ULTA Ulta Beauty Inc

By Matt Grossman 

The cosmetics retailer Ulta Beauty Inc. will open dedicated shops inside more than 100 existing Target Corp. stores starting next year, the companies said Tuesday.

The partnership will expand Ulta's physical and digital presence, Ulta Chief Executive Mary Dillon said, as the Covid-19 pandemic caused its locations to close temporarily, altered demand for cosmetics and changed the ways people buy them.

At Target locations included in the partnership, a roughly 1,000-square-foot retail section will be set aside for Ulta products, and Target workers will be trained in helping shoppers browse. The companies said they plan to expand the partnership to hundreds more stores over time.

Ulta products also will get a presence on Target's website and retail app that reflects the Ulta brand, the companies said. Ulta sales on Target's digital channels will be integrated with Target e-commerce options, such as same-day fulfillment and drive-up and in-store pickups.

Shares of Ulta rose 5.3% as trading began Tuesday, while Target shares added 1.6%.

After the pandemic began spreading in the U.S. earlier this year, Ulta temporarily closed all of its stores starting in mid-March, fully reopening them by the end of July. Ulta generates most of its revenue from stores, where customers can try on makeup, buy skin-care products or book appointments for haircuts and other beauty services. Normal operations continued more smoothly for Target, which kept locations open as an essential retailer.

Also hurting the beauty industry was reduced demand for cosmetics as people are spending less time in offices and at social gatherings.

In Ulta's fiscal second quarter, which covered May through July, the company's profit declined by nearly 95% from the year-ago period to $8.1 million. Comparable sales decreased by nearly 27%, although Ulta reported surging e-commerce sales. Year to date, Ulta shares have declined 2.4%, while Target shares are up 20.8%.

In September, Ulta suspended a previously planned expansion in Canada, adding that it would instead give priority to U.S. operations. That decision was expected to result in costs of $55 million to $65 million, Ulta said.

Write to Matt Grossman at matt.grossman@wsj.com

(END) Dow Jones Newswires

November 10, 2020 10:32 ET (15:32 GMT)

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