American cosmetics chain Ulta abandons plans to expand in Canada

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The American cosmetics chain Ulta canceled its expansion plan in Canada this year, opting instead to strengthen its online sales platform in the current economic environment.The Illinois-based company planned to open a handful of stores across Canada by the end of 2020, but in a regulatory filing Thursday, the chain said it had canceled those plans. “Given the current operating environment, the company has decided at this time to prioritize the growth of its business in the United States and is suspending its planned expansion in Canada. “

Ulta has grown to become the largest seller of makeup and beauty products in the United States, embracing the concept of a one-stop “big box” store and making it for the cosmetics industry. Unlike other beauty chains that exclusively sell their own products, the company claims to sell 25,000 different items, made by 500 well-known beauty brands.

In its most recent quarter, the company posted sales of $ 1.2 billion at its 1,264 stores in the United States in the three months leading up to the start of August.

Ulta has become the largest makeup and cosmetics seller in the United States by bringing the concept of the big box to the beauty industry. (Gabby Jones / Bloomberg)

Instead of expanding, the chain closed 19 locations in the quarter, due to slower sales due to reduced foot traffic amid COVID-19.

The company claims to have spent between US $ 55 million and US $ 65 million debuting tires to find potential store locations and other “early stage infrastructure builds” in Canada.

Instead of a Canadian launch, the company will focus its efforts on strengthening its presence in online shopping. Barclays analyst Adrienne Yih believes this is probably a good strategy. In a note to customers, she noted that the chain typically registers about three-quarters of its sales in-store and less than a quarter online. But during the pandemic months of May, June and July, nearly 60% of the company’s sales were done online.

With the pandemic showing no signs of slowing down, “we believe beauty is a category that women will continue to spend on,” she said.

But those online upgrades won’t include offering online sales in Canada, which the chain is not currently doing.

While the channel is closing the book on Canada for now, it’s clear they would still like to expand at some point in the future. “Ulta Beauty continues to believe that international markets provide a long-term growth opportunity for the business,” the company said.

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