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Ulta Beauty Is Reviewing Which Stores to Keep Open

By Rhian Hunt – Jun 10, 2020 at 5:06PM

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The COVID-19 shutdown gave it the opportunity for a major retail outlet overhaul.

Big cosmetics retailer Ulta Beauty (ULTA 0.76%) is turning the COVID-19 pandemic and its aftershocks into an opportunity to review and streamline its store network, according to Ulta executives and other sources. The company's Chief Financial Officer (CFO), Scott Settersten, summed up the process and the thinking behind it by saying, "If you did this with a white, clean piece of paper, how would you reorganize your store fleet?"

Ulta is reviewing a variety of factors in deciding which stores to keep open and which to close. These factors include profitability, rent, traffic, and location. Some stores may undergo relocation to more favorable retail space in malls and other shopping areas, pouncing on desirable floor space left open by shops shut down permanently during the coronavirus retail disaster.

A cosmetics shopper.

Image source: Getty Images.

As retailers such as the clothing and shoe sector discover that COVID-19 accelerated the changeover to online sales from brick-and-mortar shopping, Ulta Beauty also wants to find the best balance between e-commerce and physical stores. CFO Settersten said the company needs to ask itself, "How does that change your thinking about the total number of stores you need to service your customers or optimize your sales opportunity?"

Ulta has also attracted some recent commentary from analysts. A research note from Morningstar's David Swartz observed, "we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other e-commerce." He went on to observe that brick-and-mortar sales might remain central to Ulta's strategy because "teen girls and women like to sample products in Ulta's stores" so "its salons, selection, promotions, and service encourage frequent visitation."

Rhian Hunt 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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