The Motley Fool Money team turns its attention to the impressive results Ulta Beauty (NASDAQ:ULTA) has churned out under the leadership of CEO Mary Dillon. From striking the right balance between the company's e-commerce and brick-and-mortar efforts to building up a massive loyalty program, Ulta is a star in an otherwise challenging retail sector.

A full transcript follows the video. 


This video was recorded on March 10, 2017.

Chris Hill: Guys, stop me if you've heard this one before -- shares of Ulta Beauty hitting a new all-time high this week after fourth quarter profit and revenue came in higher than expected. Andy, when we talk about retailers attempting to go after the omnichannel approach, you look at what Ulta Beauty is doing, and they're really setting a great standard in terms of how to balance e-commerce and physical stores.

Andy Cross: You got that right, Chris. Mary Dillon came on a few years ago as the CEO and really revolutionized the Ulta business. Their e-commerce sales were up 60% last quarter. They'll probably be not quite that explosive in 2017, probably. But still, 40% growth. This company continues to just knock it out of the park on both the retail side and the e-commerce side. They have 22 million people tied to their membership rewards. I think that's twice as much as Starbucks. It's a substantial amount. And those people drive a lot of their sales and a lot of high return sales, both in the store and on e-commerce, where their comp growth still continues to be 13%. I think last quarter, the comp store growth was up 17%, that includes e-commerce. But just in the retail environment alone, which, we all know the struggles retailers are having. For Ulta, the retail comps were up 13%. And their salon comps were up 9%. So, they continue to do it well. And cosmetics is probably one of the only areas really doing well inside retail, if you're not named Amazon.

Matt Argersinger: Or, if you're not a home improvement retailer like Home Depot or Lowe's.

Cross: True, good point, Matty.

Argersinger: It's remarkable, I think, looking at Ulta -- we've had Ulta on our Million Dollar Portfolio watch list and not bought it, stupidly, for a long time. But, you try to identify those businesses that are truly Amazon-proof, and by all accounts, Ulta looks like it's completely Amazon-proof.

Cross: Yeah. Another factor, Chris, is that their sales were up 25% in the quarter and up 24% for the year. And their store footage was up 11%, and their average inventory per store was up 11% as well. So, just think about the economics, that works its way through to the bottom line, and that's why their earnings grew 30% last quarter, and 30% for the year.

Hill: And Andy, you talk about the cosmetics industry in general, e.l.f. Beauty (NYSE:ELF) also hitting a new high this week. They had strong fourth quarter results. I was completely unfamiliar with them. I mean, come on, the name of the company is e.l.f. Beauty. I learned that e.l.f. stands for eyes, lips, and face.

Cross: Yeah, don't Google that, you'll get interesting photos if you look for "elf beauty". It does stand for eyes, lips, and face. It's a really relatively new company, newly public, so all-time high is kind of relative. Venture-capital still owns most stock, 40% of the stock. And you're right, it's basically a fast-fashion business, cosmetics business that is offering its own brand products, much different than what Ulta does, which offers 20,000 different products across 500 different brands. e.l.f. is really just its own thing. It's a $1.2 billion company, compared to the $17 billion Ulta. So, much different business. Ulta continues to grow faster than e.l.f. does, even on the size. e.l.f. has some opportunities because of the way they operate, to potentially juice those growth rates, which has investors excited, which is why it sells at 6 times sales versus 3 times sales for Ulta. But, that's a lot of growth baked into a very young company.

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