The battle between Ulta ($ULTA) and Sephora ($EPA:MC) is one as old as time. But while the beauty retailers remain each other’s biggest competitors, they’ve managed to both stay afloat by fulfilling different consumer needs. Ulta offers a wider range of goods at a lower price point, with 25,000 products from approximately 500 major and emerging beauty brands. Sephora carries a more curated selection, about 300 brands, with an emphasis on the luxury sector.
Today, Ulta will share its Q4 earnings report. Analysts’ predictions were mixed after the company’s stock fell 6.9% on a year-to-date basis on Monday. But there’s a shared optimism around the retailer’s growing skincare, bath, and fragrance businesses, all of which performed well in the third quarter while cosmetic sales declined. Overall, Ulta’s third-quarter sales rose 7.9% year-over-year to $1.68 billion. The adjusted EPS increased by 3.2% to $2.25, exceeding Wall Street’s estimates.
Ulta’s product inventory has seen a 5% relative increase with the inclusion of these new beauty categories, while Sephora’s has decreased by about 5%.
The U.S. makeup market has been slowing as a whole with the rise of direct-to-consumer brands and a newfound focus on natural beauty. And companies like Glossier ($PRIVATE:GLOSSIER), which check both boxes by design, pose a potential threat to traditional beauty retailers.
Ulta has been doing its best to adapt by expanding into the skin and hair care categories and launching a buy-online-pickup-in-store service. Sephora has its virtual try-on app. But Glossier’s loyal consumers have been multiplying since the company's inception in 2010. Over the past year, Glossier’s Instagram follower growth outpaced Ulta by a long shot with a 7,682% relative change. Ulta’s saw a 66% relative change.
The success of Ulta’s earnings report today could suggest where the company will stand in the future of beauty.
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