Ulta Beauty delivers in third quarter

Ulta Beauty posted strong double-digit gains during its third quarter thanks in part to strength in sales of prestige cosmetics and skin care and strong online sales.



Sales for the quarter ended Oct. 27 rose 22.4% to $618.8 million. Same-store sales rose 6.8%, including the impact of e-commerce sales.



Net income increased 19.1% to $45.4 million compared with $38.2 million. Income per diluted share rose 18.6% to 70 cents per share, including 2 cents per diluted share related to a severance charge.



During the quarter, e-commerce sales grew 74.4%, representing 170 basis points of the total company same-store sales increase.



“[The third quarter] was an excellent quarter for Ulta.com, demonstrating continued momentum on the top line despite tough prior year comparisons and a major site relaunch,” said Mary Dillon, CEO, during the company’s recent quarterly conference call with analysts. “Our limited-time Beauty Breaks!, our sample beauty bags and CRM program all contributed to better-than-expected sales growth.”



The new platform was rolled out over a period of several weeks and was revamped to enhance visibility to its product assortment, highlighting bestsellers and featuring products across all categories. Search capabilities were improved and brands were recognized for greater visibility.



Ulta noted that it is the one of the first retailers to feature Responsive Web Design, a new technology that enables a consistent browsing experience regardless of the device being used — a laptop, smartphone or tablet.



Also helping to fuel sales was prestige cosmetics and skin care. Dillon noted that prestige cosmetics and skin care continue to be the strongest categories, while it experienced some softness in nail and fragrance — in line with industry-wide trends.



Dillon, who joined the company in July, said that looking ahead the company will need to find new ways to grow.



“I believe there are significant opportunities ahead for Ulta in areas such as driving higher brand awareness; developing smaller and urban store formats; increasing our digital presence, both online and in store; and growing our capabilities to enable initiatives like localization of assortment,” Dillon told analysts.



As for 2014, the company plans to embark on a number of smaller in-store projects like additional prestige boutiques and reflowing the mass cosmetics program in some of its older stores to make the shopping experience in that category more consistent across the chain.



Another area of focus: its loyalty program. Dillon said the company continues to see increases in retention in its loyalty customer base. There are currently 12.5 million active loyalty members who have shopped within the past 12 months, up 18% compared with last year.