Ulta’s Sales Shine Again, Sephora Gets A New CEO And Consumer Spending Jumps: A Look At November 2022’s Retail News

The beauty industry seems to have an uncanny ability to get people to spend even when they’re getting pinched. The category rose to the top of the pack over the busy Black Friday/Cyber Monday period by outperforming nearly every other consumer product goods category, and it helped buttress sales for retailers that otherwise stumbled. Below, we summarize recent retail news.

Retail Spending Bounces Back 

While retail spending in the United States was flat in September, it escalated in October as consumers jump-started their holiday shopping. Retail sales for the month increased by a seasonally adjusted 1.3% over September, according to the U.S. Census Bureau. Retail sales are unadjusted for inflation and capture spending at stores, online, restaurants, car dealerships and gasoline stations. Spending on services like transportation and travel, housing and utilities isn’t included.

Consumers opened their wallets wider in October across categories, from staples like groceries and gas to discretionary items like cars and electronics. Brick-and-mortar retailers registered a boost, with health and personal care stores, clothing stores, general merchandise stores and department stores experiencing sales lifts during the month. 

Online spending rose 10.9% over September as shoppers took advantage of early holiday deals, per a report by Adobe Analytics. Toys, outerwear apparel, gaming devices and other electronics were among the month’s top sellers. In total, consumers propelled $72.2 billion in online purchases.

Spending gained momentum in October as inflation eased for the first time since January. Consumer prices increased 7.7% from the same period last year, down from 8.2% in September. Prices peaked in June when inflation reached a four-decade high of 9.1%. Retail sales grew faster than the rate of price increases in October, with the consumer price index increasing by a seasonally adjusted .4% over the previous month. 

Job growth withered in October. Another 261,000 jobs were added to the U.S. labor market, but September and August had 250,000 and 310,000 new jobs, respectively. Although October’s job growth was above pre-pandemic levels, it marks the slowest pace of job growth since December 2020. Similar to September, healthcare and hospitality led the charge in the number of jobs added in October. Retail, warehousing and transportation brought up the rear. 

The national unemployment rate inched up to 3.7% from 3.5% the prior month as layoffs in the technology, media, e-commerce, fulfillment and apparel sectors persist. 

Beauty Scores On Black Friday/Cyber Monday 

Beauty scored wins during the Black Friday/Cyber Monday holiday stretch, which saw 17 million more consumers shopping in stores and online than last year. Online purchases for health and beauty products were up by 16%, according to Bluecore, a retail technology company tracking purchases across eight categories.

Health and beauty was the top-performing category, ahead of apparel, electronics, home and sporting goods. With a 26% bump in website traffic from last year, the category notched the highest online traffic during the important holiday shopping period.

While multi-category brick-and-mortar stores like Walmart, Target, Costco, Nordstrom and T.J. Maxx had Black/Friday traffic dips, traffic at beauty retailers and spas increased 8.4% from last year and 19.8% from 2019, according to traffic analytics firm Placer.ai. Ulta Beauty’s store traffic climbed 16.5% on Black Friday from last year and 31% from 2019. 

Sephora Gets A New CEO 

It’s been a period of change for senior management at Sephora. Guillaume Motte will assume the role of CEO and president on Jan. 1, reporting to Chris De Lapuente, who precedes him in the role after stepping into it temporarily following Martin Brok’s abrupt departure from Sephora seven months ago.

Motte is not new to Sephora or its parent company LVMH Moët Hennessy Louis Vuitton. He served as president and CEO of Sephora in Europe and the Middle East for three years before moving to LVMH’s fashion division, where he’s been deputy chief executive.

Motte is reentering the Sephora ecosystem as the retailer plans to double its business within the next five to 10 years by growing its product assortment and geographic reach. According to the publication Women’s Wear Daily, haircare, body care and wellness are being looked at as potential areas of expansion. In the fall, the retailer returned to the United Kingdom following a 17-year absence from the country, and it’s expanding its presence in other regions, particularly Latina America and Asia. 

Ulta Sales Surge And Target Sales Decline

Ulta continued to outperform the retail sector in the third quarter. Its sales, comparable-store sales and profits were up double digits in the quarter. Specifically, its net sales jumped 17.2% to $2.3 billion, and net income rose 27.5% to $274.6 million. Comp-store sales were up 14.6%, fueled by a 10.7% increase in transactions and a 3.5% increase in average ticket.

Makeup, skincare, haircare, fragrance and bath saw double-digit gains over 2021 as did both prestige and mass segments. However, mass generally outperformed prestige during the quarter. Ulta CEO Dave Kimbell noted the relatively robust performance of mass could signal the beginning of trade-down behavior. 

The retailer revised full-year guidance to reflect its strength. Its sales are expected to hit $10 billion, and comps are expected to increase 13.2%. Earlier full-year guidance pegged sales at $9.75 billion and the comps increase at 10.5%. In the fourth quarter, Ulta expects the comp-store sales increase will land somewhere between 6% and 8%, up from its previous forecast of a low single-digit increase.

The beauty specialty retailer has been on a tear this year, posting top- and bottom-line growth. Other major retailers have grappled with over-extended inventories and profit losses. Ulta’s net sales increased by 16.8% in the second quarter, and its operating and net income surged by almost 18%. Its sales and profits saw double-digit hikes in the first quarter, too.

Ulta Beauty notched another successful quarter of top- and bottom-line growth.

While Ulta soars, its shop-in-shop partner Target has been dealing with lackluster sales and dinged profits. The chain’s comp-store sales grew 2.7% in the third quarter. It had 12.7% sales growth in the same period a year ago and 20.7% growth in the same period two years ago. Beauty, food and beverage, household essentials and private brands were growing categories in the third quarter. Home, electronics and sporting goods slumped. 

The beauty category, specifically, saw gains in the mid-teens. The Ulta Beauty At Target assortment continued to be a bright spot for the retailer. The shop-in-shop blending mass and prestige beauty merchandise nearly tripled its sales volume compared to the same period a year ago. More than 350 Ulta Beauty At Target locations are open across Target’s network of nearly 1,950 units. 

Target’s operating and net profits plunged at least 50%. Shoppers were price-sensitive and reliant on promotions. Amid challenges, Target revised its full-year outlook downward. Its fourth quarter operating margin rate is expected to be around 3%. Previously, Target forecast its operating margin rate would be 6%. 

Food Boosts Walmart’s Top Line

Walmart fared better than Target as its U.S. grocery business nabbed market share in the third quarter. The humungous retailer’s revenues were up 8.7% to $152.8 billion. U.S. comp-store and e-commerce sales climbed 8.2% and 16%, respectively. Nearly three-quarters of Walmart’s grocery gain came from consumers making in excess of $100,000 a year. 

However, the chain’s bottom line took a hit thanks in large part to $3.1 billion in legal payments made to resolve opioid-related lawsuits. Operating income fell 53% from last year to $2.7 billion. Sales of general merchandise declined by low single digits. Demand in discretionary categories like electronics, home, and apparel softened. Gross profit dropped by 77 basis points as the mass-market retailer slashed prices in low-performing categories.

Buoyed by grocery, Walmart released a more positive full-year guidance. Net sales growth is now forecast to be 5.5%. The previous estimate was net sales growth of 4.5%. Adjusted operating income is expected to dip between 6.5% to 7.5%. A previous forecast was for a 9% to 11% decrease.

Along with Bloomingdale’s, Bluemercury helped bolster parent company Macy’s Inc.’s disappointing earnings in the third quarter.

Department Stores Underperform

Department stores registered top- and bottom-line declines during the third quarter. They’re contending with weakening demand, high markdowns and internal struggles.

Nordstrom’s net sales dipped modestly 2.9% to $3.4 billion. The department store retailer was assisted by moving its annual anniversary sale from the third to the second quarter. Its e-commerce sales were down 16.4% for the third quarter, and sales at Nordstrom and Nordstrom Rack fell. Nordstrom registered a $20 million loss compared to net income of $64 million last year.

Kohl’s comp-store sales declined 6.9% from a year ago, and its net income tanked 60%. After revising its yearly guidance several times this year, the department store chain withdrew its outlook and declined to provide performance estimates for 2022. Michelle Gass stepped down as CEO on Dec. 2 following months of turmoil. 

Macy’s sales decreased 3.9% to $5.23 billion in the third quarter. It’s margins were squeezed by heightened promotions and hefty markdowns. Net income dove almost 55% to $108 million. Bloomingdale’s and Bluemercury, the higher end concepts in Macy’s portfolio, were highlights. Their comp-store sales were up 5.3% and 14% for the third quarter, respectively. Despite losses in the third quarter, Macy’s full-year guidance remains unchanged. Its net sales are forecast to land between $24.34 billion and $24.58 billion.

Additional News

  • Thirteen Lune To Open Flagship Store In Los Angeles Early Next Year [Beauty Independent]
  • Beauty Retailers Are Upbeat Heading Into A High-Stakes Black Friday [Beauty Independent]
  • Vspot Adds Second New York City Location With Flatiron Flagship [Beauty Independent]
  • Pretty Well Beauty To Open First Brick-And-Mortar Store At The World Trade Center [Beauty Independent]
  • New Online Marketplace Skinholy Is Built To Spotlight And Support Emerging Beauty Brands [Beauty Independent]