Ulta Beauty Rises 7% On Plans To Enter Target Stores

Shares of Ulta Beauty rose 7.4% on Tuesday, Nov. 10 as the company announced its strategic partnership with Target, marking its debut at over 100 Target stores nationwide and on Target.com beginning next year.

Under the deal, Ulta Beauty (ULTA) stores will operate within 100 Target locations through a “shop-in-shop” concept and will offer established and emerging prestige brands. The two retailers plan to scale the concept to additional locations over time. The Ulta Beauty shop-in-shop stores at Target will occupy about 1,000 square feet of space and will be prominently located next to the existing beauty section in Target stores.

Ulta Beauty will also train newly hired Target (TGT) employees to serve as experts on prestige beauty offerings. Meanwhile, guests who shop for Ulta Beauty products at Target online will enjoy free shipping for qualifying orders and Target’s same-day fulfillment services, including Drive Up, Order Pickup and Shipt same-day delivery, at participating store locations. The Ulta Beauty at Target merchandise offerings will be available on Target.com and in select stores in the second half of 2021.

For Ulta Beauty, the new deal provides the company with another channel to boost its sales while for Target, the partnership will help in enhancing its beauty offerings.

In reaction to the deal, Oppenheimer analyst Rupesh Parikh commented, “At this point, details are very limited in fully evaluating the partnership, especially with regard to economics, cannibalization with existing stores, etc. We are surprised by the partnership given the overlap in brands on the mass side and the risk of losing traffic to TGT locations.”

Parikh stated that he would await more details to formalize his views. However, he also commented that if the partnership becomes successful, then it could potentially put ULTA in play as an M&A target down the road. Parikh has a Buy rating for Ulta Beauty with a price target of $180. (See ULTA stock analysis on TipRanks)

The rest of the Street has a cautiously optimistic outlook on Ulta Beauty stock, with a Moderate Buy analyst consensus based on 11 Buys and 6 Holds. Shares have risen 4.9% so far this year and the average analyst price target of $271.57 indicates a modest upside potential of 2.3%.

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