Image Courtesy of Target
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.