Beauty retail giant Ulta ($NASDAQ:ULTA) reported disappointing earnings Thursday, May 28 after market close. The company had diluted losses per share of $1.39, worse than Wall Street’s estimate of earnings per share of 68 cents. Its revenue of $1.17 billion also missed analysts’ estimates of $1.25 billion, and came in 32.7% lower than the $1.74 billion from the same time last year. Ulta reported a net loss of $78.5 million, a significant decrease from the company’s net income of $192.2 million in the previous period.

“For much of the first quarter, Ulta Beauty operated as a digital-only business, and while e-commerce sales exceeded our expectations, it was not enough to fully offset the impact of our store closings,” CEO Mary Dillon said.

Beauty is a high-touch business. People want to browse and apply ten lipstick shades before they buy one. Obviously, this is no longer an option for shoppers. The Coronavirus pandemic has been tough on retailers in all sectors, and the beauty industry has felt its influence shifting over years. There’s been an increased focus on skincare as many consumers opt for a natural look and wellness-focused products. But the beauty industry seems equipped to adapt to changing values and lifestyles, with an emphasis on skincare and safety.

Ulta and Sephora ($EPA:MC) seem less like competitors now that both beauty retailers are dealing with the same overwhelming obstacle. The companies don’t need to fight; they’re dealing with different consumers. Ulta dominates the Midwest. In Wisconsin, there are ten Sephora's and 20 Ulta's. Ohio has 43 Ulta stores and ten Sephoras. Michigan has 49 Ulta's and seven Sephora's. 

Ulta’s average product price is about $25, while Sephora’s price point hovers around $48.

Social media engagement with the companies spiked over the past few months as they introduced curbside pick-up options and leaned into digital services like virtual try-on and skin tone matching. Ulta hit 65,800 Facebook mentions, the most attention the page has seen since December.

This month, as Sephora rolled out its revamped loyalty "Beauty Insider" program and a product samples subscription box, the company saw more Facebook mentions than it's seen in years.

“Overall, the beauty category should see a strong bounce back from the reopening as people look to begin socializing again,” principal analyst of eMarketer Andrew Lipsman said in a statement. “US consumers also tend to seek the joy and comfort of small luxuries amid more recessionary landscapes.”

If Ulta and Sephora can stay in their own lanes and double-down on appealing to their average consumers, they might have a better shot at weathering the global crisis. But for now, it also means a shift in marketing tactics and a pivot further toward e-commerce. 

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