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In 2020, it appeared that a marriage was made in heaven when Ulta Beaty (ULTA) and Target (TGT) announced a partnership that involves putting Ulta stores in Target locations, a concept the retailers called “shop-in-shop.”
By 2021, Ulta Beauty debuted in over 100 Target stores nationwide and on Target’s website. By the following year, both retailers expanded their partnership by implementing this concept in 250 more Target stores and announced their goal to build towards 800 shop-in-shops over time.
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During an earnings call in August last year, then-Ulta Beauty Chief Operating Officer Kecia Steelman said that the company’s partnership with Target is “driving growth” and is still on track to reach that goal of expanding to over 800 Target stores.
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“I think it's also really key that nearly 4 million guests have linked their Ulta Beauty and their Target circle loyalty programs together,” said Steelman.
Last year, Ulta Beauty debuted at 101 new Target locations. Currently, Target operates roughly 610 Ulta shop-in-shops in its stores.
Ulta Beauty slams the brakes
Despite this recent progress, Steelman, now CEO of Ulta Beauty, has announced that the beauty retailer is pausing its goal to expand to more Target stores.
“In joint partnership with Target, we’ve made the decision to really lean into the 600-plus 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?’” said Steelman at JPMorgan’s 11th Annual Retail Round Up Conference.
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She said that the move will create even “greater value” for Target and Ulta Beaty and emphasized that the beauty retailer hasn’t announced further plans for additional stop-in shops past 2025.
Ulta Beauty's decision comes after it revealed in its fourth-quarter earnings report for 2024 that its net sales decreased by 1.9% year-over-year during the quarter, and its operating income, the company’s profit after expenses, declined by about 5% year-over-year.
During an earnings call last month, Ulta Beauty flagged that it is operating in a “dynamic environment" causing “incremental pressure on consumer spending.”
Target faces controversy amid Ulta Beauty partnership
Ulta Beauty’s pause on expanding into more Target stores also comes during a time when Target was in the midst of controversy after it scaled back its diversity, equity, and inclusion policies in January. As a result, Target faced a 40-day boycott from consumers in March.