Ulta Beauty (ULTA.US) Seeks New Growth by Entering the Children's Makeup and Toy Market
1min read Intelligible Finance learned that cosmetics retailer Ulta Beauty (ULTA.US) is launching a new product line - makeup toys to attract young consumers. The company is selling plastic balls for $10, which contain miniature replicas of some of Ulta's most popular products, without any real cosmetics.
So far, the experiment of producing 68 miniature samples with Zuru Toy's Mini Brands seems to be going well. Executives mentioned these toys in the company's recent earnings call, as both profits and sales exceeded expectations this quarter.
Since the series was launched in October, the collectibles have often sold out in stores and have gone viral on TikTok and YouTube. Ulta's chief sales officer Monica Arnaudo noted at an investor day that children under 14 were "obsessed" with them. The trend of teen skincare has raised alarms among parents and dermatologists. This move is aimed at attracting a younger crowd.
Ulta needs an edge. Same-store sales growth has slowed in recent quarters. This is an attractive target market for the beauty industry, which sells a wide range of products that were once considered too complex or uninteresting to young consumers, or simply didn't exist. Selling brands to consumers while they're young may yield a lifelong customer, at least in theory. According to NIQ, families with children aged 6-12 spent $2.4bn on facial skincare in 2023, up 27% from the previous year.
Still, competition is fierce to attract these groups. According to Piper Sandler's latest survey of adolescents, whose average age is 15.8, Ulta lost out to Sephora, a major competitor owned by LVMH, as the preferred destination for Gen Z to buy beauty products. (Ulta ranked second.)
