At its virtual analyst and investor conference this week, Ulta Beauty laid out its strategic priorities and long-term financial targets for fiscal 2022 through 2024.

Ulta chief executive officer Dave Kimbell opened the event saying, "As we look forward, we must acknowledge that we are operating in a time of unprecedented change." He called 2020 an "incredibly disruptive year, globally" and noted that the pandemic has created "permanent shifts in behavior."

Financial Targets

• For fiscal 2022 through 2024, Ulta expects total net sales to increase 5%-7%, reaching $10 billion in annual sales by 2024, comparable sales to grow 3%-5% annually, and operating profit (as a percentage of sales) to increase 13%-14%. Capital expenditures (as a percentage of sales) are pegged at 4% to 5%.
• The retailer is expecting to bring in $8.1 billion to $8.3 billion in sales for 2021.
• A new, multi-year cost savings target of $150 million to $200 million to fund investments in future growth initiatives was announced.

“Reflecting our understanding about how the consumer and beauty category are evolving, we have refreshed our strategic framework, and we are excited to share our vision for Ulta Beauty's future," stated CEO Dave Kimbell. "We have a long record of disruption, creativity and success, and we intend to build on this foundation and continue to lead the beauty category, seamlessly connecting physical and digital channels, expanding our market share, and increasing member loyalty.”

Store Footprint

• By the end of 2021, Ulta expects to have 100 shops-in-shop open with Target.
• Ulta says it has the opportunity to operate 1,500 to 1,700 stores in the US.
• The business plans to open 50 new stores per year.
• The company will test smaller 5,000-square-foot format stores that can serve as a beauty discovery destination in smaller markets with tailored assortments and services. These pilots will inform how the scale of the experience rolls out beyond 2022.
• Before the pandemic, the retailer had plans to expand into Canada, but plans for international expansion are on the back burner.
• The merchandising assortment will be rationalized by cutting unproductive products and moving skincare to the front of new format and renovated stores.

Online Strategy

• Ulta is also quietly rolling out the "digital store of the future," a website and app refresh combined with content and increased personalization tools for shoppers.
• Ulta announced a strategic investment and partnership with Adeptmind, an AI retail technology company, to power a new personalized search engine for the retailer's "digital store of the future."
• The company is launching a partnership with Google to leverage Ulta's virtual try-on tool for lipstick and eyeshadow with select brands within Google's Search and YouTube platforms.
• The retailer is also launching UBMedia, a retail media network which brand partners can use to place ads on the Ulta e-commerce site and app, and outside sources such as Facebook and Instagram.
• A $20 million Digital Innovation Fund was unveiled to enable the company to closely partner with innovators, entrepreneurs, early-stage investors, and other agents of change to transform the future of beauty, retail, and commerce.

“The new digital store is where we seamlessly merge content with commerce to help guests find what they are looking for, and introduce them to products and services they didn't know they need," said Prama Bhatt, Ulta's chief digital officer, at the meeting. "We will have an unmatched source of personalized beauty information and use each opportunity to anticipate their beauty needs. It will make shopping and exploring for beauty online even more fun and functional, and with our new design system, we can create culturally relevant and inspiring content and experiences at the speed of beauty.”

Business Investments

• Ulta will expand services, experimenting with same-day delivery in some markets and implementing its two-hour Beauty to Go buy online, pick up in-store option.
• The business plans to invest between $160 million and $180 million over the next three years to upgrade its resource planning platform to be more nimble.
• Market fulfillment centers will be opened to fulfill e-commerce orders and help serve stores.