Ulta Builds Out Digital Store Experience and Bolsters Supply Chain Operations

Key takeaways:

• Ulta Beauty grew total sales over 18% in both the fourth quarter and the year.

• Executives point to an improved online experience as part of the reason for growth.

• About one-third of online orders in 2022 were fulfilled by stores, a slight increase over 2021.

Ulta Beauty is making steady progress in its multiyear business plans, investing in supply chain optimization, digital stores, and workforce culture. In the latest earnings call, members of Ulta C-suite outlined recent financial successes and homed in on the tech investments forming part of its longer-term growth strategy. 

Record-breaking Earnings and Supply Chain Improvements

Ulta made a strong financial showing in the latter part of 2022, achieving $10 billion in annual revenue and an annual net income of over $1 billion. Looking ahead, supply chain will be a key focus area in the upcoming fiscal year. The retailer has initiated a multiyear optimization effort, breaking ground on its first market fulfillment center and rolling out a planned retrofit for its distribution center in Greenwood, DC. Ulta expects both facilities to be fully operational by this year. To drive these efforts, the retailer will devote $70 million of its budget to supply chain operations.

“In addition, we will begin the retrofit of our Dallas DC, and construction of our second market fulfillment center here in Bolingbrook, Ill. This new facility will replace our existing Romeoville facility and transition our experienced team to a new state-of-the-art facility. In addition to these transformation initiatives, we will leverage our established continuous improvement capabilities to drive additional cost efficiencies,” said Dave Kimbell, Ulta’s CEO, during the call with investors. 

Driving Growth Through Digital Expansion

In addition to supply chain optimization, the beauty retailer also plans to drive more growth in its digital experiences, with digital stores a particular area of focus in the upcoming year.

“Between BOPIS, same-day delivery, and ship-from-store capabilities, 31% of our digital orders this year were fulfilled by stores, up from 28% last year,” Kimbell shared. The retailer also experimented with new digital experiences, refreshing its digital stores and building out its virtual hairstyle and skincare try-on capabilities.

Through its partnership with Target, the beauty company also added 254 more Ulta Beauty at Target shop-in-shop locations in the fourth quarter of 2022. In the upcoming year, Ulta plans to open 25 to 30 net new stores in addition to remodeling or relocating 20 to 30 stores throughout the course of the year. 

Workforce investments look to be a strategic growth enabler this year, as well. “Our winning culture is key to driving our success, so our fifth strategic pillar is focused on protecting and cultivating our world-class culture and talent,” Kimbell stated. Our vision is to create a highly aligned, engaged workforce and an inclusive workplace that creates opportunities for our people and our business, and I am proud of the progress we made.”

Specifically, these investments allowed Ulta to promote over 11,000 associates last year while boosting enterprise-wide retention.