Years of post-Covid growth in beauty may be coming to an end. On Thursday, retail giant Ulta Beauty reported a disappointing outlook for the year ahead after the second quarter of 2024 turned up a 1.2% decrease in comparable sales.
“Consumer behavior is starting to shift, as consumers increasingly focus on value and become more cautious with their spending,” said Ulta CEO Dave Kimbell on Thursday’s earnings call. In light of those changes, Ulta has adjusted its outlook for the fiscal year 2024 to result in net sales of $11 billion to $11.2 billion, down from its previous forecast of $11.5 billion to $11.6 billion.
Ulta cited an increasingly competitive retail landscape as contributing to the slowdown. According to Kimbell, more than 80% of Ulta stores were impacted by one or more competitive opening in recent years, and more than half were impacted by multiple competitive openings. During the second quarter of fiscal 2024, Ulta opened 17 new stores, in addition to relocating one store, remodeling nine stores and closing one other.
Kimbell said Ulta aims to combat a crowded retail landscape through its exclusive brand offerings, including many new celebrity-owned brands in its lineup such as Bella Hadid’s Orebella and Serena Williams’s Wyn Beauty, both launched this year. The retailer is also introducing brands to its lineup that are sold at competitors. That includes the new addition of clean makeup brand Ilia Beauty, already available at mass retailers like Sephora and Credo Beauty.
The beauty retailer is not alone in facing a slowdown in beauty. Beauty conglomerate Estée Lauder also reported a comparatively weak Q2. The Le Labo and Tom Ford Beauty owner reported a 2% decline in net sales and predicted a disappointing 2025 in its quarterly earnings call in August, where it also announced the departure of CEO Fabrizio Freda.
Fragrance remained a bright spot at Ulta, however. Kimbell cited double-digit growth in the category, thanks in part to new brands like Noyz and Kylie Jenner’s fragrance, both of which are exclusive to Ulta. Fragrance’s share of sales grew to 11% of overall sales for the 13 weeks ending on August 3, compared to 9% in the same period in 2023. Hair care’s share of sales, meanwhile, fell from 22% to 20% in that same period.
With the holiday season ahead, Kimbell said loyalty programs and promotional tools will be crucial to maintaining sales, as well as Ulta’s particular mix of mass and prestige beauty brands. “It’s one of the things our guests continue to tell us that they really love about us, [along with] the fact that we deliver that in an omnichannel way, in-store and online,” said Kimbell.
