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Target to Sell Beauty E-Commerce Site to THG Holdings

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GuruFocus.com
·2 min read
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- By Mayank Marwah

Retail company Target Corp. (NYSE:TGT) is selling its skin care and beauty e-commerce site, Dermstore, to THG Holdings (LSE:THG) in a deal valued at $350 million.

THG Holdings, a British e-commerce company that owns various skin care and beauty lines like ESPA, Christophe Robin, Grow Gorgeous and Illamasqua, said it expects to receive approval from U.S. regulators in January.


Looking to reinforce its presence in the budding beauty sector, Target purchased Dermstore in 2013. The wholly-owned subsidiary provides beauty products and maquillage subscription services to its customers through a digital platform. Its product lineup consists of roughly 350 brands.

Industry experts believe Target's decision to divest Dermstore is most likely associated with its long-term collaboration with Ulta Beauty (ULTA) that was announced in November. As per the terms of the deal, Ulta will open mini cosmetics shops inside select Target stores as well as online. The company said it will have more than 100 Target stores featuring Ulta Beauty products by the second half of 2021.

THG Holdings, popularly known as The Hut Group, said that the Dermstore acquisition will help support growth of its existing beauty brands in the U.S. and increase sales by $180 million in 2021.

Parting thoughts

Due to the coronavirus pandemic and the resulting lockdowns, many customers refrained from visiting stores and started shopping online. As a result, digital sales have gained momentum. As a brick-and-mortar store, Target was at the receiving end of these headwinds. Therefore, strategic alliances and collaborations became inevitable to survive in the turbulent retail environment.

The retailer is expected to reap maximum benefits out the collaboration with Ulta Beauty in terms of strategic locations, omni-channel capabilities and market presence. In addition, the American retail chain is also slowly broadening its Levi's (NYSE:LEVI) offerings. Target and Levi's partnership has been expended to around 500 stores.

In order to enrich customers' shopping experience, Target has been introducing new brands, revamping stores, enhancing omni-channel commerce and expanding same-day delivery options as well. Besides the beauty and personal care categories, the company is also focusing on other key segments like apparel, electronics, essentials and food and beverage.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.