ULTA - Ulta Beauty

[kab60]

Alliance Data Systems, of which Ulta is a major client, with fine Q2 results. They note that Beauty (and home decor) are strong categories despite c19. I have a position in Ulta and will buy more. I think they are uniquely positioned to come stronger out of this. Lower rent, better locations, departement stores hurting and JCP troubles a possible hit to Sephora. Clean balance sheet so a combination of high ROIC, SSS and new unit growth as well as buybacks can be a very powerful combination. And then international expension as a joker/option.

[kab60]

Bullish take on Ulta: https://www.barrons.com/articles/why-ulta-beauty-shares-can-gain-55-portfolio-manager-51595612327

I suppose the bear case is that retail is dead, they mostly saturated the market with stores, membership growth slowing and if SSS starts trending in the wrong direction they're in for a lot of hurt. But this thing used to trade at plus 40xEPS, now at 16x2019.

Also a story on how cosmetics retailers are remaking the sample experience in a world without touching: https://www.cnbc.com/2020/07/30/how-cosmetics-are-remaking-sample-experience-in-contactless-world.html

[kab60]

Boom, smashed it. Not sure why market is so positive on the release, but comments look good - SSS only down a 'lil bit in August and actually made money in the Q.

[kab60]

Interesting development - store in stores at Target coming next year:

"Ulta Beauty at Target will debut at more than 100 Target locations starting in 2021, with plans to scale to hundreds more over time. The planned locations will complement Ulta Beauty's current store footprint, welcoming new guests to the brand and building upon Target's existing assortment of beauty options... With approximately 1,000 square feet of retail space, Ulta Beauty at Target will be prominently located next to the existing beauty section."

https://seekingalpha.com/pr/18078751-target-and-ulta-beauty-announce-strategic-partnership