In the second quarter of 2024, Businessman Warren Buffett invested around $266 million in 690,106 Ulta Beauty shares. However, only a quarter later, he sold over 95% of his shares.
Buffet is known for his long-term investments and successful track record, so this sudden move was a major signal that something bad was heading Ulta’s way, and he was right.
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On Mar. 13, Ulta released its fourth-quarter earnings for fiscal 2024, reporting a net sales decrease of nearly 2% compared to last year, marking the company’s first year losing market share in the beauty category.
Ulta attributes this slowdown partly to increased competition and fast-evolving consumer trends.
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To get business back on track, Ulta Beauty unveiled its new growth strategy, “Ulta Beauty Unleashed.” This strategy aims to turn the company around and combat its slowdown in sales after it reported alarming quarterly net sales declines for the first time in the last few years and lost market share in the beauty category for the first time ever.
This turnaround plan focuses on three growth drivers: brand building, personalization, and digital acceleration.
People walking in front of an Ulta Beauty store.
Ulta unveils its turnaround plan to regain lost market share in the beauty category
To target its growth initiatives, Ulta (ULTA) wants to enhance customers’ experiences by expanding its in-store and online product offerings and assortment, which it will do by introducing new brands and launching a marketplace in its e-commerce platform.
“We are focusing to ensure the guest is at the center of everything we do, and we intend to move faster, invest strategically and optimize our business to achieve our long-term goals to drive profitable growth and market share,” said Ulta Beauty CEO Kecia Steelman during an earnings call.
The online marketplace will provide customers with perks similar to those obtained with Ulta’s official partner brands, including earning loyalty points as reward members and in-store returns at local Ulta locations. It will also allow the beauty company to introduce new brands to its customers and test them out before committing to a long-term partnership.
The marketplace is expected to launch in the second half of this year and comprises a mix of exclusive, emerging, and established brands in the beauty and wellness sector.
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To create a more seamless online shopping experience, Ulta will add new features to its app and website. It will also encourage member growth and engagement through accelerated personalization, increased automation, and real-time content across digital channels.
As for its in-store offerings, Ulta is increasing its wellness sector by introducing 20 new brands. It will provide more space to feature them in stores by replacing less popular products to make space for new and more profitable additions.
“Our teams are focused on opportunities to sharpen our execution and get back to the basics of running excellent stores that are easy to navigate, fully stocked, appropriately staffed, clean, and inviting,” said Steelman.
Ulta will deliver value to stakeholders by optimizing roles and cutting costs
In January, Kecia Steelman became the new CEO of Ulta Beauty. Since then, the company has experienced multiple changes in its executive leadership team, with even more coming soon.
To deliver value to stakeholders, Steelman wants to streamline costs and optimize working methods by repositioning corporate and staff roles to better meet the business’ needs.
“This includes taking steps to optimize our corporate and field support staff, reducing management layers, and shifting resources to higher-growth driving areas,” said Steelman.
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As part of this rearrangement, Steelman created a new chief officer role to focus on real estate, store design, staffing in-store teams, and loss prevention organization. She also created a chief technology and transformation officer role to add enterprise-wide responsibilities and named two people as transformation leaders.
Additionally, she named a new chief merchandising and digital officer and merged the digital and e-commerce teams with the merchandising and planning teams.
Although Steelman didn’t mention any layoffs to cut costs, she stated that optimizing costs is key to sustaining annual expense growth and achieving long-term profitability goals.
“As we’ve shared at our Investor Day in October, we are targeting cost optimization of $200 million to $250 million over the next three years,” said Steelman.
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