Ulta Salon, Cosmetics & Fragrance wants to be every woman's ultimate beauty stop. The company operates more than 700 stores nationwide. About a third of its locations are in Illinois, Texas, Florida, and California. Ulta stocks more than 20,000 prestige and mass-market products, including cosmetics, fragrances, skin and hair care products, salon styling tools, and accessories. Stores offer hair salon services, as well as manicures, pedicures, massages, waxing, and other beauty treatments. In addition to its brick-and-mortar presence, the company markets more than 20,000 products and more than 500 brand names through its e-commerce site. Ulta was founded in 1990 by Terry Hanson and Dick George.
Ulta operates about 715 stores across 47 states. Illinois, Texas, Florida, and California make up more than a third of its stores network.
The retailer operates its business through one reportable segment. Ulta combined its three operating segments -- retail stores, salon services, and e-commerce -- into one reportable segment, because it determined that each previous segment boasts a similar consumer, economic characteristics, nature of products, and distribution methods.
Ulta's operations are supported by three distribution facilities located in Illinois, Arizona, and Pennsylvania. (A fourth is slated to open in the Dallas area in late 2015.) The retailer carries more than 20,000 products and replenishes its stores with less-than-case quantities to allow it to ship less than an entire case when only one or two of a particular product is required. Its distribution facilities use warehouse management and warehouse control software systems, which has been upgraded or installed during the past three years.
Ulta's ultimate goal is to grow its US stores network to approximately 1,200 locations. It aims to continue opening stores in markets where it currently operates and in new markets as it tracks its long-term target of 15% to 20% new store growth rates. It has found success opening new locations in diverse markets nationwide. To this end, the retailer opened 127 new stores in fiscal 2014, marking a 22% increase in square footage growth. Meanwhile, Ulta remodeled seven stores and relocated four others over the same period. During the past two years, the company has focused on opening new stores in existing centers. It anticipates following this store growth strategy for several more years. To support its growing business, Ulta will break ground on a new $18-million, 670,000-square-foot distribution center near Dallas that's expected to be completed in late 2015. Ulta is projecting that the new facility will generate almost $14 million in sales from e-commerce transactions in its first year of operation.
Ulta's strategy is to benefit from a change in where women -- especially younger generations -- purchase their beauty products. As department store operators have consolidated and slumped in recent years, specialty stores (such as rival Sephora) have been looking to capture a bigger share of the market for prestige beauty products. To that end, Ulta is focused on expanding its range of higher-priced "prestige" products, such as Estée Lauder fragrances, Frédéric Fekkai hair care products, and Smashbox cosmetics. The prestige category is the beauty industry's highest growth category. As part of this push, Ulta added popular fragrance brands Coach, Dolce and Gabbana, Cartier, Fendi, Chloe, Marc Jacobs, Oscar de la Renta, and Thierry Mugler. New cosmetics brands include Dermalogica, Philosophy, Dr. Brandt, Juice Beauty, Vichy and La Roche-Posay, Benefit, Butter London, CK One, and Laura Geller. It hair care additions include DermOrganic, Living Proof, Ouidad, and Carol's Daughter.
It is also working to drive more customers to its revenue-generating salon areas for hair, nail, and facial treatments. A cornerstone of the Ulta business is its work to build customer loyalty. The beauty retailer maintains an ULTAmate Rewards program (for purchase-based points) and a nationwide program that offers certificates for free beauty products.
The retailer fills its stores with help from some 300 product vendors, which altogether offer more than 500 brands. Its top 10 vendors include the likes of Bare Escentuals, Farouk Systems, Procter & Gamble, Coty, and L'Oréal. The group represents about 53% of Ulta's total annual sales.