Dave Kimbell on Ulta Beauty’s Boom

In an increasingly chaotic world, Dave Kimbell, chief executive officer of Ulta Beauty, is a paragon of optimism.

During an exclusive interview with WWD, words like “dynamic,” “resilient,” “optimistic” and “engaged” dominated his conversation — and why not?

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One year into his tenure as the head of the largest beauty retailer in the U.S., Kimbell has a lot to be happy about. Despite the many macro factors that could impact consumer spending — war, inflation, extreme weather — Ulta’s first-quarter results were up 21 percent year-over-year, and were 35 percent higher than in 2019. The makeup category has rebounded, brick-and-mortar stores are buzzing and the momentum shows no signs of slowing.

“We are optimistic about the path ahead,” Kimbell said. “We see stronger than planned growth for the year. We are trying to stay very connected to our guests in the macro environment, which is a composite combination of influences that we’ve never seen before. There’s a lot coming at consumers, which does introduce uncertainty.

“But I also think that it can lead to continued engagement in the beauty category,” Kimbell continued. “Even in this environment, people still want to go out and be around others and beauty is an important part of that. But we’ve also seen that in times when consumers want to take care of themselves, beauty plays a role in that.

“So, as we look out into the uncertainty ahead of us, we’re prepared for it and managing toward it,” he said. “But I have a lot of confidence in beauty being resilient because of the importance it plays in people’s lives.”

Overall, analysts reacted positively to Kimbell’s message, their tone slightly more tempered but still bullish.

“His excitement is well placed now that makeup has turned,” said Jefferies analyst Steph Wissink. “The only risk is that this is a short cycle boom, linked to a return to socialization and events.

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“Real inflation hasn’t come through the category yet, so demand elasticity considerations thus far are limited,” she continued. “If we roll forward into fall and the seasonal event bubble bursts, inflation forces price increases and innovation isn’t exciting enough to the consumer, we’ll be seeing momentum backtracking. We’re hopeful his optimism is early and right.”

Raymond James analyst Olivia Tong was also upbeat. “We expect Ulta to build on its dominance in the attractive, fast-growing beauty category. Investment has been disciplined in our view, and we expect both price and volume to drive continued growth,” she wrote. “While pockets of retail have been volatile of late, we believe Ulta is one of the most competitively advantaged operators, with solid positioning in an in-demand category, growing store count/square footage and a loyal base of consumers.”

Ulta expects those factors to add up to continued growth, with the company raising its guidance from 3 to 4 percent comp-store growth for the year to 6 to 8 percent growth, even with looming economic uncertainty. Kimbell noted that while beauty is technically a discretionary item, it’s still lower on the list of categories that consumers are likely to cut back on. He also posited that Ulta’s business model — it is the only pure-play beauty retailer that sells prestige, mass and professional products with cross-category services, too — has been a clear competitive advantage in today’s landscape.

“Our business model is working better than ever,” he said, noting that while the retailer hasn’t yet seen a trading down in terms of spending — prestige makeup performed better than mass makeup in the first quarter for the “first time in a long time,” he said — Ulta is well-positioned should that happen.

“If there is a trading down, you can adjust your spending within Ulta, if that’s what an individual decides to do. We’re set up to do that,” he said. “We want to be there to serve our guests however they want to be served at any given moment.”

Kimbell’s confidence comes at a time when many in the retail sector are struggling. Target Corp.’s stock fell dramatically last week after it said that it would “right-size” its inventory with markdowns, Walmart’s most recent quarterly earnings fell short on bottom-line profits and Kohl’s Corp. is in acquisition negotiations with Franchise Group.

Meanwhile, in the beauty sector, Ulta’s archrival Sephora is in the midst of a management upheaval, with CEO Martin Brok departing after less than two years on the job and Chris de Lapuente, chairman and CEO of the selective retailing division of LVMH Moët Hennessy Louis Vuitton, resuming the position of president and CEO.

The battle between the two retailers for dominance in the U.S. market has become especially heated over the last year, with both signing deals with non-endemic retailers to grow their consumer base, Ulta with Target and Sephora with Kohl’s. Kimbell said that the partnership is doing “great,” noting that it’s not just successfully recruiting new customers but increasing the value of existing ones. “We’ve seen that the more touchpoints we offer guests — our app, our loyalty program, our credit card — we see greater loyalty and ultimately a greater share while they concentrate more of their spend with us. We believe Ulta Beauty at Target is another one of those opportunities and we’re encouraged by what we’re seeing.”

Ulta Beauty at Target has been a win for both retailers. – Credit: Courtesy Photo

Courtesy Photo

He also said the retailer is winning with Gen Z, citing a Piper Sandler survey of 7,100 American Gen Zers that reported Ulta was the number-one preferred beauty destination for teens, with 48 percent mindshare.

“They like to be able to flex among price points with mass and prestige, even if they don’t think of it that way,” said Kimbell. “They don’t think of the historical model of the category — that’s certainly not how TikTok thinks. So, we’re perfectly built for that experience of being nonjudgmental, non-intimidating, welcoming, bright. It’s a great fit for Gen Z and they’re responding well.”

Kimbell credited the 17 percent increase in Ulta’s loyalty program during the first quarter, to 37.7 million members, in part to the retailer’s dominance with the demographic, noting that younger shoppers like to shop in a physical store environment and “touch and smell and discover and have a human experience with the associates, and use our hair and makeup and brow services.” That in-store engagement led to a 10 percent increase in in-store transaction, which Kimbell called “a solid indicator that consumers are back and they like the store environment.”

Consumers aren’t the only ones in store. Kimbell has spent much of the last year crisscrossing the country visiting brick-and-mortar locations, identifying operational efficiencies and category opportunities, meeting the teams. He thrives on such interactions (“frankly, it’s been awesome”) and he seizes any opportunity to praise and thank the store teams for the job they’re doing.

“I just can’t overstate how important that is to me,” he said. “It’s hard work to run or work in a store in any retail environment, and a key learning for me is continuing to find ways to support our team in any way possible to make sure they have everything they need.”

Kimbell’s not just paying lip-service to the people who keep the shelves stocked with product. For him, success in navigating today’s tricky terrain will rest on his ability to rally the troops. “I recognize there are challenges,” he said. “But our culture is what allows us to deliver as one unified team and contributes in a meaningful way to our success. So I’m really proud and very optimistic about what’s ahead.”

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