.

E-commerce enhancements already in place include new features and functionality, chief financial officer Scott Settersten told analysts, “designed to enhance the discovery and browse experience, with the addition of rich editorial content. New pages for Get Inspired, Beauty Consultation and Share & Play, focused on trends, new arrivals, best kept secrets, advice, and social content.” also added online booking capability for salon appointments in all of its 1,200 stores, and hosted live chats featuring brand partners like the founders of Carol's Daughter. The merchant also released its first iPad app in July, Settersten said.

A major opportunity with mobile is to help shoppers learn about brands, products and services, Dillon said, which also will help store associates become greater brand experts. “Having more access to mobile information helps get us to the same position that our guests are in,” Dillon said. Mobile transactions are continuing to grow as a percentage of Ulta’s transactions, and Dillon expects that to continue. She did not share the percentage of transactions occurring on mobile devices.

Ulta plans to develop what it calls the “omni-channel capabilities” shoppers expect, such as ordering in store and delivering to home, and checking availability of inventory online, Dillon said.

For the second quarter ended Aug. 2, Ulta reported:

  • E-commerce sales increased by 55.6% to $25.2 million, compared with $16.2 million in the second quarter of 2013.
  • Total sales increased 22.2% to $734.2 million from $601.0 million.
  • Comparable-store sales, which include e-commerce, increased 9.6%. The same-store sales increase was driven by 5.8% growth in transactions and 3.8% growth in average ticket.
  • Net income increased 35.4% to $60.8 million from $44.9 million in the second quarter of fiscal 2013.

E-commerce accounted for 3.4% of total sales for the first six months, compared with 2.7% in Q2 2013.

For the first six months Ulta reported:

  • E-commerce sales increased by 63.7% to $54.5 million, compared with $33.3 million in the first six months of fiscal 2013. 
  • Total sales increased 22.9% to $1.45 billion from $1.18 billion.
  • Comparable-store sales, including e-commerce, increased 9.2%.
  • Net income increased 27.7% to $110.7 million from $86.7 million in the first six months of fiscal 2013.

The web accounted for 3.8% of total sales for the first six months, compared with 2.8% in the same period in 2013.




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