Ulta Beauty posted better-than-expected second quarter results and record e-commerce growth, as it launched new digital technology to meet the needs of beauty shoppers during the health crisis.
“While the pandemic continues to impact our business, we are encouraged by improving trends,” said CEO Mary Dillon. “Comparable sales trends improved significantly throughout the quarter, from decreasing 37% in early May, as we began reopening stores, to decreasing 10% in July, when most of our stores were re-opened."
Ulta's Updated Investment Plans for the Year
Ulta plans to spend $180-$200 million, including $90 million for supply chain and IT; $65 million on new stores, remodels and merchandise fixtures; and $30 million on store maintenance and other.
Sales trends have continued to improve, with comp sales only down in the mid-single digit range for the first three weeks of August, she noted. Shares of Ulta gained on Friday after the retailer posted adjusted per-share earnings of 73 cents in its Q2, which ended Aug. 1, beating analysts' estimates of 6 cents a share, The Street reported.
After closing stores in the first quarter, Ulta reopened its fleet in the second quarter with new operating procedures in place. However, Ulta’s e-commerce business still achieved record growth in Q2, delivering sales growth in excess of 200%, of which about 20% came from curbside pickup and buy-online-pickup-in-store fulfillment options. The retailer said it's testing a new notification processes to expedite the curbside pickup experience now, in hopes of having a more seamless digital experience in place for the holidays.
Additionally, it saw huge success with its digital experience tools, such as its virtual try-on tool GLAMlab. Since the COVID-19 crisis began, shopper engagement with GLAMlab has increased meaningfully with product views in the second quarter jumping more than 150% from Q1.
Omnichannel shoppers, which spend three times more per year than store shoppers, grew to 21% of Ulta’s loyalty program members in the second quarter, nearly double from the same quarter last year. And online-only members represented 7.5% of all members, 2.5 times the amount last year.
As the pandemic has accelerated the adoption of digital shopping, Dillon said Ulta is expanding investments in digital innovation with enhancements to the Ulta Beauty mobile app and ulta.com to create more personalized and seamless shopping experiences.
“We’ve also continued to enhance and expand our ability to provide members with personalized recommendations based on insights from our loyalty data,” Dillon noted.
Through both the app and the beauty retailer’s website, Ulta provides members with unique recommendations, including new products, products-based on category preferences, reminders for replenishment, and handpicked items, all powered by the retailer’s internal artificial intelligence (AI) platform. Ulta recently launched app-only offers and exclusives to drive member mobile app engagement, and has added sponsored ads to allow brand partners to influence specific product placements.
Ulta also launched several new digital services in the quarter. It began rolling out a new service-booking tool in the app and website in July, which enables shoppers to easily book or reschedule salon, brow and other service appointments. Now more than 1,000 stores are actively using the new tool.
It also launched a customer service chatbot on the website to improve the convenience and speed in resolving basic customer questions. Behind the scenes it launched a new guest service customer engagement platform, which allows Ulta’s call center team to respond to customer service needs across a variety of contact channels and across internal platforms.
In addition, the retailer added new virtual try-on capabilities in GLAMlab to include hair color, false lashes and the benefit brow bar. To help shoppers identify and address skin care concerns it has launched a new skin analysis tool in the Ulta Beauty app, which uses augmented reality technology and AI to assess skincare needs and offer personalized recommendations and skincare tips.
“While these are newer capabilities our guests are actively playing and engaging with these innovative tools,” said Dillon. “Longer-term, we intend to support discovery trial and play by offering a combination of limited state product testing with an expanded selection of single use samples and seamless digital innovation like GLAMlab and 3D printing.”