Ulta Beauty (ULTA) knows your face looks tired as hell from staring into a computer at all times of the day during the COVID-19 pandemic.
Now that you are becoming more mobile post-vaccination, Ulta is testing a solution for those worn out faces (and at the same time making more money from its salon spaces in its stores, where it’s known for offering hair and eyebrow services) — facials.
“Services play an important role in driving guest engagement, loyalty, frequency, and spend. I am excited to share that we plan to relaunch skin services in select stores in the third quarter. We plan to offer new services that target specific concerns such as hydration, anti-aging, as well as acne facials that cater to our Gen Z guests. And we will test micro-channeling, derma-planing, and HydraFacials in select stores,” Ulta Beauty CEO David Kimbell told analysts on an earnings call Wednesday evening.
The facial-service test comes as traffic begins to build at malls and Ulta looks to capitalize on interest throughout the pandemic on face creams and serums. In the second quarter, Ulta said comparable sales for skincare products rose by double-digits compared to the second quarter of 2019 (pre-pandemic).
Makeup sales were down slightly versus the second quarter of 2019 as the category’s growth is still being hurt by mask-wearing amidst the pandemic.
To be sure, Ulta does have some room to test something like facial services as the business has recovered from the very lows of the pandemic. Here is how Ulta Beauty performed in the second quarter compared to Wall Street forecasts:
The company also lifted its full-year profit forecast to $14.50 a share to $14.70 a share, up from $11.50 to $11.95 a share previously.
Shares of Ulta Beauty fell slightly in Thursday’s session. The stock is up 35% year-to-date, outperforming the 20% gain for the S&P 500.
Wall Street stayed optimistic on the cosmetics seller following the results.
“Across the metrics that matter most, the company beat and the trend-line is constructive. All categories ex-makeup are up double-digit percentage year-over-year and while makeup and traffic remain down to pre-pandemic levels, the model is performing so much better on all other inputs. Second half guidance appears reasonable, implies steady on two-year basis balanced with greater competition and potential for promos to return,” said Jefferies analyst Stephanie Wissink.
No word on whether Ulta facials are coming to your local Target, however.
The beauty chain has begun opening its first shops inside of the retailer as part of a deal struck late in 2020. I’m not frowning on the idea of buying a $7 steak at Target, then hopping over to the Ulta shop inside the store for an equally affordable detoxifying face mask application.
Somehow I don’t think I would be alone.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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