Narrow-Moat Ulta Beauty Overcomes Competitors Through Its Popularity and Beauty’s Strength

We think Ulta Beauty’s brand strength provides a narrow moat and has allowed the company to thrive despite economic conditions and other external challenges. Over the past decade, Ulta has become the largest specialty beauty retailer in the United States through store openings, product and brand introductions, improved marketing, and—with more than 43 million active members—an enhanced loyalty program. Sales increased to $11.2 billion in 2023 from $912 million in 2007 as Ulta opened more than 1,000 stores, its shops became more productive, and its e-commerce developed. This success has made Ulta a desirable partner for prestige, mass, and emerging beauty brands. While the firm faces intense competition and is affected by innovation and product cycles in cosmetics, we think it has developed a following that has allowed it to take share from mall-based stores while competing effectively against wide-moat Amazon and other e-commerce. We believe teen girls and women like to sample products in Ulta’s stores and that its salons, selection, promotions, and service encourage frequent visitation.