U.S. cosmetics chain Ulta scraps Canadian expansion plans

U.S. cosmetics chain Ulta has cancelled plans to expand into Canada this year, instead opting to beef up its online selling platform in the current economic environment.

The Illinois-based company planned to open a handful of stores across Canada by the end of 2020, but in a regulatory filing on Thursday the chain said it has cancelled those plans. "Given the current operating environment, the company has decided at this time to prioritize growth of its U.S. operations and is suspending its planned expansion to Canada."

Ulta has become the largest seller of makeup and beauty products in the U.S., by taking the "big box" store concept of one stop shopping, and doing itfor the cosmetics industry. Unlike other beauty chains that sell exclusively their own products, the company says it sells 25,000 different items, made by 500 different well known beauty brands.

In its most recently completed quarter, the company booked $1.2 billion in sales at its 1,264 stores across the U.S. in the three months up to the start of August.

Instead of expanding, the chain closed 19 locations during the quarter, as a result of slower sales because of reduced foot traffic amid COVID-19.

The company says it has spent between $55 and $65 million US kicking the tires on finding potential store locations and other "early-stage infrastructure buildout," in Canada.

Instead of a Canadian launch, the company will focus its efforts on beefing up its online shopping presence. Barclays analyst Adrienne Yih says that is probably a good strategy. In a note to clients, she noted that the chain typically books about three quarters of its sales in store, and less than one quarter online. But the pandemic months of May, June and July, almsot 60 per cent of the company's sales happened online.

With the pandemic showing no signs of abating, "we believe beauty is a category clearly women will continue to spend on," she said.

But those onlineupgrades won't include offering online sales to Canada, something the chain does not currently do.

While the chain is closing the book on Canada for now, it makes it clear it would still like to expand at some point in the future. "Ulta Beauty continues to believe international markets provide a long-term growth opportunity for the company," the company said.