Ulta Beauty Inc. (NASDAQ: ULTA) shares rose more than 8 percent in the mid-day trading Tuesday following the news that the company has inked a long-term agreement with Target Corp (NYSE: TGT).
The Bolingbrook, Illinois-based cosmetics store chain will open its own stores at Target locations, according to the terms of deal. Ulta will initially launch its products in nearly 100 locations, with a plan to add more with time. The stores will be opened next to the existing beauty section at Target.
The two companies did not disclose the financial details of the deal. Ulta will also list its products on Target’s e-commerce website. Some industry experts believe the latest partnership will open another growth channel for Ulta, which is currently struggling to boost sales amid limited opportunities due to the pandemic.
Sales of cosmetic products were rising before the Covid-19 outbreak, which resulted in lower demand, as people see little reason to wear makeup behind the masks. However, daily skin care products such as lotions and face serums are still needed by shoppers. Target stayed opened even during the pandemic as it is as a provider of essential day-to-day products, which gives it a competitive edge over rivals. Ulta Beauty can also capitalize on the opportunity by selling its products through Target locations if the lockdown is once again imposed in future.
Target reported in August that sales of beauty items rose over 20 percent in Q2, representing a surge of more than two-folds from the prior quarter, as customers resume shopping of non-essential products after the restrictions related to Covid-19 were softened.
Ulta Beauty (ULTA) shares have been on a roller coaster ride since the start of pandemic. The stock has jumped nearly 5 percent on year-to-date basis, including today’s jump.