Major discount retailer Target (TGT -3.26%) is preparing to sell its wholly owned beauty, cosmetics, hair care, and skincare e-commerce company Dermstore to a British buyer for $350 million in cash, The Street reports. Target acquired the online personal care retailer in 2013.
Dermstore offers a beauty product and cosmetics subscription service to its customers, and carries approximately 350 different brands in its product lineup. The move comes despite Target's $6 billion gain in market share during 2021, driven by rising same-store sales along with explosive growth in same-day delivery and digital sales. According to the company's third-quarter 2020 earnings conference call, its beauty sector came in behind decor and kitchen, but still registered "third quarter comp growth in the high teens." This gave it equal performance to food and beverage, and outpaced apparel department comps by almost double.
Target's Dermstore divestiture could be related to its recent pact with Ulta Beauty (ULTA 1.12%), which will see 100 Ulta outlets opened inside existing Target locations. Ulta expects a relatively weak fourth quarter in 2020, but its strategic alliance with Target and other factors make analysts expect a strong rebound for the cosmetics and personal care company in 2021.
Dermstore's buyer, British online retailer THG Holdings (THG -2.49%), was recently listed on the London Stock Exchange for the first time and is angling for a share of the American personal care and beauty market. According to CEO Matthew Moulding, gaining "capital through a listing has enabled us to accelerate our growth plans," The Street reports. THG anticipates Dermstore will add $180 million to its 2021 sales, assuming the deal receives the regulatory go-ahead in late January 2021.