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Ulta Beauty Slows Its Expansion Plans

By Daniel B. Kline - Apr 6, 2020 at 11:02AM

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The retailer's stores are closed and it has taken steps to slow spending.

Before the coronavirus pandemic, Ulta Beauty (ULTA 1.52%) was growing quickly. That has obviously changed in the short term as the retailer has been forced to close all its stores and operate as an online-only business.

This unforeseen situation has forced the company to push back some of its expansion plans and slow other expenditures.

A selection of makeup and brushes.

Ulta Beauty has slowed its expansion plans. Image source: Getty Images.

What is Ulta doing?

The retail chain has decided to moderate "the pace of investments to build international capabilities," according to a press release. Ulta says it does, however, still expect to have "an omnichannel presence in Canada in 2021."

In addition, the beauty retailer expects to open fewer stores in 2020 than it had previously planned.

"While the Company plans to open new stores this year," the statement said, "it no longer expects to open a total of 75 new stores in fiscal 2020 and is working on an adjusted plan for new store openings, relocations and remodel projects."

Ulta has also frozen hiring and deferred merit-based wage increases for corporate and store workers. It has also been adjusting its inventory to reflect current demand and has suspended its stock repurchase program to conserve capital.

"Although we do not expect to fully offset the revenue impact of our store closings, the multi-year, strategic investments we have made to enhance our omnichannel and supply chain capabilities, combined with the ongoing commitment of our distribution associates, have enabled us to support increased e-commerce demand and guest engagement," said CEO Mary Dillon in the press release.

Short term pain, long-term gain

Ulta Beauty is doing what it can to emerge on the other side of the coronavirus pandemic. It makes sense to delay building new stores and put off expansion when the length of the current crisis remains a major question.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ulta Beauty. The Motley Fool has a disclosure policy.

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