The Ulta Beauty x Target Partnership is a Bullseye

This seems like common sense: As masks come off and consumers increasingly resume social activities, they want to put their best face forward.

The growing demand for makeup coupled with stimulus spending helped drive a major surprise when ULTA reported last quarter.

• Comp Sales increased +66% YoY, +7% vs. 2019
• Traffic increased +53%
• ULTA shares are trading accordingly: +73% on a YoY basis

What are we watching heading into Ulta's next Earnings Event?

1. The Launch of Ulta Beauty on Target.com and in 100 Target stores is off to a resounding start. Buzz has rocketed since the partnership's August launch, and is significantly outperforming the similar Sephora x Kohl's duo. Our data suggests this partnership is an excellent fit, and tweets are overwhelmingly positive. In the last week, Target x Ulta buzz has outperformed Kohl's x Sephora Buzz vs. the prior month by more than 100%. Combined, Target and Ulta Rewards programs already have more than 100 million users.

2. Social Media is helping to drive renewed consumer interest in beauty and cosmetics. This included makeup and skincare routines. On Ulta's last earnings call, the company specifically highlighted TikTok's relevance: "Engagement with social media platforms like TikTok are bringing new life to the color cosmetic category, engaging younger audiences, driving trends, and reinvigorating trial and usage." LikeFolio data shows mentions of consumers discovering makeup or beauty products and routines on TikTok are on pace with levels posted in 2020 (when TikTok's platform was booming). Videos tagged with #Ulta have more than +970 million views. We see stickiness here.

3. Back-to-School Shopping includes beauty products, too. These shopping mentions have increased +97% on a YoY basis.

With shares trading near all-time highs, it's important to consider where the performance bar is set. Many investors expect another record-setting quarter.

We're expecting a strong report, but will it be strong enough?

Long-term, we're watching to see how the Target x Ulta consumer base evolves. But so far, it's clearly off to a great start.

Ulta reports Q2 earnings August 25 after the bell.