Beauty Store Business magazine - January, 2020

ULTA Beauty Is Testing Smaller Brick & Mortars

ULTA Beauty is experimenting with a smaller-store format at two locations and has big plans to beef up its distribution-centers infrastructure, the beauty retailer's CEO said in a Dec. 4 conference call with financial analysts on the company's excellent third-quarter 2014 results.

"In terms of the small-store tests, we opened two 5,000-square-foot stores in September—one in Vernal, Utah, and one in Morganton, North Carolina," said Mary Dillon. "These stores feature a curated assortment with every major category represented, lower fixture heights for increased visibility and a full guest experience with a three-chair [hair] salon, Dermalogica skin services and a Benefit [Cosmetics] brow bar. And [at] these two stores we're piloting a new capability for guests to order in-store on an iPad and have the product shipped for free from our DC [distribution center] to their homes in order to give our guests access to our full assortment."

Dillon added, "We continue to monitor the performance of these stores and in their initial weeks they're exceeding their sales budgets and confirming our hypothesis that these stores will be extremely well-received by guests and that they're likely to have a higher mix of prestige-product sales versus the chain. We expect to learn a lot about operating small stores during these tests to help us be successful in rural and urban markets in the future."

In other news, ULTA Beauty's Greenwood, Indiana, distribution center is now under construction and is expected to open in mid-2015, stated Dillon. "We're currently looking for a location in the South for our fifth DC to open in 2016," she noted.

"These buildings will have all-new systems and operating models, driving more efficiency, increasing replenishment speed and improving in-stocks, while making it easier for store associates to stock shelves and free up their time to spend with our guests," commented Dillon.

Watch the grand-opening festivities of the ULTA Beauty store in Vernal, Utah, on YouTube, which was posted Sept. 26, 2014: www.youtube.com/watch?v=E9ibS0G0wMQ.

[Image above of the Morganton, North Carolina, ULTA Beauty store that was posted Sept. 11, 2014, courtesy of Sharon McBrayer, The News Herald, Morganton, North Carolina; click on The News Herald story online here.]

[Earnings-call transcript by Seeking Alpha used]