By Carolina Gonzalez and Kim Bhasin | Bloomberg
Target inked a deal with Ulta Beauty Inc. to add miniature “shop-in-shop” versions of the makeup store to its aisles beginning next year.
Ulta products will initially be available in over 100 Target locations, with a plan to add hundreds more, the retailers said in a statement. The pop-ups will take up about 1,000 square feet of space and will be located next to Target’s existing beauty section. The financial details of the partnership were not disclosed.
Ulta shares jumped as much as 7.2% Tuesday in New York, while Target climbed as much as 2.2%.
The partnership gives Ulta “another growth channel” as it faces limited opportunities to expand in the U.S., Quo Vadis Capital’s John Zolidis said in a note. It will also help offset margin pressure amid a shift to online sales, he said.
Sales of cosmetics, like those sold at Ulta, were surging prior to 2020, though the pandemic put a damper on demand. Though makeup is struggling to recover with people seeing little reason to wear lipstick behind their masks, shoppers are still gravitating to skin-care products like moisturizer and face serums. And with Target deemed an essential retailer during the pandemic, it’s likely to remain open even if other retailers shut their doors during future lockdowns.
“Shop in shop” concepts are a way for retailers to offer customers new experiences and a wider selection of brands. J.C. Penney Co. has a similar model with Ulta rival Sephora, while Walgreens Boots Alliance Inc. offers Birchbox products in some of its locations. Target has similar shops with Walt Disney Co.
“More than ever before, now is the time for innovation in retail,” said Mary Dillon, chief executive officer at Ulta Beauty.