Ulta scales back store expansion plans
ROMEOVILLE, Ill. Beauty retailer Ulta, which experienced a decline in both net income and same-store sales during the fourth quarter ended Jan. 31, is scaling back store expansion plans for fiscal 2009 in light of the turbulent economy.
Net sales for the quarter rose 10.4% to $341 million from $309.3 million in the year-ago period. Same-store sales decreased 5.5%, compared with an increase of 4.5% in the year-ago period.
Net income slipped to $12.3 million, or 21 cents per diluted share, compared with $13.6 million, or 23 cents per diluted share, in the year-ago period.
“We reported solid fourth quarter results and adjusted full year earnings and comparable store sales equal to last year, despite the difficult economy,” stated Lyn Kirby, Ulta’s president and CEO. “We chose not to participate in the promotional frenzy that emerged across the retail industry in the key selling days leading up to Christmas. While this negatively affected our comp store sales during the gift-giving season, as we believe consumers favored the unprecedented discounts on apparel, we believe our balanced approach maintained the integrity of our brand and value proposition. While we had to reduce our guidance in response to the more difficult that expected holiday season, we delivered 21 cents per share for the quarter.”
In light of the current economy, the company is scaling back its store expansion and plans to open about 35 stores during fiscal 2009, an 11% increase in annual square footage.
In addition, the company has initiated a cost reduction plan that is expected to generate $15 million in savings this year. This involves supply chain, store operating costs and corporate expenses.
Meanwhile, the company is continuing to focus on brand expansion. In the first quarter, Ulta introducing several new skin care brands, including Cosmedicine and Kouros. During the year, it will continue to test existing and new brands.
In partnership with its brands, Ulta held its first ever in-store customer tutorial and promotion with hair appliance brand Chi. Looking ahead, the retailer plans to hold its Annual Spring Beauty makeover events for all of its prestige brands.
Economy’s a beast for prestige beauty industry, research concludes
PORT WASHINGTON, N.Y. Despite a few beacons of light, the economic downturn is taking its toll on the U.S. prestige beauty industry, as sales dropped 3% to $8.38 billion during 2008 compared with the year-ago period, according to market research company The NPD Group.
The decline in the U.S. prestige beauty industry was driven largely by fragrance, which experienced a 6% decline to $2.68 billion. Fragrances for both genders experienced a decline, with women’s fragrance down 5% and men’s fragrance down 8%, according to NPD.
However, sales of higher priced gift sets, those priced between $60 and $100, were a bright spot for the fragrance category. This category represented 65% of gift set sales in 2008, compared with 40% in 2005, and experienced a growth in both dollars (+12%) and units (+11%).
Thanks to new brands like Viva La Juicy, Estee Lauder Sensuous, Ed Hardy and the Harajuku Lovers collection, women’s new fragrances posted a 9% boost in 2008, according to NPD.
Fragrance sales have struggled for the past few years, but what is a bit of a surprise, according to NPD, is the decline in the makeup category. Annual 2008 marked the first time makeup products posted a decline, dropping 3% in dollars and 6% in units. All segments in the makeup category (eyes, lips and face) experienced a decline in 2008.
Natural makeup did experience a boost in the past year, while premium-priced products in the face segment also showed strength in 2008, even as other makeup segments struggled with their premium-price offerings, the research stated.
Prestige skin care managed to stay afloat, capturing 29% dollar share, an additional share point over 2007, of total prestige beauty sales. Total prestige products, which include face, body, sun and hair products, generated $2.4 billion in 2008.
In addition, anti-aging and specialization products (e.g. allergy relief, redness and whitening/brightening) were up double digits and premium priced facial products (priced $70 and up) increased 4% from 2007.
Natural/spa/wellness skin care brands showed the strongest dollar growth of the distinctive brand types, up 6% versus the year-ago period to $304 million.
“The economic realities of 2008 have created fundamental shifts in the behavior of our consumers and the way they approach beauty. In 2009, we recognize that while consumption will not stop for prestige beauty, it has changed. It has become and will become more careful, more selective and more meaningful,” stated Karen Grant, senior global industry analyst and VP beauty for NPD. “Across all three prestige beauty categories, there were areas that experienced growth despite overall soft performance. We saw growth in premium price, natural and new innovations among trusted brands as well as alternative brand types.”
Rite Aid launches five-blade shaving system
CAMP HILL, Pa.
As consumers increasingly shift to lower-cost private brand products in an effort to curb costs amid the current economic crunch, Rite Aid has announced the launch of its M5 Magnum five-blade shaving system, which will be available exclusively at more than 4,900 Rite Aid stores nationwide beginning March 29.
According to Information Resources’ “Competing in a Transforming Economy” series, grocers and pharmacy retailers are experiencing the biggest jump in private brand share over the past year. Research from IRI shows that private brand products accounted for 17.1% of dollars spent in all package goods categories last year, up 0.7 points last year. That number is expected to increase at a significantly accelerated rate in each quarter of 2009 and beyond.
“The launch of the M5 Magnum underscores Rite Aid’s commitment to providing our customers with high-quality products at up to 40% less than name-brand equivalents,” stated Bryan Shirtliff, Rite Aid VP, category management. “Now more than ever, consumers are evaluating their spending and realizing they can experience the same premium performance with more cost-efficient private brand products. With the M5 Magnum, we’re offering a value-based solution at a time when consumers need it most.”
Rite Aid’s M5 Magnum razor has a retail price of $6.99, or $3 less than the comparable national brand, the retailer stated. M5 Magnum’s replacement blades are priced at $7.99.
In its March 29 weekly circular, the pharmacy retailer is inviting customers to try the M5 Magnum for a special price of $4.99, with a no-risk “free bate.” Customers who purchase the M5 Magnum between March 29 and April 4 can apply for a full refund of the purchase price through Rite Aid’s Single Check Rebate program.
The M5 Magnum has five titanium-coated blades and a trimmer on the back of the cartridge for a more accurate cut on sideburns, goatees and under the nose. The razor also features a soap bar, a lube strip with botanical oils, and a 90-degree trimming angle. Comfort and ease of use are further enhanced by the M5 Magnum’s ergonomic handle design with soft-grip raised ribs, which, according to Rite Aid, was preferred by consumers in side-by-side testing against leading name brands.