VOL. XCIV, NO. 247
★ WIDE MOAT STOCKS & COMPETITIVE ADVANTAGES ★
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Ulta Beauty, Inc.
ULTA · NASDAQ
Weighted average of segment moat scores, combining moat strength, durability, confidence, market structure, pricing power, and market share.
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Overview
Ulta Beauty is a U.S.-focused specialty beauty retailer operating an omnichannel model (1,445 stores plus 600+ Ulta Beauty at Target shop-in-shops). The core moat is demand-driven: a large loyalty program (44.6M active members; >95% of sales from members) and a one-stop assortment spanning prestige, mass, and salon categories, reinforced by some exclusive product rights. Physical network density supports discovery/sampling and embedded services, while vendor relationships and scale can improve access to new launches (but are not contractually secured). Ulta also monetizes its audience and data via UB Media retail media plus credit card and deferred-revenue programs, though these face strong competition from larger retail media ecosystems. Key pressures are vendor concentration, potential loss of exclusives, and channel competition from Sephora, mass retailers, and online marketplaces.
Primary segment
Beauty Products Retail
Market structure
Competitive
Market share
8%-10% (reported)
HHI: —
Coverage
3 segments · 5 tags
Updated 2026-01-06
Segments
Beauty Products Retail
U.S. beauty products retail (specialty omnichannel beauty retailer)
Revenue
94%
Structure
Competitive
Pricing
moderate
Share
8%-10% (reported)
Peers
Beauty Services
U.S. salon services (hair, brow, skin) delivered inside retail stores
Revenue
4%
Structure
Competitive
Pricing
weak
Share
0%-1% (reported)
Peers
—
Platform Monetization (Retail Media, Credit Cards, Partner Royalties, Deferred Revenue)
U.S. retail media and ancillary monetization on Ulta's customer base (advertising/vendor income, credit cards, partner royalties, gift cards/loyalty deferred revenue)
Revenue
2%
Structure
Competitive
Pricing
moderate
Share
—
Peers
Moat Claims
Beauty Products Retail
U.S. beauty products retail (specialty omnichannel beauty retailer)
Revenue share uses FY ended Feb 1, 2025 category mix: cosmetics+skincare+haircare+fragrance = 94% of net sales.
Switching Costs General
Demand
Switching Costs General
Strength
Durability
Confidence
Evidence
Points-based loyalty + credit cards create repeat purchasing incentives; redemption is confined to Ulta channels, increasing friction to switch.
Erosion risks
- Competitor promotions and loyalty programs reduce differentiation
- Privacy/marketing restrictions reduce personalization effectiveness
- Lower perceived value of rewards (point inflation)
Leading indicators
- Active loyalty members
- Percent of sales from members
- Loyalty redemption rate and breakage
Counterarguments
- Loyalty points are not a hard lock-in; customers can multi-home across retailers
- Price and exclusive product availability can outweigh rewards in purchase decisions
Physical Network Density
Supply
Physical Network Density
Strength
Durability
Confidence
Evidence
Large, convenient store footprint plus shop-in-shops supports product discovery, sampling, and immediate fulfillment, which are harder to replicate purely online.
Erosion risks
- Traffic decline and channel shift to online
- Store cannibalization and diminishing returns on new stores
- Rising labor and occupancy costs
Leading indicators
- Comparable sales growth
- Store traffic and conversion
- E-commerce penetration
Counterarguments
- Large general retailers (mass merchandisers) already have ubiquitous footprints
- Beauty discovery increasingly happens online (social/influencers), reducing store advantage
Contractual Exclusivity
Legal
Contractual Exclusivity
Strength
Durability
Confidence
Evidence
Permanent and time-limited exclusive brand/products create reasons to choose Ulta over alternative retailers.
Erosion risks
- Brands shift distribution to direct-to-consumer or broaden to competitors
- Exclusivity windows shorten, reducing differentiation
- Regulatory scrutiny of exclusivity in some contexts
Leading indicators
- Exclusive product sales mix
- Number of exclusive launches per quarter
- Vendor/brand partner churn
Counterarguments
- Exclusives are a minority of sales and may not drive most trips
- Competitors can secure their own exclusives or substitute products quickly
Preferential Input Access
Supply
Preferential Input Access
Strength
Durability
Confidence
Evidence
Scale and vendor relationships can improve access to new/limited products and cooperative marketing, supporting assortment freshness.
Erosion risks
- Vendor consolidation increases vendor bargaining power
- Brands shift to direct-to-consumer or competitors
- Supply disruptions and overseas sourcing risks
Leading indicators
- Share of sales from top brand partners
- New brand/product launch cadence
- In-stock rates during key launches
Counterarguments
- Major brands have strong bargaining power and can allocate supply elsewhere
- Lack of long-term supply contracts limits defensibility of access advantage
Suite Bundling
Demand
Suite Bundling
Strength
Durability
Confidence
Evidence
One-stop assortment across prestige + mass + salon categories reduces the need for customers to shop multiple channels and supports higher basket size.
Erosion risks
- Consumers unbundle purchases to specialty/DTC channels
- Online marketplaces increase assortment breadth and convenience
- Reduced differentiation if competitors match breadth and price points
Leading indicators
- Average basket size and units per transaction
- Cross-category attachment rates
- Share of wallet among active members
Counterarguments
- Online retail can match or exceed assortment and convenience without stores
- Brand-owned DTC channels can bypass Ulta for new launches and loyalty
Beauty Services
U.S. salon services (hair, brow, skin) delivered inside retail stores
Revenue share uses FY ended Feb 1, 2025 category mix: services = 4% of net sales.
Physical Network Density
Supply
Physical Network Density
Strength
Durability
Confidence
Evidence
Embedding salons/brow bars across a large store network creates local convenience and cross-traffic advantages versus standalone salons.
Erosion risks
- Staffing shortages and wage inflation for licensed professionals
- Standalone salons compete on specialization and convenience
- Reduced store traffic lowers service demand
Leading indicators
- Service bookings per store
- Stylist retention and productivity
- Service revenue per square foot
Counterarguments
- Salon services are local and fragmented; customers often choose based on stylist relationships
- Ulta's in-store environment may not match premium standalone salon experience for some customers
Suite Bundling
Demand
Suite Bundling
Strength
Durability
Confidence
Evidence
Service + product bundling (appointments plus immediate product upsell) increases customer value and improves economics versus services-only operators.
Erosion risks
- Consumers decouple services and product purchases (buy products online)
- Higher price transparency and discounting for services
- Competitive service formats (membership salons, at-home services)
Leading indicators
- Attachment rate of product purchases to service visits
- Repeat appointment frequency
- Net promoter score for services
Counterarguments
- Many customers buy recommended products elsewhere; upsell is not guaranteed
- Service differentiation depends on stylist quality rather than retailer format
Platform Monetization (Retail Media, Credit Cards, Partner Royalties, Deferred Revenue)
U.S. retail media and ancillary monetization on Ulta's customer base (advertising/vendor income, credit cards, partner royalties, gift cards/loyalty deferred revenue)
Revenue share uses FY ended Feb 1, 2025 category mix: other = 2% of net sales (includes credit cards, Target royalties, deferred revenue).
Data Network Effects
Network
Data Network Effects
Strength
Durability
Confidence
Evidence
A large loyalty member base generates customer data that improves targeting/personalization, which can increase vendor income and reinforce the value of the platform.
Erosion risks
- Privacy regulation and platform changes reduce data availability
- Brands shift spend to larger retail media networks (Amazon, Walmart, Target)
- Data quality degrades if engagement declines
Leading indicators
- Retail media and other vendor income growth
- Ad inventory utilization and CPMs
- Active loyalty members and engagement
Counterarguments
- Retail media scale may be limited versus general retailers with larger reach
- Brands can reallocate budgets quickly; switching costs for advertisers are low
Two Sided Network
Network
Two Sided Network
Strength
Durability
Confidence
Evidence
UB Media connects brand partners seeking targeted reach with Ulta's beauty-enthusiast audience; more brands improve offerings while more engaged customers improve inventory value.
Erosion risks
- Ad budgets shift to platforms with better ROI or larger scale
- Measurement/attribution limitations reduce advertiser willingness to pay
- Channel conflict if brands prioritize DTC marketing
Leading indicators
- Number of advertising brand partners
- Repeat spend and retention of advertisers
- Attribution/measurement improvements
Counterarguments
- Two-sided effects may be weak because advertisers can multi-home across many retail media networks
- Ulta audience is narrower than mass retail platforms, limiting reach-based spend
Float Prepayment
Financial
Float Prepayment
Strength
Durability
Confidence
Evidence
Gift cards and loyalty program deferrals create customer prepayment-like economics (cash up front, revenue later) that can modestly benefit working capital.
Erosion risks
- Higher redemption rates reduce breakage benefit
- Regulatory changes to escheatment/breakage recognition
- Lower gift card sales in weaker consumer environments
Leading indicators
- Deferred revenue balance trend
- Gift card sales and redemption rates
- Working capital (cash conversion cycle)
Counterarguments
- Float benefit is modest relative to core retail economics
- Breakage assumptions can reverse if customer behavior changes
Evidence
more than 95% of total sales coming from our 44.6 million active ... loyalty program members
Shows loyalty program scale and that most sales are member-driven, supporting repeat-behavior and switching-friction claims.
Points earned are valid for at least one year ... may be redeemed ... in Ulta Beauty stores or through our digital platforms.
Points validity + redemption inside Ulta channels creates ongoing incentives to keep spending within Ulta.
Total stores end of period ... 1,445
Scale of physical retail network.
more than 600 Ulta Beauty at Target shop-in-shops
Adds incremental physical reach via partner locations, reinforcing convenience and discovery.
Both permanent and temporary exclusive products represented approximately 9% of our net sales in fiscal 2024.
Quantifies how meaningful exclusives are to revenue.
Showing 5 of 20 sources.
Risks & Indicators
Erosion risks
- Competitor promotions and loyalty programs reduce differentiation
- Privacy/marketing restrictions reduce personalization effectiveness
- Lower perceived value of rewards (point inflation)
- Traffic decline and channel shift to online
- Store cannibalization and diminishing returns on new stores
- Rising labor and occupancy costs
Leading indicators
- Active loyalty members
- Percent of sales from members
- Loyalty redemption rate and breakage
- Credit card penetration and spend
- Comparable sales growth
- Store traffic and conversion
Curation & Accuracy
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