Image Courtesy of Target
April 16, 2025
Why Is Target Pausing Its Ulta Shop Expansion?
Target closed 2024 with 610 Ulta Beauty in-store shops, reaching about a third of its U.S. doors. Additional openings, however, have been suspended amid an increasingly competitive beauty category.
“In joint partnership with Target, we’ve made the decision to really lean into the 600-plus stores that are open this next year and really look at ‘How do we continue to drive efficiencies and leverage the learnings that we’ve had to really unlock value for both of us collectively together?’” said Kecia Steelman, Ulta’s CEO, last week at JPMorgan’s 11th Annual Retail Round Up Conference.
She added, “So we’ve taken a little bit of a pause in opening more stores, but that is really to just make sure that we’re working on all the things that we’ve learned over the last few years collectively together and bring two great companies’ minds together to really make this even a greater value for both of our organizations”
Ulta Beauty shops debuted in over 100 Target stores in fall 2021. By February 2022, Target announced plans to open 250 Ulta shops in 2022 and committed to “operating at least 800” over time as the shops were increasing traffic, awareness, and loyalty.
During an earnings call last August, Steelman, Ulta’s COO at the time, said, “I think it’s also really key that nearly 4 million guests have linked their Ulta Beauty and their Target circle loyalty programs together.”
Target also spoke positively of the Ulta partnership and overall beauty business to analysts over the last year. At an investor meeting in early March of this year, Rick Gomez, Target’s EVP and chief commercial officer, said Target’s beauty business has “nearly doubled” in size since 2019. He said, “Amazing in-store presentation and a great digital experience, our partnership with Ulta Beauty, and our assortment that includes some of the leading brands in the industry have combined to make Target an undisputed beauty destination.”
Target in February announced plans to add 2,000 new beauty products, 90% of which will be priced under $20.
Target employees in a Reddit post speculated that high shoplifting rates, failure by Target to adequately staff the Ulta shops, and cannibalization of nearby Ulta stand-alone locations were factors in the pause. Retail Brew, which reported on a Reddit thread, noted that the Ulta shops are staffed by Target, and understaffing was an issue in Sephora’s dissolved partnership with JCPenney.
Both chains are also facing headwinds this year. In its fourth-quarter earnings report, Target warned of flat same-store sales in 2025 as shoppers continue to pull back on discretionary spending.
Ulta, in releasing fourth-quarter results, said it lost market share in beauty for the first time last year. Steelman said on an analyst call that while competition in beauty “has never been more intense,” Ulta’s business has become more “complex” as it’s grown, and she vowed to improve in-store stocks, staffing, cleanliness, and navigation. Steelman said, “Our in-store presentation and guest experience today are not as strong as we would like.”
The pause comes as Kohl’s recently announced plans to expand its Sephora in-store shop program to all locations in 2025, with the shops driving a 13% comp hike in the beauty category in the fourth quarter.
Discussion Questions
What would you speculate is behind the pause of the rollout of Ulta Beauty shops inside Target?
Are Sephora’s in-store shops inside Kohl’s better set up for success than Ulta’s inside Target, or do you suspect the pause was due to broader challenges facing the beauty category and retail or other reasons?
Poll
Loading …BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Nolan Wheeler
Founder and CEO, SYNQ
Paula Rosenblum
Co-founder, RSR Research
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Target is not delivering the growth that Ulta needs and many of the existing shops are not being run particularly well. They suffer from out of stocks, often being cordoned off due to theft, a lack of customer service, and weak merchandising. As Ulta is offering a prestige/premium product this jars with the proposition. The reason for this staffing problem is part of a wider issue across many Target stores: there are not enough labor hours, especially as dealing with online orders is absorbing more and more time. That means staff are being spread too thinly and are not able to undertake all the basics of retail. Dealing with this problem means spending money with a potential hit to the bottom line, which is why Target is sitting on its hands. Sadly, the short term protection of profit is causing longer term damage to the Target brand and the company’s prospects.
As for Kohl’s, Sephora is working for them – partly because staff are not being pulled off onto other things and there is a degree of discipline in the shop-in-shop. However, there are other differences with Target/Ulta. One of them is that Target is often in the kind of locations where Ulta would have its own stores; so this is now limiting where Ulta can open new space. In contrast, Sephora is mostly mall based so Kohl’s with its off-mall stores fills an actual gap. The other point is that before Sephora, Kohl’s beauty offer was inconsequential, so almost all of the sales are incremental. Target has its own beauty business so there is a degree of tension with Ulta.
I’ll take them at their word (“really to just make sure that we’re working on all the things that we’ve learned over the last few years”); might some of those “things” be negatives that actually imperil the relationship? Perhaps, but we’ve nothing but gossip to support the idea.
That having been said, I’m not overly keen that this seemed like a necessary relationship in the first place (and I say that mostly from the POV of Target): Ulta isn’t some couture brand opening up a boutique; it may well have some of its own items, but primarily it’s a retailer..aka: a competitor. The comparison to Kohl’s and Sephora seems off: Kohl’s had little experience in cosmetics, bringing in a pro made sense. This seems more like an admission of defeat from Target.
Hard to know whether this was a Target or an Ulta call — or a mutual decision. In any case, Target may be learning some of the same lesson that Kohl’s learned in its Sephora rollout. Even though the comp sales in cosmetics are healthy at Kohl’s, the expense of the installation and the effect on other businesses (like jewelry) has been a drag on Kohl’s overall performance.
The Ulta inside my local Target has shrunk in size since its opening a couple of years ago. Plus, it’s surrounded by stanchions that limit shoppers entrance and exit to one point. It’s hard to shop.
Target’s plan to add 2,000 new beauty products, with 90% priced under $20, should tell you something. Target’s HBC focus looks like it’s going inside.
This is more about Ulta than it is Target. There are simply too many of them. It has become shocking. There are as many in Miami as there are Publix, and that’s really saying something. At least that’s the way I see it.
The decision to pause the rollout may have been influenced by a number of factors. With a growing focus on direct-to-consumer brands and online shopping, the beauty industry is experiencing shifts in consumer preferences.
Furthermore, both companies may have difficulty expanding their physical presence at the desired rate due to economic uncertainties and supply chain challenges.
Through its partnership with Kohl’s, Sephora will be able to leverage Kohl’s established customer base and mid-range retail positioning, which may offer a strategic advantage in reaching a broader audience.
Alternatively, Ulta’s partnership with Target places it within a retail giant with multiple product offerings and extensive foot traffic, potentially increasing its visibility among a diverse consumer demographic.
However, broader challenges in the retail and beauty industries may still have an influence on the ultimate success of both strategies.
The beauty category is a high-touch business. It requires selling and high levels of customer service. This model is challenging for Target, or any big-box retailer, to support, as they need more generalists in their store teams to effectively grow this category. It doesn’t help that consumer confidence is in plummeting, which will impact discretionary spending in beauty.
If the employee posts are accurate, the pause may come down to expanding faster than operations could support. Shop-in-shop concepts succeed when staffing, stock, and the guest experience are consistently strong. If those fall short, both brands risk losing trust and sales.