Profitable but Lesser-Known Ulta, Poised to Battle Sephora

Sep 23, 2015 — Allan Pulga
Ulta_photo_-_Source_-_Bloomberg.jpg

A Bloomberg article about U.S. beauty retailer Ulta made waves yesterday, particularly due to its provocative headline and sub-headline: "Can America's Biggest Beauty Retailer Take On Sephora? Ask any woman what Ulta is. Chances are she doesn't know."

Now I'm not a woman, of course, but the only time I'd ever heard of Ulta was when I wrote a blog post a couple months ago about Birchbox. So how does a 25-year-old company that happens to be "the country's biggest speciality beauty retailer by sales" remain so under the radar?

Ulta has never really advertised its brand. This month's national ad campaign is a first for the 25-year-old company.

One reason is its preference for suburban store locations, versus Sephora's more urban positioning. "Ulta rules suburbia, while Sephora’s got that big-city glam and is much larger globally," wrote Bloomberg's Kim Bhasin. "Step into a bustling Sephora, and you’ll find a lively but small store that can get a bit hectic. Ulta’s locations are big and bright, with an open plan, for the shopper with time to explore the bazaar."

But the big reason nobody's heard of Ulta is because it's never really advertised itself. This month, the company is embarking on its first-ever national ad campaign injecting its fun, bright colors into prime-time slots among shows like The Voice, Dancing With The Stars, and Scandal.

As it turns out, Ulta has more than twice as many U.S. store locations as Sephora. "Unlike Sephora’s, its shops are typically standalone, drive-up locations rather than elements of malls," Bhasin added.

In spite of its less familiar brand, Ulta has more than twice as many U.S. store locations as Sephora.

Ulta has been incredibly profitable of late. In its previous fiscal year (ending Jan. 31) it reported $3.2 billion in sales more than double its sales from five years prior. The company posted $257 million in net income, up from $71 million, with margins increasing steadily year-over-year. Shares have jumped more than 500% in the past five years, to $170.

In terms of store footprint, Ulta will have nearly 900 by the end of the year, up from fewer than 400 five years ago, as it looks to expand in the New York metropolitan area and New England.

For Ulta to attain its current level of business success without nationwide marketing is remarkable. Now that it's committing to the latter, perhaps Sephora has much to be worried about.

Topics: Wireless Trends

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