Ulta Beauty Reports Strong Sales Growth Despite Dealing With Retail Theft

Ulta Beauty CEO Dave Kimbell shared the company’s first-quarter results on Thursday (May 25), highlighting a 12.3% increase in sales compared to the previous year. Same-store sales also experienced a positive growth of 9.3% over the previous year.

Despite the positive results, the beauty retailer has acknowledged that it has been affected by shrinkage, similar to many other retailers in the industry.

Kimbell expressed concern over the escalation of violence and aggressive behavior observed during organized retail crime thefts. The company has encountered higher levels of theft and is facing the challenge of addressing these issues.

“Protecting our associates and keeping our employees safe is our main concern,” Kimbell said.

Similar concerns have been raised by retailers in other sectors regarding the rise in organized retail crime, which involves professional, large-scale theft.

The company intends to collaborate with law enforcement, government agencies, and retail communities to mitigate theft.

Other Retailers Singing to the Shrink Choir

Dollar Tree, like other retailers, is facing challenges related to shrinkage. The discount store chain recently reported its earnings results, revealing an increase in sales. However, the company had to revise its profit outlook downward due to shrinkage, which includes issues like theft, damage, and other losses, as well as reduced spending.

“While we are seeing early results from our initiatives, we are not immune to the external pressures affecting all of retail, notably, the margin impact of elevated shrink and the product mix shift to consumables,” CEO Rick Dreiling said in a news release. “While we are maintaining our full-year 2023 sales outlook, we are adjusting our EPS outlook as we expect the elevated shrink and unfavorable sales mix to persist through the balance of the year. We still expect earnings to be more back-end loaded this year as the benefits of lower ocean freight rates flow through.”

See also: Dollar Tree Lowers Profit Outlook Due to ‘Elevated Shrink’

Target has also experienced a significant increase in retail crime, leading to projected losses and stolen merchandise that are expected to surpass last year by about $500 million.

“The unfortunate fact is violent incidents are increasing at our stores and across the entire retail industry,” Target Chairman and CEO Brian Cornell said last week. “And when products are stolen, simply put, they are no longer available for guests who depend on them. Left unchecked, organized retail crime degrades the communities we call home. As we work to address this problem, the safety of our guests and our team members will always be our primary concern. Beyond safety concerns, worsening shrink rates are putting significant pressure on our financial results.”

As a result, the retailer, along with its counterparts, is reevaluating its approach to in-store operations.

See also: Target Faces Profit Losses, Rethinks In-Store Operations Amid Rising Retail Crime

Ulta Beauty by the Numbers

Despite concerns regarding a slowdown in consumer demand and many retailers pulling back, Ulta Beauty continues to demonstrate robust sales growth, increased store traffic, and a growing membership base for its loyalty program.

Kimbell mentioned that consumers are actively exploring ways to navigate economic uncertainty, resulting in strong sales but more selective purchasing behavior from guests. The company observed an 11% increase in store transactions, although there was a slight decrease in average transaction value.

Kimbell addressed the growth of the membership loyalty program, which expanded to 41 million members, marking a 9% increase compared to the previous year for the same period. He noted that diamond and platinum memberships experienced a 30% growth in the first quarter compared to the previous year. The marketing efforts to raise awareness about the membership program, both online and in stores, contributed to new acquisitions for Ultamate Rewards.

Members of the loyalty program tend to spend more per store visit and shop more frequently. Additionally, there was an increase in members using additional services.

Ulta Beauty witnessed an increase in net sales, which rose by 12.3% to $2.6 billion compared to $2.3 billion in the first quarter of fiscal 2022. This growth can be attributed to improved comparable sales, strong performance from new stores, and increased revenue from other sources in comparison.

Comparable sales, which include sales from stores open for at least 14 months and eCommerce sales, experienced a 9.3% increase. This growth was driven by an 11.0% rise in transactions, although there was a 1.5% decrease in average ticket size.

The gross profit for the quarter saw a 12.1% increase, reaching $1.1 billion compared to $941.0 million in the first quarter of fiscal 2022. However, as a percentage of net sales, the gross profit margin slightly declined to 40.0% from 40.1% in the first quarter of the previous fiscal year.