A longtime Sephora holdout, MAC Cosmetics is close to becoming Ulta’s highest-performing brand

Entering Ulta has been a significant boon to MAC Cosmetics’ North American business, which has witnessed a slowdown in recent years as department store and mall traffic dwindles.

When the company first announced the partnership, which saw a selection of products go live on Ulta’s website this May and into 25 stores in June, MAC’s global brand president, Karen Buglisi Weiler, told WWD that MAC hoped to become Ulta’s “most-preferred brand.”

And on Ulta’s first quarter earnings call for 2018 on Thursday, CEO Mary Dillon had high praise for the brand.

“We’re delighted with our new partnership with MAC,” she said, noting that the brand is now in 107 stores and will be in 120 by the end of this year. The brand is No. 1 in 80 percent of the Ulta locations it’s carried in, she said, and a close second in the rest. It’s also been one of the more popular brands ordered through the chain’s store-to-door initiative, which allows customers to place online orders in store and have products delivered to their homes, said Dillon.

In February, the brand kicked off a similar push for new customers by partnering with Birchbox to sell a selection of its products. Surprisingly, however, MAC has long held off on entering Sephora, Ulta’s competitor in the specialty-multi space.

So far, MAC’s products have been relegated to Ulta’s specialized prestige boutiques, of which there are 700 in total. Ulta counts 1,078 doors, so MAC’s in-store presence is still a small piece of a much larger pie.

Nevertheless, Ulta — which grew its prestige segment by 28 percent this quarter — reported that MAC and its fellow prestige brands Clinique, Lancôme and Benefit, contributed to almost a third of the company’s total growth during the quarter. The company saw a 20 percent uptick in net sales.

The MAC assortment at Ulta currently includes around 45 percent of its overall assortment, featuring hero products like its Lipglass lip gloss and Studio Fix Fluid foundation, as well as some exclusive instant artistry kits, which combine various products. Five of MAC’s best-selling items were also moved to the impulse purchase section at checkouts this quarter, said Dillon.

One of the cosmetics brand’s main goals in entering Ulta was to reach both new and younger consumers for the brand, according to Fabrizio Freda, the CEO of Estée Lauder, MAC’s parent company. The brand has been successful on that front, he said on Estée Lauder’s first quarter earnings call for 2018 in early November, citing findings from Ulta’s consumer insights team: “[The rollout] has resonated strongly, as approximately half the consumers who purchased MAC products were new or lapsed users of the brand.”

Dillon echoed those findings, from Ulta’s consumer insight team, while discussing Ulta’s most recent earnings: “We’re helping to recruit a new consumer to the brand.”

That consumer is the omnichannel shopper, said Phil Granof, the CMO of the multi-channel retail platform NewStore. “These shoppers spend two-and-a-half times more than single channel shoppers,” he said, adding that Ulta’s popular loyalty program, responsible for 90 percent of its sales, collects a massive amount of data that helps to personalize its consumers’ experience. “This provides a huge boost to MAC.”

Elsewhere, according to Freda, sales on MAC’s website have accelerated, while sales in its freestanding stores and department stores continue to decline. The brand plans to double-down on speedier, more trend-driven product launches in the coming year, in an effort to offset those losses — but expect to see it further expand into Ulta stores, as well.

“MAC is more of an edgy boutique brand, and it was the first in the department store sector,” said the retail investment researcher Jane Hali. “Over time, it didn’t fit in with the luxury names — Givenchy, Dior — at places like Saks, nor the traditional brands — like Bobbi Brown, Estée Lauder — at stores like Macy’s.”

Ulta, where millennial consumers routinely seek out boutique brands like Urban Decay and Benefit, she said, is simply a much better fit.

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