By sd Modiano

Ulta Beauty reported stellar third quarter earnings primarily due to the resilience of the beauty category, as well as retail price increases, and the impact of new brands and product innovation, said Ulta Beauty’s CEO, Dave Kimbell, in an earnings call Thursday afternoon.

For the third quarter ended October 29, net sales jumped 17.2 percent to $2.3 billion over the prior year, while net income increased 27.5 percent to $274.6 million. Diluted earnings per share increased 35.5 percent to $5.34, compared to $3.94.  As a result of their success, the company has increased its outlook for fiscal 2022: net sales are estimated to reach between $9.95 billion to $10 billion, up from $9.65 billion to $9.75 billion, while earnings per share are expected to reach between $22.60 and $22.90, up from $20.70 to $21.20.

By category, cosmetics comprised 44 percent of sales; hair care, 21 percent; skin care, 16 percent; fragrance and bath, 12 percent, and services and accessories were 4 percent and 3 percent of sales, respectively.

For the first nine months, sales grew 18.3 percent to $7.0 billion, up from $5.9 billion in the similar time period in 2021. Net income increased 29.5 percent to $901.7 million compared to $696.5 million in the first nine months of fiscal 2021. Diluted earnings per share increased 37.7 percent to $17.35.

Highlights of the quarter:

  1. All major categories exceeded expectations. Ulta Beauty increased its market share in prestige beauty versus the fiscal third quarter last year based on dollar sales. According to point-of-sale data from The NPD Group, Ulta delivered growth across store and digital channels and achieved record loyalty membership of 39 million members. 


  2. Skin care, fragrance, bath, hair care, and makeup all delivered doubledigit comp. growth against the third quarter of last year. From a segment perspective, Ulta saw doubledigit sales growth across both prestige and mass, with mass generally outperforming prestige. 


  3. Skin care was the quarter’s fastest growing category as beauty enthusiasts maintain their skin care routines with a focus on science-backed and dermatologistrecommended products. Guests are engaging with newer brands to the store, such as Drunk Elephant, Supergoop!, and Good Molecules, while new products from established brands such as The Ordinary, Hero Cosmetics and La Roche-Posay also contributed to sales growth to drive discovery and support guest education. 


  4. During the quarter, Ulta Beauty introduced their Skin Care We Love Wall in all stores, a curated presentation highlighting exciting brands and bestselling items across key categories. 


  5. The fragrance and bath category delivered another impressive quarter driven by Gen Z guests who purchased multiple fragrances to express themselves. Recently launched items such as Billy Eilish, and new items from Burberry, Gucci, and Victor & Rolf drove meaningful sales growth while Ulta’s monthly Fragrance Crush program drove engagement with established brands including Versace and Jimmy Choo. Fragrance also benefited from strong guest engagement with Ulta’s holiday fragrance gift sets, which were available earlier this year. 


  6. Hair care, Ulta’s second largest category, delivered solid growth, primarily driven by newness and innovation. Key category trends included hair health, damage repair, and targeted treatments. Prestige brands, including Ouai and Briogeo, saw strength in treatments and core assortments, while masstige brands including Eva NYC, Batiste, and Kristen Ess, and professional brands such as PureOlogy, Redken, and Kenra, continued to resonate with guests. Strong hair product growth was offset by softer performance in hair tools. 


  7. Makeup, Ulta’s largest category, delivered doubledigit comp. growth driven by newness and the strength of the retailer’s key events, including 21 Days of Beauty and Fall Haul. Ulta saw growth in foundation, concealers, and blush. New brands like Fenty, R.E.M. Beauty, and No1 de Chanel drove sales during the quarter, while new products from a wide range of brands, including Clinique, e.l.f., and NYX also contributed to growth. The expansion of M.A.C., Chanel Beauté, and Bobbi Brown into more stores have continued to drive prestige sales. 


  8. Ulta’s key cross-category platforms performed well. With 290 certified brands, Conscious Beauty continues to resonate with beauty enthusiasts reflecting growing interest in products that are good for the world. This quarter, Ulta certified 15 new brands, including IT Cosmetics, Morphe, and DIME Beauty, and introduced the Conscious Beauty Essentials kit featuring minis of more than 15 brands such as Dermalogica, Coola, Ulta’s own Beauty Collection. Ulta expanded their BIPOC brand assortment with four new brands, Bevel, Bread Beauty Supply, Sugardoh, and Undefined Beauty. And, Ulta launched their Muse Accelerator program to support early stage BIPOC brands to prepare them for retail. In addition to financial support, each Muse Accelerator participant took part in an intensive 10week training program, learning from multibeauty leaders, industry subject matter experts, and leading IPO brand owners. 


  9. During the quarter, Ulta enhanced their wellness assortment, and in September brought in intimate wellness as the sixth onlineonly pillar of the Wellness Shop. While wellness represents a small part of the overall business today, Ulta believes it is a significant longerterm growth opportunity given the incrementality of the purchase and the strong emotional connection consumers have with selfcare.


  10. During the quarter, Ulta introduced a new layout in about a dozen stores to showcase categories better, improve navigation, enhance services experiences, and create more opportunities for discovery. The most noticeable changes include the repositioning of skin care, an important growth category, to the front of the store. All products are grouped by category with delineated fixtures and visuals, and a flow from prestige to masstige to mass. Elevated gondolas showcase key iconic and service brands. New beauty bars offer brow and makeup services, as well as support instore events. Dedicated space in the front of the store feature brand and product launches across categories. A relocated checkout is now closer to the salon. This new store layout will roll out to new stores, remodels, and relocations.