Ulta Beauty and Target have announced its plans to terminate its shop-in-shop partnership by August of 2026.
The partnership includes 1,000-square-foot Ulta Beauty shop-in-shop curations within standalone Target locations that are managed by Target staff. The partnership rolled out in 2021 with the launch of around 100 locations and a goal to open 700 more. More than 600 locations have been opened thus far.
“[This partnership] began at a point in the retail industry when the beauty category started its meteoric growth, which benefitted both retailers tremendously,” said Elizabeth Lafontaine, director of research at Placer.ai, a location analytics firm that leverages millions of devices to capture data on brick-and-mortar shopping patterns.
However, according to data from the firm, the shop-in-shop placement may have cannibalized some of its potential growth. “Both chains share similar visitor demographics,” said Lafontaine. For example, looking at data captured by Placer.ai in Q3 of 2022, 14.5% of customers who shopped at a California Target with an Ulta shop-in-shop also visited an independent Ulta location, compared with just 10.8% of those who shopped at Target statewide. The firm found similar data in this time period in New York and Arizona.
“I am a big believer in strategic partnerships because, when they work, it’s a one-plus-one-equals-three scenario, but maybe this was a one-plus-one equals one-and-a-half,” Howard Meitiner, former CEO of Sephora and current managing director at Carl Marks Advisors, told Glossy. “Between the problems that Target has now, the loss of market share that Ulta [experienced in 2024] and the pivot that Ulta is making, I think [Ulta] came to the conclusion that they would be better off starting their own course.”
For example, Target’s sales have tumbled in the past few years, including a 1.7% drop in net sales for fiscal 2023 and a 0.8% drop for fiscal 2024. Ulta Beauty reported 0.8% growth in fiscal 2024, dragged down by a 1.9% decline in Q4. Ulta Beauty responded with an executive shakeup in January of 2025, including the appointment of CEO Kecia Steelman and her “Ulta Unleashed” comeback plan.
The Target and Ulta breakup announcement comes after months of speculation that the partnership may be dissolving. In April, Seelman announced that the retailer would halt expansion into more Target doors, landing around 200 shy of its initial goal of 800 locations.
According to a report released on Thursday from global investment firm William Blaire, Target staffs and manages the section, and pays Ulta a royalty on all products sold, which contributes around 4% of Ulta’s revenue. Ulta Beauty’s full-year revenue in fiscal 2024 was $11.2 billion, which would put its Target revenue at around $451 million for the year.
This stands in sharp contrast to the success of similar rollouts within its competitors. The partnership mirrors similar rollouts from Sephora into Kohl’s and JCPenney stores in 2006 and 2021, respectively. The former ended in 2022 and was widely thought of as less successful than the latter, which has reached more than 1,000 Kohl’s locations thus far and generated $1.4 billion in 2023. The retailers anticipate surpassing $2 billion per year from the mini Sephora locations starting in 2025.
Perhaps the biggest issue was around staffing and consumer expectations, Meitiner said. For example, Sephora’s Kohl’s locations are staffed by Sephora-trained sales associates, while Ulta’s shop-in-shops do not receive dedicated associates.
Another barrier to growth for Ulta’s shop-in-shop includes a limitation on category expansion. In December, Penny Coy, Ulta Beauty’s svp of merchandising, told Glossy that, despite wellness being a major focus for Ulta in 2025, how to handle wellness offerings at Target was a “future conversation.”
“Ulta must have come to the conclusion that this [partnership] wasn’t supporting their brand equity in the way that they wanted to be supported. And clearly, they didn’t feel that they were making enough of an incremental sales and profit outcome from that relationship,” Meitiner told Glossy. “I am absolutely sure Target would have wanted Ulta to stay because it’s a better image than what I think they’re going to be able to do themselves in the beauty category.”
Still, the partnership is a blueprint of sorts for Space NK, the U.K.-based retail chain Ulta Beauty purchased last month. Announced earlier this month, Soko Glam, a K-beauty e-commerce retailer launched in 2012, will open shop-in-shop stores within 30 Space NK locations in the U.K.
