Target has signed a contract with Ulta Beauty to open businesses in makeup, skin care, hair care products, and more in hundreds of their stores.
Source: Ulta Beauty
Target and Ulta Beauty announced a deal Tuesday to open makeup and skin care stores in hundreds of Target stores across the country.
Brian Cornell, CEO of Target, said shoppers will find a smaller version of an Ulta store in more than 100 Target stores and on its website by the second half of next year.
Each “shop-in-shop” will be approximately 1,000 square meters and include more than 40 beauty brands and a changing selection of products from hair care and fragrances to lip gloss. Customers can shop in person or use Target's services on the same day, e.g. For example, roadside collection or home delivery by ship to make your online beauty purchases.
Ulta will train Target employees as beauty consultants.
Ulta shares rose approximately 7% to $ 265.49 at the close of the market. Target shares rose approximately 2% to $ 158.07 at the close of the market.
Mary Dillon, CEO of Cornell and Ulta, told CNBC that they view the strategic partnership as a long-term deal that will attract customer attention and result in increased sales. They declined to share the length or financial terms of the agreement, but said they will expand Ulta Beauty at Target to hundreds more stores over time.
As the coronavirus pandemic disrupts the retail industry and shopping behavior, Dillon said retailers are "embarking on a time of change to innovate and lead".
With the deal, Target will gain a unique traffic driver in a rapidly growing category of goods, while Ulta will be visible on store shelves and on a website that has expanded its reach during the pandemic.
Both companies will attract larger audiences. Together they have more than 100 million members of the active loyalty program in Target Circle and Ultamate Rewards – more than 33 million of them are from Ulta.
Target was able to keep its nearly 1,900 stores open as a major retailer during the global health crisis, selling everything from groceries to pillows.
The retailer's profits increased roughly 80% in the second quarter compared to the same period last year. The roadside pick-up service, Drive Up, grew more than 700% over the three month period. The company said it attracted 10 million new digital customers and gained $ 5 billion in market share in the first half of the year.
Since many competitors had problems, Target had strength – even in discretionary categories. Beauty sales rose more than 20% in the second quarter.
Ulta, on the other hand, has been hit hard by store closings. The beauty retailer's sales in the same store decreased 26.7% year over year in the second quarter, but have gradually improved. Like-for-like sales, comprised of sales in stores that were open for 14 months or more, and e-commerce sales declined 37% in early May, but rebounded slightly and declined 10% in July as most of the 1,264 stores reopened were.
Beauty sales across the industry were rocky during the pandemic. Americans have fewer social outings and work remotely instead of dressing up for the office. According to the NPD Group, around 70% of consumers have used less makeup this year.
However, some categories like skin care and hand soaps have grown in popularity as buyers focus on relaxation and self care. For example, sales of hair products rose 11% in the third quarter as customers bought hair masks and hair colors.
"We see two stories unfolding for beauty – one of stagnation and the other of recovery," said Larissa Jensen, beauty industry consultant for NPD Group, in a report.
Instead of a shared tube of lipstick, shoppers can use Ulta’s GLAMLab digital tool to safely try a makeup product.
At Ulta, Dillon said the sale "reflects a desire to take more care of ourselves at home" as customers purchase items such as face masks and accessories for DIY nails or hair care.
Cornell said Target's deal with Ulta "will build on the momentum we have in the category and the investments we've made in beauty for years."
"This is a very important category," he said. "We continue to believe that it will be a high-growth category."
The Target and Ulta partnership is not the first of its kind. J.C. Penney and Sephora made a similar agreement in 2009 to introduce a makeup and beauty shop concept in department stores. However, the long-contested department store has lost market share as Target gained them. Penney filed for bankruptcy protection in May.
At Ulta Beauty at Target, Dillon said customers will find a "curated selection of established and emerging prestige beauty brands". Shoppers will also see a pandemic-inspired addition: a virtual tool from Ulta called GlamLab, which allows customers to safely try on makeup digitally instead of sharing samples of lipstick and eye shadow palettes with others.
Cornell and Dillon said the companies are working together to identify the stores where the stores will first be available and that their beauty retailers will help select the brands and products featured.
"It's going to be breathtaking," said Dillon. "Target guests won't miss it. They'll see something new happen and I think they'll want to jump in and take part."