Great. Good morning. Again, welcome to day two of the J.P. Morgan 11th Annual Retail Roundup Conference. It's my great pleasure to have the Ulta management team, including recently promoted CEO Kecia Steelman, and then CFO Paula Oyibo, who was promoted last year right ahead of this conference. We appreciate you coming back again, and we appreciate your time. As with the other ones, at about 15 minutes ago, I'll go to audience questions. Please don't be bashful. The last ones were a little bit quiet because someone else needed a marketing attendant or something. Ulta is a very dynamic category and a very dynamic story, so there are plenty of questions. Please join in. To kick it off, Kecia, it's been about three months since you stepped up from President and CEO into the CEO role.
While you've been at more than Ulta for 10 years, I'd love to hear about your view of the organization. Now that you have more of a direct sort of inference on the organization, where do you want to take it?
I want to start off by saying thank you, Chris, and J.P. Morgan for hosting Paula and I and Ulta Beauty here today. We're looking forward to our conversation. Yes, I'm actually going to be at 11 years with Ulta Beauty here in a couple of months. I've been over 30 years in retail. What I can say is time is going by really, really fast. I could not be more excited to be at the helm of Ulta Beauty as the CEO right now today. As you mentioned, business environments are tough, but I'm ready for it. I could not be more excited about our future.
One of the big reasons is that we have such a strong foundational advantage, I believe, in the beauty and retail sector, from our assortment to our world-class loyalty program to our strong omnichannel offering to the ability that we have at Ulta Beauty to generate a lot of cash. We have a very strong financial foundation. It is all underpinned by the 58,000 Ulta Beauty- loving associates that we have out there bringing our brand to life every single day. The landscape, while it has continued to change, there are still some fundamentals that are true still today. The first is that beauty is a highly engaging category. Even if the consumer is looking at where they are spending with their wallet, they are still really engaged in beauty. The second is that this is a human connection business.
While there's a lot of talk about e-commerce and more products going online, 80% of Ulta Beauty's sales come from our stores. This is an environment and a category that human connection and coming into stores is really important. That's great for us because we're having over 1,400 stores across the United States. Also in the category itself, it's about newness and innovation and having the ability to have the consumer want to engage and come in and try things. The brands are really invested in that. We see really good pipelines for 2025 and beyond. What gets me the most optimistic is about the Ulta Beauty Unleashed plan that we shared on our earnings call.
It is really about driving our core, about doubling down our margin-accretive businesses for us to continue to drive our profitability forward, and also realigning our foundation for the future. To me, it is about having the right people in the right place at the right time with the right plan. We are just having that momentum going in the right direction. Your question was, what have I seen in the first 90 days? What I have seen is exactly that. When people understand the role they play and they understand what the mission is that Ulta Beauty is about, they are on board. The momentum is palatable within the organization. That is what really excites me about the future of Ulta Beauty.
You have made some very decisive changes in the management structure and realigning some responsibilities in some people. Can you talk to the audience about what you did and why you did it?
Yeah. I'm a big believer in that one of my top jaws as a leader is to make sure that I have the right people in the right places and the right level of talent. What's gotten us to the growth at Ulta Beauty today isn't going to be what necessarily gets us to growth in the future. I’ll just take a step back and say that two of the leadership changes I had were because of retirement. It's not like I came in and I cleaned house with the team. Two of them were retiring after long careers here. I'll start with the General Counsel. She gave her retirement announcement. I have a new GC that's starting actually on Monday. I'm going to have a nice overlap in timing so we shouldn't miss a beat there. Our Chief Merchandising Officer gave her notice to retire.
I've been on the hunt for chief merchandising and digital officer because that's one of the changes that I did make is that I pulled digital and e-commerce from marketing and I put it with merchandising. The reason for that was it was friction in the ways of working. I really want to keep the consumer at the center of all of our decisions. That has to be the driver for our decisions. Streamlining that thought process and combining those roles in one is what I believe is going to take Ulta Beauty to the next level. I'll be able to announce relatively soon who's coming. I wish. Soon, relatively soon, who's going to be in that role. I feel like we've got an exceptional candidate that's going to be stepping in. Then you look at that left marketing organization.
It's a little bit smaller in scale, but we had an internal person who actually started with Ulta Beauty many years ago building our credit card business. She also has been very intimately involved with the loyalty program. She knows the consumer better than anybody at Ulta Beauty. Understanding your consumer, especially in this hyper-personalized environment, is going to be what it takes to really drive the business forward for us. We had an internal promotion there, which is fantastic. I love seeing internal people grow. You position to, I got elevated. I didn't talk to myself. That gave me the opportunity to really streamline within my own management team and elevate a couple of roles. The first one I want to talk about is our Chief Store Operations Officer. We elevated her title to a Chief Retail Officer.
She owns everything off stores, loss prevention, and services. We put real estate and store design under her leadership purview. It just has all things stores are now under one leader, which really can simplify and create speed of decision-making and how we're really impacting our store fleet in the hands of one leader. Also, our Chief Technology Officer, he's done just a fantastic job of so much transition over the last couple of years. I put transformation under him because we've got a lot on our agenda and a lot on our plate.
I'm very confident that under his leadership, all of the investments that we're making, that Paula and I were staying really close to, that he's bringing it all together in a way that we can really understand our tactics and our OpEx and making sure that we're getting our ROI and getting the value realized out of these investments. To me, it was really not about creating a lot of change. It was more about alignment and clarifying ways of working. I call it internally putting our aces in their places for the next phase of growth at Ulta Beauty. I feel that's exactly what we've got going on right now. We've got the right people in the place to really carry us on to the next phase of growth here at Ulta Beauty.
I think we're already starting to get a sense of this, but I'd love to ask a question. How would those in the organization that have been around for a long time describe your leadership style and maybe how that's different versus the way the organization was run prior?
Yeah. Maybe you should ask Paula that question. I don't know. I'll.
I'm going to ask Paula later.
Oh, okay. You can definitely. You can definitely. You know, Chris, what's so interesting, I think, and unique about me specifically is I grew up in retail. I started in an hourly position at a Target store. I have worked every level of position you can imagine in a retail environment, in many retail environments out there. I think that gives me a couple of advantages in the CEO spot today. First of all, that if I did it, anybody else can do it too. I think I'm a good role model for creating a lot of dreams that are out there because the American dream is definitely possible. The second is that I have a total appreciation for the role that everyone plays in making a company at retail a success.
Not only do I have an appreciation, but I also have the credibility within the organization that they're like, "She does get it. She's walked the mile in my footsteps." There aren't that many CEOs, if I don't believe, out there in retail specifically that have had that kind of a journey. It's a little bit unique in and of itself. The second thing I would say is about my leadership style and approach is that I'm decisive. I'm strategic. I'm execution-oriented. I'm competitive, and I like to win, but I like to win with the team. I'm a big believer in surrounding yourself with a team that excels at what they do, but they play really well together. I use a lot of sports analogies with my team.
It's like I want a team that will pass the ball to each other and leverage each other's strengths. I've been called the fast at times, but I'm fast with intention. I say oftentimes inside the organization, spinning is my least favorite move. Because if you can't make a decision, you can't start moving in a direction, you're just spinning in place. That's not good for any organization and also for the culture within the organization in and of itself. We're decisive. We're moving in a direction. I'm a big believer if we're going down the wrong path, we can change the course. If we're not going down a path at all, it's 10x worse, in my opinion. I'm optimistic about the future. This is the best job I've ever had.
I'm very excited about what the future looks like at Ulta Beauty and spend a lot of fun.
That's a great segue. The new strategy was launched in October at the Analyst Day. Obviously, given your President and CEO title, you had a lot of influence on that strategy, the pacing of that strategy, the direction of that strategy. As in any team environment, everyone has a vote. You didn't have the biggest vote. How do you think about, as you reflect on that strategy, how do you think it evolves? What might be edited versus what was laid out in October?
I was a key architect of the strategy. I do believe in what you shared at the October Analyst Day. We are still committed to our financial targets that we shared along with the strategy. Some of the nuances and changes that I've made since stepping into the role is I'm a big one on simplification and making sure that the organization really understands what it is we're trying to deliver. Let's just take a couple of facts. I talked a little bit about driving the core. Driving the core, to me, is about being best in class at execution. That's table stakes to me. Getting back to the basics is step number one. That's the cost of entry, really, to me in retail. It is also things like brand building and digital acceleration and personalization.
It's how do we take the businesses that we're currently doing today and taking them to level up and invest in ways that are going to continue to drive a greater moat between us and the competitors. Instead of just talking about everything separately, I've combined it together because that's really about driving the core. When you look at driving margin-accretive businesses, to me, that's wellness. It's a new business that we can continue to lean into and really grow. It's Marketplace, which we announced on our earnings call. That's going to continue to help us have the best to be a store brand in a highly curated way for our guests and consumer.
It's around UB Media and leaning into UB Media as a way that our brands can continue to communicate with the consumer and also drive accretive businesses for us and profit for us in the organization. The fourth is around international. That international expansion. Instead of talking about everything separately, we're talking about it collectively as a whole. The organization understands that a little bit more. It's easier to talk through and get people aligned behind it. Oh, I understand that. I've got that. The last one is really important too. That is realigning for the future of the foundation. To me, it's in two parts. It's the ways of working, which I've talked about a couple of times here. It's making sure that everyone understands the role they play in the greater good of the organization.
What they do day in and day out makes a difference. When people understand what it is and why they're doing it, they can get behind it a lot quicker. I'm seeing that come to life. That's really, really exciting to me. The other part of that is driving cost out of this model. It's like, how do we continue to look for efficiencies and drive cost out? We've got everybody all in. I'm very confident we shared $200-$250 of cost out of the model. I feel like we've got a really good line of sight to that. It wasn't necessarily changing things. A little bit of the pacing. A little bit of the pacing I've adjusted, Paula and I, together along with the executive team. We've got some change within the leadership team.
We want to make sure I've got to get that new merchandising and digital officer in role because I want them to be a part of this overall strategy. The pacing's changed a little bit, but our objectives are still the same. It's the way we've communicated them. We've simplified them. We've put really good plans in place to have good decision-making around our investments and our OpEx and our CapEx and accountability. Maybe that's one thing that we've continued to lean in is making sure that we have really good visibility and ROI and adjusting as we need to. Just because this is the plan we have today, I'm a big believer, Chris, that if it's not working, we're going to pivot. At the end of the day, we've got to make sure that we're returning long-term responses to our shareholders and creating shareholder value.
Coming from the store side, did you think that just taste was a problem? Was it a digestion issue that the stores couldn't handle it? To what degree was there a lot of people in different roles and there's a new person coming in that affected maybe a more moderate pace of change?
I would say there's clarity of the expectation and making sure you're right, that you aren't trying to do more than you're not overprescribed for what you can deliver. One of the go-to strengths that I believe I have is focusing on execution. I want to make sure that we're executing with excellence. This is what we need to do. I believe in all of these strategies. These are the strategies we need to really lean into in 2025 to continue to emerge and take growth in 2026 and beyond. Like I said, we're going to stay close to it. We're going to be agile. If we need to adjust accordingly, we will. I'm overall very confident in the plan that we've got in place. The sequencing, we've got a massive Gantt chart.
We've gone through a lot of change in this organization, just all of the foundational improvements that we've made. We've shown that we can do it. This is actually when the fun starts to happen because now we're focused a little bit more on the go-to-market side of the business. The team internally at the culture office is very excited. The stores are too. They're ready to get behind us and execute excellence and bring this vision to life.
You know, I want to touch on sort of the investment cycle a little bit because I think it's part and parcel. You came in after Mary. I think it was also went into an investment cycle for a number of reasons. It was big stores, it was field stores. We've got to become more efficient as an organization in digital and CRM and supply chain automation. That program emerged in 2014. It is now 2025. You did the ERP recently as well. It is kind of high rate of spend. I think investors interpreted it as there was a catch-up and we needed to catch up. I think one question right now is sort of two-part is, is the spend sort of growth for the sake of growth without a focus on returns?
The other piece of it is, to what extent has the spend maybe lasted longer than investors expected because the industry has changed and become more dynamic?
I think the industry has continued to evolve and change, but we've had to evolve and change with it. You know, the last three years, we've been in a heavy investment cycle on our foundational systems. I mean, when you just look at what we've had to tackle as an organization, it was our ERP upgrade, which is now behind us, our digital store platform, which was a monolithic platform that we're now on a more robust system that we can introduce changes and enhancements in a much more unique and individual bespoke way. You know, our POS was outdated. We had to get our POS updated. Our data systems were a little antiquated. We didn't have really good data governance around all of our data, which is a huge unlock if you can have clean data sources to leverage AI, generative AI in the future.
We've got all that work behind us. We had to do that in order to be able to now start to shift to work on our go-to-market type strategy, so all of the things that we're talking about now. In this competitive environment, you've got to continue to invest in your business or you're going to become irrelevant, I think, very quickly. Yes, we've been in a heavy investment cycle, but the market is highly competitive. It is still really growing at the same pace. I believe we are focused on the right things that are going to continue to grow the business for the long-term growth of the future. Anything you'd like to add?
Yeah. The thing that I would add is that we can assure investors that we are not just investing for the sake of investing. We are focused very much on return on the investment. We do recognize with what we shared a 10% growth this year on granted 2025. We've got an extraordinarily low level because we quickly adjusted in order to navigate to a more challenged top line. A 10% growth over the long term is not what we're targeting. Our absolute goal is to ensure that we're managing SG&A growth at a slower pace than our top line in the long-term perspective, which we've shared we expect that to be between 4% and 6%.
Since you get beyond 2025, you have a multi-year plan out there. Is the expectation that you'll start to see leverage in SG&A if we got back to normalize growth rate from a top-line perspective?
What I would say is what we're focused on, and we shared this, we're focused on driving a top line 4-6 on a 3-4 comp. We are really focused on driving mid-single-digit operating profit growth. We think that that is the key thing to focus on in an industry and category that is as dynamic as the beauty category. We want to allow ourselves the flexibility to invest in ways that we think is the most relevant at the particular time. Some years we may decide to invest more from a growth margin perspective. Some years we may decide to invest more from an SG&A perspective in service of making sure we are delivering that mid-single-digit operating profit growth. We are confident, and we share this, that we will be able to maintain a margin rate of 12%.
Absolutely expect that we will expand that margin over time.
I guess as long as we're on the expense side before we begin to talk about the brands and consumer a little bit, can you talk about the 10% is a big number after big numbers for a while. If you were going to pocket that 10% growth, what's driving it?
Yeah. What I would say is a big component of that is what I would consider wage and inflationary pressures, right? When we think about store wage pressures, we know what's going on from a macro perspective. We have a big fleet. Wages is one component. Healthcare cost is another component. I would put those under the inflationary pressure perspective. Another component would be, as we have invested over the last several years, and Kecia talked about this in our core infrastructure, we are now realizing the impact of that from a depreciation and a cloud and SaaS perspective. That is pushing some pressure from an SG&A growth perspective.
As we look to invest and support some of the core elements of the Ulta Beauty Unleashed plan, that in this year is driving the strategic investments or driving some of our SG&A growth.
I guess back to the brand side, you mentioned you're on the cusp of announcing a new Chief Merchant and Digital Officer. The relationship with the brands is so important. I do think investors underappreciate how important Ulta Beauty is to the brands in terms of driving their business. What were you looking for? The digital and Chief Merchant, one is sort of, "I got relationships with brands and I know how to speak with brands," but then there's the digital aspect. What were you looking for in this person that we were, sounds like, going to soon find out about?
Clearly, someone who has gone through many cycles in retail, I think, is very important. Someone who really understands what it takes to build an exceptional team for the future. A great cultural fit. Somebody that had experience in mass to luxury and everything in between. I do think that there's unique differences and you have to have an appreciation for that. Global experience, while not necessary, I thought it would be something if we found it, it would be important. Somebody who just likes to win. I mean, I want somebody that wants to be a part of this team, that wants to win, that wants to drive the business forward in a cohesive way. I shared that the team, the go-to-market team, it's not just about the merchandising piece.
It's about the merchandising and digital officer working very closely with the marketing officer, working really closely with the Chief Retail Officer. The power of that trifecta, it's going to be just I'm very excited about what the future is going to bring when I see the three of them working really cohesively together. I think that's what it's going to take for us to continue to take Ulta Beauty into the next stage of growth. Those are the traits that I was looking for.
You said the brands. Can you talk to investors about the importance of Ulta Beauty to the brands? Are brands appropriately channel managing a s they think about good, better, best, as they think about how they launch newness in in terms of thinking about Ulta versus an Amazon versus a Sephora in terms of customer acquisition and growth?
Yeah. One of the very first things that I've done, as I stepped into the role as CEO, is I've spent a lot of time in conversations face-to-face and in teams calls with our brands, spending time in L.A. and New York and many places in between. Creating an environment where we can have open and honest conversations. What do I need from them? What do they need from us? We do call them our partners because if we win and they don't, no one's successful. If they win and we're not, we are such a big part of their brand, they can't win. It's all transparency. We've had some really good dialogues of things that I feel like we can, with having a fresh set of eyes, lean into and really help them drive their business forward.
I have expectations from them of what I'd like to see, how they show up with Ulta Beauty. Things like if you're in a lot of distribution points, we need to have some exclusivities that are unique to Ulta Beauty that's driving that consumer into our ecosystem. Because in other places, no one does what we do. We are the only place where we can take a consumer from mass to luxury and have conversion both ways. You want to try to get a new consumer into your product line, you probably need to be either launching your newness with us or having exclusives with us. That's how we're going to help you grow your overall business. When you're ready to roll it into some other place, we need to have something on the back end of that.
We call it getting in the kitchen with brands. We're leaning in on that. Getting in the kitchen and coming up with bringing our best thoughts together with their best experience and coming up with ideas that are unique to our consumer. There is a lot of openness to that, which I'm very excited about. I think that's going to continue to help differentiate us in the future. Yes, we're very important to brands. We've had very clear and candid conversations about expectations, I believe, going forward.
To think about the two sides, put yourself into your own box in our case around Amazon. What do you bear as appreciation about the category and the beauty enthusiasts? What scares you about Amazon?
Let me start with no one does what we do. No one does what we do. As I shared earlier, 80% of our revenue is still coming from stores. Part of that is the experience of human connection. We have services in our stores. The human connection in beauty is really, really important. The fact that we have a world-class assortment that is really targeted to the beauty enthusiast and the beauty consumer, which is just having a lot of products out there. Our buyers do a fantastic job. Our merchants are doing a fantastic job day in and day out, making sure that we are putting the best items in front of the consumer versus just having everything in front of the consumer.
We have created that reputation, I believe, out there in the industry and with the consumer base that they know they can trust Ulta Beauty. We are going to just continue to lean into our areas like marketplace and our digital acceleration. There are things that we still have an offer on our e-commerce platform that are coming very soon, like Subscribe and Save. For that replenishment piece, which is still a relatively smaller part of what drives the spend, it is really newness and Innovation that is driving the spend. Newness and Innovation, you have to experience it in store. I would say that is what we are continuing to lean into and what makes us unique from Amazon as a perspective. We have seen just recently, Estée Lauder, some of the brands that have gone onto Amazon, the product was actually being sold on Amazon before.
It was just in a gray market way. To us, we do not see a huge disruption. It is just that you are buying it off of Amazon. You are actually buying it now through Estée Lauder versus through a third party, which who knows where it came from. Nine times out of ten, it could be, not it could be, stolen products even from us. That is not good for us either as a company. We are continuing to keep an eye on it. We are leaning into our super strengths and what makes us different and what makes us unique. I believe by doing that, I am very optimistic that we will continue to grow our business in the future in beauty and in wellness.
Great. Sephora, North American CEO at a mid-March fireside, called "the consumer very, very overwhelmed right now" . There is a lot of consternation amongst all of us around what did something after a really nice holiday, what happened? It was self-announced in January, and they talked about the deceleration environment. How are you thinking about the consumer? What's going on? How do you think the category reacts in a tougher environment? It's definitely a tougher environment.
I'll start by saying that beauty is still a highly engaged category, and the consumer is still making a decision on where they're investing their dollars. Beauty is the category where they can feel good about themselves and how they can express themselves in a cost-effective way. We still see good engagement in beauty. We haven't seen a shift in the consumer shopping patterns from our last report that we've had that we've publicly shared. We've not seen adjustments in how the consumer is spending. I would just say that what makes us unique from the competitor that you mentioned in your question, what makes us different is that we have everything from mass to luxury. We're not just relying upon higher-end price points, and we've got everything in between.
If the beauty consumer is wanting to still engage in beauty, but maybe in a less high-dollar way, they can still come to us and be engaged with us, whether it's online or in- store. I would say that we're not seeing whatever was being referred to before. We're pleased with how the beauty consumer is continuing to engage with Ulta Beauty today.
Just as a follow-up, to sort of one level down, in the past, if you went back to the GFC, I think the power was down seven and beauty was down three, right? It is a relatively defensive category. One of the early warning signs that you've talked about in the past is trade down. How did the consumer behave in 2024? If there's been any change, any signs that you're seeing that are concerning?
Yeah. I mentioned that just in the previous question that we've not seen any changes necessarily in the consumer behavior. We are just continuing to lean into what it is that we do well and controlling what we can control. 2025, I mean, even the tariffs that came out today, it's a totally unpredictable environment that we're in. I believe Ulta Beauty focusing on controlling what we can control, keeping the guests the center of all the decisions that we're making, and really being focused on our Ulta Beauty Unleashed plan is going to be all of the right things that we need to continue to lean into to help propel us through 2025 and beyond.
Awesome. With that, I'd love to open it up to the audience for questions. We've left one very fantastic that did not bring up. Someone's going to ask in the audience.
Can't imagine.
Starts with a Tariffs . That's what they're all thinking. That is what they're all thinking. Can you talk about, obviously, I didn't bring the big board. I was going to ask about Malaysia, 46%. Can you talk about tariff risk? I know it's very hard. You have a lot of brands. How do you think about tariff risk? Have you seen any impact? Some companies that have some exposure have already seen some impact in their categories and in our factories taking some place. Just broadly talk about tariff risk.
Yeah. Thank you, Chris, for the question that I know is on a lot of minds. What I would say is we're watching the tariff evolution as closely as everyone else. It'll take us a minute to kind of process what the implications of all that has been shared over the last day or so. Broadly speaking, what I would say is for Ulta Beauty, our tariff risk is relatively low. The reason why we say that is because in 2024, only about 1% of our receipts were direct imports, which would mean they were subjected to tariff. Again, relatively low. Our Ulta Beauty Collection is a large portion of that.
When we think about our brands, right, I mean, being a house of brands and having 600 brands, it's difficult to really, and it takes time for the brands and then also us to go through and assess for them what are the impacts on their business. We work in close partnerships with our brands to try to mitigate kind of the impact that that would have on the end consumer. Similar to how we navigated in 2018 and 2019 when there was a big kind of tariff implication, we'll continue to do that. We'll stay close with our brands and we'll flex. Beyond merchandise products, I would say we do have some exposure. Again, very limited in things like our store fixtures, our store lighting, IT equipment, and other store supplies.
We will continue to monitor that and to the best of our ability offset or mitigate some of those implications.
The first question to that is pricing. I think in 2018, it was a bit of a different environment where it was pre-all this inflation in consumer wallets, particularly around needs. Historically, can you talk about how you approach pricing around inflation? Is it potentially different in partnerships with brands? Is it potentially different this time given how much the consumer has taken from the inflation side?
I would say it's all we will continue to work—we will work with our brands to adjust to this evolving and dynamic environment. What I would remind us is that half of our business is on the prestige side of the house, which is in our salons. The other side is mass, which we have a little bit more flexibility from a pricing perspective. Yeah, I think we will leverage a lot of—we'll go back to our toolbox that we used prior. We will flex it and adjust it given the evolving consumer dynamic and feel as consumers are even more value-sensitive.
Any other questions? Go ahead.
[audio distortion]
Yeah. Yeah. We're deploying that technology here very, very soon into our system. We also you earn your points, which is very important to our Ulta Beauty consumers, and points matter versus going something else for your replenishment. In addition, our ability to communicate through our personalization efforts. We already had the algorithm that was there. It's just that we're going to make it a lot easier so they can automatically set up for it. We were doing a lot of that already behind the scenes with our personalization efforts. Now it's just going to become automatic, and you'll be able to sign up for it. That's kind of low-hanging fruit for us that's coming relatively shortly here soon.
[audio distortion]
What I would say is, obviously, when you think about this at the bottom page, there is an implication because we're offering a bit of a discount to get that repetitive purchase. Even if we take a step back and think about the beauty enthusiast, the thing that's driving the beauty enthusiast, which is this context, they are not a true beauty enthusiast, is not buying the exact same product or replenishing the exact same product every month. Because newness is so important to them, they may try a serum one month and want to try a different serum the next month. While there are some consumers that are very focused and repetitive, for the large majority of the beauty enthusiasts, they are going to be looking to try different products and different brands.
[audio distortion]
Yeah. We opened 101 stores last year. We were right around 610 stores open. In joint partnership with Target, we made the decision to really lean into the 600+ stores that are open this next year and really look at how do we continue to drive efficiencies and leverage the learnings that we've had to really unlock value for both of us collectively together. We have taken a little bit of a pause in opening more stores, but that is really to just make sure that we're working on all the things that we've learned over the last few years collectively together and bring two great companies' minds together to really make this even a greater value for both of our organizations.
We haven't announced what we're going to do past 2025, but right now this year, we're really focused on improving and leveraging the learnings that we've had already in the 610 stores that we have open right now.
[audio distortion]
Yeah. The question is on TikTok. What we've done is just in our more recent 21 Days of Beauty, we actually were participating on TikTok that you could click the link, and it would take you to our site. We really want the consumer to still be purchasing through our Ulta Beauty channel today. What you'll see from a lot of the brands that are selling on TikTok, the majority of them are at a discounted rate. I don't know how long the brands can continue to do that because it's expensive to be on TikTok. If you're doing it at a discount, it's not necessarily what I would view as a long-term play. It might be a way for you to get some energy and excitement into your brand, but you're not going to stay on there forever. I just don't see that working.
I think that you'd see it to spike some activity within your brand, but then you're going to want to back off of it. I don't think that's going to be where brands are going to be going every day, all the time.
[audio distortion]
Let me start just a little bit about the category, and I'm going to kick it over to you, Paula. One of the things that was unique over the last few years is points of distribution, specifically around packaged cosmetics. There have been over 1,600 new points of distribution added in the last few years, and that has been extremely disruptive to the industry as a whole. The fact that we were able to really go through that cycle where we had 90% of our store chain was impacted by one or more competitors opening, we've never seen anything really like that. The fact that we were able to hold in there in 2024, we said it was the first time that we actually lost a little bit of share. We've been in this fight for a while. We're cycling through that now.
I do think that there's some good upside potential for us here in the future. Paula, anything you'd like to add?
The thing that I would add is broadly our perspective on the category is that Kecia talked about this earlier. That it is strong. It's resilient. It is a growing category. Our expectation is that it continues to grow. Moderating, but it's still growing at the historical rate of 2-4%. We're confident about the growth of the category. Know that we would participate and be driving that growth over the long term.
In the last three years, beauty itself has grown $20 billion in sales. The wellness category is the size is $400 billion, and it's actually outpacing the growth of beauty. We're leaning into beauty and wellness. When you think about what the future looks like for this category specifically as well, I think there's huge upside potential here in the future.
[audio distortion]
I would say where we're confident we will end up is in continuing to be a leader in this category and a share gainer, and so a market share gainer. There's disruption that's happening that's happened over the past several years. It's an attractive category. It's a great category with margins. It has always been a competitive category. We expect the competition to continue and for new entrants to come and go. Ulta Beauty will be the lasting one, and we will be the leader in the category and a share gainer. This is what we do. That's the other thing. We were talking about all these other department store discounters, etc. This is what we do. This is who we are to our core. Others can want to participate in it because there's attractive margins that are out there.
This is what Ulta Beauty is all about. This is what we've been about since day one.
Points. I was—I'm sorry. Go ahead.
Can you just talk a little bit more about wellness? I guess conceptually, especially coming out of COVID, how that's been making more focus. I'm not sure I understand what the action means for merchandise. What categories does that mean? How much of the store do you guys want to dedicate to this? Because it seems like it's a fairly out-of-best investment that you guys are making this year.
Yeah. Currently, we have wellness in about eight feet in all of our stores. We have had some initial key learnings of what wellness can drive within the category. What we really like about wellness is it's not a trade-off for investing in your beauty. It's actually an add-on in addition to. Some categories that I could just share today that we're thinking about is sleep. Sleep is really important. How much sleep you get after you're slept and your face and on your body. Those eye patches do not always cure not having enough sleep at night. Sexual wellness and changes in life stages, especially for the female consumer. Going from engaging from someone having their first period as a young teenager all the way through menopause, it's a very personal thing to have to ask about.
We have done a lot of research that says that we have the credibility in the industry and the confidence of the consumers that they feel that they trust Ulta Beauty for these questions and these needs. I think the fact that our associate base is very, they're approachable. They're not judgmental. The confidence that the consumer has with us, it just leads to that this is an area of the business that we need to continue to lean into. Sexual wellness, this younger generation, that's really important to them also. It is not just about ingestibles, which is truly important, and we have them in store today. It is beyond that. It is these categories that kind of surround how you feel about yourself and how you can be the best version of yourself going forward. Were you going to ask?
I was going to say, yeah, and how you take care of yourself. It's a really important category, evolving category. Right now, it's disparate. There's no one clear owner in this category. We know that given the trust that the consumer has for Ulta Beauty, we have a real right to win in store and digitally. We think that our announcement about marketplace wellness will play a key role in bringing marketplace will play a key role in bringing wellness to life in a differentiated way as well.
I wanted to clean up with a question on points and promotions. I think a lot of investors don't appreciate the importance of points, as you mentioned, to the consumer. You have evolved the promotional strategy, as I said, over the past two years in terms of leveraging points. If you have an open mic for you there.
Yeah. Yeah. I'll start, and maybe Paula can add. Is that points are really important to the consumer. What we like about points is a lot of times the brands are participating in funding those points. And it's a way that the brands can engage in offering the consumer a greater value without discounting their prices, especially in prestige and luxury. They don't really like to play that price game often. This is a way that you engage a consumer. That is a competitive advantage that we have. The last couple of years, since I've been here even, the evolution of the personalized marketing campaigns that we can do that are really tailored. We used to do a lot more broad-based marketing to the consumer. We don't really do much of that anymore.
If you're getting a unique coupon to you, it's different than your neighbor's going to be because your shopping patterns are different. What works for you is different. Maybe we want to get you back in the store a little bit sooner. That is just a superpower that we've been able to unlock. Again, the fact that we have our foundation systems, really top-notch, world-class, leading right now, enables us to continue to lean in on that. Paula, anything you'd like?
I would say our guests tell us they love our points. I mean, it's clear. It's simple. You spend a dollar, you get a point throughout the year. We offer really compelling point multipliers. 2x, 3x, 4x, they love it. It's unique. In an environment where consumers are looking for value, points become even increasingly important. We believe that it's a key draw for us, and our consumers love the program that we have.
Awesome. That's a great thought to cut off. Thank you for your time so much.
Thank you.
Thank you.