Ulta reports out COVID-19 sales damage
Beauty retailer Ulta revealed a more than 35% drop in comparable-store sales for the first quarter, a number that isn’t far off from what some grocers and retailers have gained in the first quarter.
It’s a stark reminder of the uneven impact of the coronavirus pandemic between "essential" and "nonessential" retailers.
For Ulta, the temporary store closures caused by the national crisis proved detrimental. Comparable sales for stores open at least 14 months, including locations temporarily closed and e-commerce sales, showed a drop of 35.3%, versus the 7% increase a year ago. Net sales decreased 32.7%, close to $1.2 million, versus the $1.74 in first-quarter sales the previous year. Gross profit decreased to $303.6 million compared to $644.8 million in the first quarter of fiscal 2019.
The good news is Ulta is taking steps to get operations closer to where they were — recently reopening 333 stores and continuing to push its curbside pickup at 840 locations.
“While it is still early, we have seen stronger-than-expected sales in reopened stores, and we’re seeing great engagement with our salon services, where available,” said CEO Mary Dillon. “At Ulta Beauty, we have a strong, differentiated operating model, a brand that is known and loved, and passionate and optimistic associates, and I am confident we will emerge from this crisis well positioned to accelerate our market share gains and extend our competitive advantages.”
Ulta said the company ended the quarter with $1.2 billion in cash, cash equivalents and short term investments, and is confident it has sufficient cash liquidity to fund operations.
“Fiscal 2020 started off well, with good growth in comparable store sales, market share, and our Ultamate Rewards loyalty program through mid-March. However, the rapid escalation of COVID-19 resulted in significant disruption to our operations,” Dillon said.
“For much of the first quarter, Ulta Beauty operated as a digital-only business, and while e-commerce sales exceeded our expectations, it was not enough to fully offset the impact of our store closings,” she continued. “As we have navigated the pandemic, our priority for every decision has been to protect the well-being of our associates and guests, and I am incredibly proud and appreciative of how quickly our teams adjusted to the dynamic environment.”
Whereas Ulta faced extra challenges from the pandemic, retailers deemed “essential,” have been reporting large gains. Dollar General just reported comps gains of 22%, with Target also posting sales gains, and grocers big and small have been reporting double-digit gains.