Ulta Beauty and Target announced on Thursday their decision to terminate a partnership that facilitated the establishment of makeup and beauty shops within hundreds of Target locations. Following this announcement, shares of Target experienced a decline of approximately 2% in early trading, while Ulta's stock also fell by about 1%. The collaboration, which had introduced some of Ulta's merchandise to Target's online platform, is set to conclude in August 2026.
According to a spokesperson from Target, the company had successfully integrated over 600 Ulta Beauty shops into its retail spaces, which accounts for nearly one-third of Target's 1,981 stores across the United States. These Ulta Beauty shop-in-shop locations offered a limited and rotating selection of products compared to those found in Ulta's standalone stores, and they were staffed by Target employees.
The loss of such a popular beauty retailer's offerings could pose another challenge for Target as it seeks to regain the loyalty of shoppers and investors alike. Target's annual sales have stagnated for roughly four years, and the company anticipates a decline in sales for the current fiscal year. Notably, Target's stock value has plummeted to less than half of its worth in 2021, when it reached an all-time closing high of $266.39.
During earnings calls and investor presentations, executives from the Minneapolis-based retailer highlighted the significance of Ulta's shops and its trendy beauty brands as a means to increase store traffic. In a March investor presentation in New York City, Target's CEO, Brian Cornell, underscored the beauty category as a substantial growth opportunity for the company, expressing confidence in Target's long-term business trajectory. He noted that the company had gained market share in the beauty sector, with sales in this category rising nearly 7% during the fiscal year that concluded in early February.
Brian Cornell, who is 66 years old, is expected to step down from his role at Target soon. He extended his contract for approximately three years in September 2022, following the board's decision to eliminate its retirement age policy of 65.
Analyst David Bellinger from Mizuho Securities noted in an equity research report on Thursday that Target's operational challenges, including disorganized in-store operations, retail theft, and inadequate staffing, likely played a role in the dissolution of the partnership with Ulta Beauty. He expressed concern that losing the Ulta shop-in-shop arrangement is a negative development, presenting further obstacles for Target's next CEO to navigate.
In a statement on Thursday, Target's Chief Commercial Officer, Rick Gomez, expressed pride in the success achieved in collaboration with Ulta Beauty and the shared customer experiences brought forth through their partnership. He emphasized Target's commitment to delivering an exceptional beauty experience that continues to meet consumer expectations, showcasing a dynamic mix of beauty brands with continual new product introductions, all at unbeatable prices.
Ulta's Chief Retail Officer, Amiee Bayer-Thomas, characterized the partnership with Target as one of many innovative strategies employed to extend the reach of beauty to guests across the nation. She expressed confidence that Ulta's ongoing Ulta Beauty Unleashed initiatives would strengthen their leadership position in the beauty industry and define the next chapter of the brand's evolution.
