Ulta to open beauty shops at 100 Target stores in 2021

The nation's largest beauty store chain, Ulta Beauty, has a deal to place shops in more than 100 Target stores by mid-2021. 

The shops, which will each be about 1,000 square feet and carry makeup, skincare products and fragrances, will operate beside existing beauty sections in Target stores, the companies said Tuesday. Financial terms of the deal weren't disclosed.

"It's a combination of two winning retailers that have great momentum in the market that can redefine the category," Target CEO Brian Cornell told The Associated Press on Monday.

Lipstick down, skincare up

The partnership stands to benefit both retailers as the coronavirus pandemic upends shopping habits and more people try to minimize potential exposure to the virus through one-stop shopping. COVID-19 has dampened sales of lipstick as people wear masks, but the skincare business has enjoyed stronger sales. Both companies should increase their customer base as a result of the deal. Combined, Target and Ulta have more than 100 million active loyalty program members across Target Circle and Ultamate Rewards.

Target's cosmetics portfolio will expand and at the same time, it may boost traffic at stores as people consolidate shopping trips. The Minneapolis retailer has been taking market share from competitors in all areas including beauty, where second-quarter sales jumped 20% compared with the same period a year ago. Like other nonessential retailers, Ulta was hit hard when the pandemic forced it to close its stores in the spring, but business has been slowly recovering.

Ulta can win over new customers while it adds to its approximately 1,100 locations. Ulta, based in Bolingbrook, Illinois, will train newly hired Target workers on the premium products. The shops will offer the same virtual try-on tools like GlamLab, which customers can currently use in existing Ulta stores. Customers who shop Ulta Beauty at Target online will be able to use free shipping available for qualifying orders as well as Target's services like same-day and curbside pickup.

Modernizing the beauty aisle

Both companies may be able to further encroach on traditional department stores like Macy's which had seen cosmetics sales erode even before the pandemic as big-box stores modernized their beauty sections, and as specialty cosmetics chains like Sephora and Ulta expanded rapidly.

"More than ever before, now is the time for innovation in retail," said Mary Dillon, CEO of Ulta Beauty.

Shares of Target rose a little more than 1% while Ulta's stock was up roughly 5%.