The tone of the presentations at Ulta Beauty Analyst and Investor Day on October 13 was positive. Through its rigorous and thorough data collection and mining, Ulta has been able to make meaningful changes to the company that have proven successful. Ulta has gotten to know its customer through data collection, and has been able to focus on making her happy by offering her what she wants. Accordingly, Ulta has updated its third-quarter 2016 and 2017–2019 outlooks to reflect these successes. The company expects third-quarter sales to be higher than initially forecast. Comparable sales are now expected to increase by 14%–15%, up from 11%–13% previously. The company’s revised EPS guidance calls for EPS of $1.35–$1.38, up from the previous estimate of $1.25–$1.30. Ulta has also updated its full-year 2016 guidance. The company expects comparable sales growth of approximately 12%–14% for the full year, up from 11%–13% previously. The revised guidance calls for EPS growth in the mid-20% range, compared to the low to mid-20% range previously. As for its extended outlook, Ulta confirmed that it still expects EPS growth to remain in the low 20% range for fiscal years 2017–2019. In the same period, the company now expects comparable sales growth of 7%–9%, up from 5%–7% previously. The company also confirmed that it still expects to deliver approximately 200 basis points of operating margin expansion from 2016 levels, and to reach its mid-teens operating margin target by the end of fiscal 2019. Below, we provide our additional takeaways from the day.

Focusing on the Latina Consumer Is Key

The Ulta shopper is known as a “beauty enthusiast.” The company recently concluded an in-depth consumer segmentation study that revealed a number of details about the beauty enthusiast: she is highly engaged in beauty and loves the experience of shopping for beauty products and trying new products. In the US, approximately 57% of women are considered beauty enthusiasts, according to the company. The brand is working to create a lifestyle—making shopping for beauty items something that the consumer wants to do rather than sees as a chore. The company is particularly focused on millennials, Latinas and teens as its core demographics. The Latina consumer is a very important focus for Ulta, as the company noted that one in three Americans will be Latino by 2050. Accordingly, Ulta has focused some of its marketing strategy within channels that appeal to Latina consumers, including Latino lifestyle blog Vivala. By sharpening its focus, the company has been able to clarify what its brand stands for and increase brand awareness.

Shifting Away from Sales and Discounts Toward Loyalty Programs and CRM Creates a More Interactive and Positive Store Experience

Ulta’s Ultamate Rewards loyalty program has proven a great success for the company, and its members currently represent more than 90% of the company’s sales. Ulta is focused on adding active loyalty program members; it has added 6 million members since 2014, for a current total of 20.6 million. Ultamate Rewards members love to accrue points and redeem them for a diverse selection of gifts and rewards. Additionally, the company partnered with MasterCard to launch an Ulta Beauty credit card that allows users to accrue beauty points no matter where they are shopping, thereby encouraging a lifestyle that is beauty focused. Shifting the marketing mix away from broad discounts toward loyalty and CRM drives customer loyalty and is mutually beneficial for the company and the customer.

Ulta’s Omni-Channel Capabilities Are an Integral Part of the Beauty Enthusiast’s Profile

Ulta has worked to make sure that the beauty enthusiast has beauty content and shoppable product available at any moment of the day through its new mobile app and e-commerce platform—because the beauty enthusiast lives and breathes beauty all day. She is constantly checking out new and improved products, and the app features these products at her fingertips. The company has also improved its warehouse management systems in order to streamline its supply chain and fulfillment centers to dramatically cut down on shipping time for e-commerce orders. The company also enjoys the added benefits that come with offering in-store beauty services that draw customers into stores. For example, it has seen great success with its Benefit Brow Bars, which are brow-shaping stations that are now positioned at the front of every store. Ulta is beginning to close the gap between its omni-channel margins and its brick-and-mortar margins.

The Specialty Beauty Sector Presents Opportunities

Beauty is a great sector to be in right now, as it has shown steady growth, particularly in the prestige category. Sales of premium and prestige beauty products are growing much faster than sales of mass-market beauty products. Thus, specialty beauty retailers need to fulfill consumers’ desire for high-end beauty items, though this type of retail offering still remains underdeveloped. Ulta is filling a gap within the specialty beauty category that is currently small, but that shows promising growth. The company plans to open more than 100 stores per year through 2019, and is also planning to launch a small-boutique store format in 2017. The company’s planned stores figure has been increased from initial forecasts, to a final store count of 1,400–1,700 by 2019. To complement its new stores and growing customer base, Ulta has recently rolled out new brands to appeal to the beauty enthusiast. These include Origins, Dior, Estée Lauder, Proactiv and Shiseido in skincare and cosmetics; Stash from Sarah Jessica Parker in fragrance; Honest Beauty in haircare; and Dyson hair dryers.