As demand for cosmetics remains resilient, Ulta (ULTA) is proving to be a standout among retailers, according to one analyst.
"The consumer has various reasons to shop beauty," Jessica Ramirez, research analyst at Jane Hali & Associates, told Yahoo Finance Live (video above). "And alone from beauty being a great category at the moment, Ulta has also been a very modern retailer with a very modern retail strategy in place, which... is future-proof for when times are difficult and other retailers are having difficulty with other parts of the business, either too much inventory or promotions."
Ulta earnings and revenue beat estimates in the third quarter, and the beauty retailer reported that comparable sales rose an impressive 14.6% year over year.
“They've been running a very clean promotional business in Q3,” Ramirez said. “And overall — I mean, digital, omnichannel — the stores are looking great.”
The analyst also pointed to the beauty retailer's "special" partnership with Target (TGT) as a bright spot.
"It complements each other on each side," Ramirez explained. "You're able to get this consumer into Target, discover these new brands that maybe Ulta has that Target may not have. So that's, I think, quite beautiful."
Ramirez also highlighted how Ulta has been proactive in adopting a "drop model," which uses exclusive collaborations to generate hype and drive traffic. That has been part of a wider shift in the beauty industry, she said.
"Ulta started catching on quite some time ago, and I thought that was absolutely great," Ramirez said. "I think one of the biggest [collaborations] that we commonly see is [with] Kylie Cosmetics. There, Ulta was the first one to secure that."
In the third quarter, Ulta added to its lineup of unique collaborations. These offerings, which target Gen Z consumers in particular, included new products with Disney Parks (DIS) and Lisa Frank.
And even though Ulta saw its online business boom throughout the pandemic, it is now focused on expanding in-store services such as brow and lash services, makeup application, hair styling, and more.
"They're really trying to engage with that consumer — have that sticky feeling in the store and a reason for them to trust them more and to stay within that space," Ramirez said.
Edwin is a producer for Yahoo Finance. You can follow him on Twitter @Edwin__Roman.
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