Why Ulta is Growing + Beauty Retailer Announces Mexico Expansion & Q4, Full-year 2023 Sales

ulta beauty is driving growth in beauty
Dave Kimbell, chief executive officer of Ulta shared, “International expansion represents an incremental, long-term opportunity for Ulta Beauty to extend our reach and leverage our differentiated value proposition."
jetcityimage at Adobe Stock

Ulta Beauty is coming to Mexico and forecasting growth for 2024. 

The retailer announced its Q4 2023 sales grew 2.5% year-over-year, totaling $3,554.3 million, while gross profit jumped 10.6% to $1.3 billion.

Full-year 2023 sales totaled $11,207.3 million, a 5.7% gain compared to 2022's $10,208.6 million. Gross profit for theyear increased 8.3% to $4.4 billion.

Looking ahead, Ulta Beauty is forecasting full-year 2024 net sales of between $11.7 billion and $11.8 billion, representing growth of 4-5%.

Why is Ulta Growing?

According to consumer foot traffic expert Placer.ai, Ulta Beauty's foot traffic in January 2024 was up 4.9% year-over-year, while its December 2023 traffic was up nearly 17%.

Notably, January 2024 foot traffic was up 43.3% compared to January 2019, signaling a major post-pandemic spike.

Placer.ai touts Ulta's focus on products across a wide consumer base.

Makeup Lags in Ulta Results

"Top sales for the makeup category decreased in the low single-digit range," said Dave Kimbell, chief executive officer of Ulta, during an earnings call. "Softness and prestige cosmetics were partially offset by growth in mass makeup." 

That said, prestige sales did pick up momentum in the second half of 2023.

Top contributors to the makeup sector, the retailer's largest, included "lip layering and blush proliferation," as well as key brands including e.l.f., Nyx, Juvia's Place, Dior, Natasha Denona, Pat McGrath, Hourglass, Tarte and Lancome. 

The retailer has also launched Charlotte Tilbury and added exclusive brands like Half Magic, Polite Society and Reven.

The company views the makeup sector as an opportunity to convert mass sector consumers into prestige buyers.

Skin Care Delivers Strong Growth for Ulta

"Skin care was our fastest growing category," said Kimbell, "delivering double-digit comp growth."

Top category performers included Byoma, Bubble and Good Molecules, as well as dermatologist-recommended brands like La Roche-Posay, Dermalogica and Cetaphil. 

In the body care sector, Ulta has added Sol de Janeiro to 700 stores, "driving growth in the category," per Kimbell.

Hair Care Declines

Kimbell noted that "the hair care category decreased in the mid-single digit range, primarily due to a decline in hair tools and the lapping of strong brand launches in 2022."

Top performers included styling products, as well as professional brands like Redken, Kenra and Biolage.

Kimbell added, "[I]nterest in hair health and treatments drove increased guest engagement with Way, Mielle and Divi."

New brands like Shark Beauty and Lola Bay also did well, as did in-store services.

Fragrance Delivers Double-digit Growth

"The fragrance and bath category ... delivered low double-digit comp growth again this quarter," said Kimbell.

Top performers included launches from Valentino, Burberry and Tree Hut, as well as holiday gift sets from YSL, Gucci and Billie Eilish.

Ulta is Coming to Mexico in 2025 

Kimbell also shared in the company's results announcement,  “International expansion represents an incremental, long-term opportunity for Ulta Beauty to extend our reach and leverage our differentiated value proposition. We have evaluated various operating models and partners, and geographies, and we are excited to announce the formation of a joint venture with Axo, a highly experienced operator of global brands, to launch and operate Ulta Beauty in Mexico in 2025.”

Axo, a "distributor of more than 50 international, highly recognized, brands in Mexico, Chile, Peru and Uruguay," previously managed physical and/or digital stores for Bath & Body Works, Brooks Brothers, Coach, Old Navy, Nike and many more.

During the company's earnings call, Kimbell noted, "[W]e really felt like the Mexican market is the next step for Ulta Beauty for us to have this partnership with Axo. I'm really excited about this. I know that the future is going to be really bright in this partnership. We spend a lot of time with their teams from a cultural perspective also, just even from the best-in-class performance with global partners that they've brought to the Mexico consumer, the Mexican consumer, our border stores are performing really, really well. And I just think it's the next natural step for us as we continue to expand internationally."

Of the latest financial results, Kimbell said, “We closed out a strong 2023 with better-than-expected fourth quarter financial performance. Our compelling holiday plans and thoughtfully curated assortment resonated with our guests and delivered healthy traffic, record brand awareness, and strong member growth. I am proud of how our teams drove these results while making meaningful progress on our multi-year, transformational investment agenda to enable new capabilities for future growth. We enter 2024 well-positioned to drive strong top and bottom-line growth, build on our foundational capabilities, and unlock further advantages of our differentiated model. While we are mindful the near-term macro environment remains dynamic, we are optimistic about the resiliency of the beauty category, energized by the growth opportunities ahead of us, and confident in our ability to deliver for our guests and our shareholders.”

More in Brick and Mortar