ULTA Beauty: The Journey and the Investment Essay
ULTA Beauty: The Journey and the Investment
Before ULTA entered the beauty market in 1990, a woman would have to go to multiple stores to find cosmetic, fragrance, and salon products. ULTA has become a woman’s one-stop-beauty department store, they house everything from brands such as Revlon to Estee Lauder, products such as nail polish to specialty shampoos, and they even offer makeup and hair services. In this industry of beauty there are many competitors and companies must stay ahead of their competition, ULTA has done this and more. At the same time they have to foresee any future problems while they continue to grow and find ways to overcome the barriers.
Being a lover of cosmetics investing in a company such as ULTA would seem a no brainer, but with investment there is much more to explore other than what you like. Starting out as a beauty discount retailer in 1990 ULTA found their niche and capitalized on it, by giving their customers unique experiences ULTA has become the largest beauty retailer in the US today. The founders of ULTA, originally named Ulta3, created a discount beauty department store and full service hair and nail salon. When they first stated out they had products that were discounted up to 50% of the suggested retail price, they would even match prices from competitors.
During this time they faced competition from cosmetic companies, such as Cosmetic Center. In December 1999 ULTA hired Lyn Kirby as president and chief executive. With her experience 20 plus years experience in the corporate cosmetics world Kirby transformed ULTA from a discount cosmetics brand to a “retailer offering affordable indulgence rather than discount prices”, as she told MMR magazine in 2001. This change seemed to be what women wanted, by having sales increased by nearly 20% in 2003 and expansion with 150 stores in 19 states.
Reaching fiscal stability and having a steady growth plan in October 2007 ULTA became a publicly traded company. They opened at $33 and the initial IPO sold about 8. 54 million shares raising $123. 9 million, ULTA utilized these funds to reduce their debt and pay dividends. They have provided consumers with mass salon products and services by capitalizing on beauty trends and marketing strategy. ULTA provides beauty products from various brands and manufacturers at various price points. ULTA’s top competitors are Macy’s Inc. , Regis Corp. and Sephora USA corp. Two of these competitors have a long-standing history and consumer base, where as, Sephora USA has recently entered the market. When Sephora entered the U. S. In order to attract a new consumer and establish a national brand ULTA has moved to national magazines advertising and has and e-commerce advertising strategy that complements their print advertising. They offer the most extensive products and brand selection; they keep updated and current by following fashion trends, historical sales trends, and new product launches.
ULTA’s management has undergone a change of CEO, Chuck Rubin has stepped down and joined Michaels Stores; he has been replaced by Dennis Eck who is currently the interim CEO. Along with this in 2012, CFO Bruce L. Hartman, resigned on October 18, 2012 and was replaced by Scott Settersten. ULTA’s stock is currently down about 25% after Chuck Rubin left and reporting earnings and weak guidance. ULTA’s earnings report were below analyst expectations. They forecasted revenue $568-$577 million, when analyst estimates were $579. 7 million.
Along with this store sales slowed down in the fourth quarter from 11. 5% to 8% in Q4 of 2011 and is expected to slow down even more. ULTA being a new and large company in a world such as beauty can be a hurdle at times, but for housing so many different beauty brands and at various price points ULTA has made a great change in the beauty world. With all these changes in management you would think that ULTA isn’t a good investment, but with the projections that they have and the history of the company I would definitely invest in ULTA’s stock options, but only for the short-term.
In conclusion, ULTA beauty is a company that has and will continue to push forward in the volatile beauty industry. Since they went public in 2007 ULTA has faced some declines in stock prices and faced management changes ULTA has maintained a steady rise in stock prices. This is a good company to invest in for the short term because they have a strong consumer base and has maintained their name in the beauty industry. As for a long term investment potential investors should keep a watch on the stock and the management systems. When this stabilizes I believe ULTA will be a strong contender for long-term as well as short-term investments.