Ulta Beauty (Ulta) is the largest retailer of beauty products in the United States. Loyal members are offered a selection of 29,000+ products, which include bath, cosmetics, skincare, haircare, & fragrance across 600+ brands in retail stores, its e-commerce site (Ulta.com) and Target outlets. Currently, Ulta has a market cap of US$ 17.3 billion. Here, I’ll share 5 things to know about Ulta after reading the company’s annual reports. They are as follows:
1. Store Count
Ulta grew its store count from 449 in 2011 to 1,445 in 2024. The size of each store is around 10,000 sq. ft. and they are located in convenient and high-traffic areas. Almost all Ulta stores offer beauty services that include a full-service hair salon and a Benefit™ Brow Bar.
In addition to retail stores, Ulta partners with Target to set up an elevated 1,000 sq. ft. Ulta Beauty retail spaces within Target stores. Starting in 2021, it now has more than 600 Ulta Beauty retail spaces in Target stores in 2024.
Source: Ulta
2. Loyal Members
Ulta derives >95% of its sales from its loyal members who subscribed to its own loyalty programme known as Ulta Beauty Rewards. Ulta seeks to understand its members in terms of their preferences so that they can offer recommendations and experiences that are highly relevant. In the last 10 years, Ulta increased the number of loyal members from 18 million in 2018 to 45 million in 2024.
Source: Ulta
3. Financial Results
Ulta grew its net sales by a CAGR of 13.3%, from US$ 3.24 billion in 2014 to US$ 11.30 billion in 2024. This is in line with its growth in store count and members. With slight margin improvements, Ulta’s net income grew by a CAGR of 16.67% from US$ 257.1 million in 2013 to US$ 1.20 billion in 2024.
The only exception is in 2020.
Due to COVID-19, Ulta had temporarily closed its stores, implemented social distancing, and reduced operating hours. In addition, it had incurred US$ 114.3 million in impairment losses, which arose from impairments on assets from certain stores, closure of 19 stores, and suspension of expansion plans into Canada. This caused Ulta to record lower net sales and net income at US$ 6.15 billion and US$ 175.8 million respectively in 2020.
Source: Ulta
Source: Ulta
4. Capital Allocation Strategy
In 2015-2024, Ulta generated US$ 10.0 billion in operating cash flows. From this sum, it spent and allocated its capital to:
a. US$ 3.2 billion in capital expenditures (CAPEX)
b. US$ 6.6 billion in net share buybacks.
c. US$ 0.4 billion in business acquisition and equity investments.
Source: Ulta
Source: Ulta
Ulta spent heavily on share buybacks. Thus, it has reduced its share count, from 64 million in 2013 to around 47 million in 2024. This has contributed to a CAGR of 20.3% in Ulta’s EPS for that 10 year period, up from US$ 4.00 in 2014 to US$ 25.44 in 2024, despite a CAGR of 16.7% in net income.
Source: Ulta
5. Valuation
Excluding 2020, Ulta’s 10-year P/E Ratio and P/OCF average are 25.29 and 19.48 respectively. The company’s dividend yield is 0% as it does not pay dividends to its shareholders.
Conclusion:
Ulta had expanded its store count, struck a partnership with Target and grew its number of members via its loyalty programme. Such had contributed to double digit growth in net sales and net income in 2015-2024. In Q4 2024, Ulta doesn’t have any borrowing outstanding and keeps a current ratio of 1.70.
Based on the company’s annual report 2024, Ulta revealed its potential to expand its number of stores to 1,800+ in the U.S. and 800+ retail spaces at Target in the long run. It also formed a joint venture partnership with Grupo Axo to introduce and run its stores in Mexico in 2025 and a franchise partnership with Alshaya Group where Alshaya Group licenses the Ulta Beauty brand name and operating model in the Middle East.
There you go, the 5 things to know about Ulta Beauty before investing.
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