Ulta Beauty (ULTA) is one of the most prominent players in the beauty retail industry, but a recent decision may impact consumer demand.
Recently, the retailer saw a surge in sales. In Ulta’s second-quarter earnings report for 2025, it revealed that its comparable sales increased 6.7% year-over-year as it saw a 3.7% increase in customer transactions.
Also, the amount of money customers spent per purchase spiked by almost 3%.
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Despite a boost in sales, recent data from Placer.ai found that Ulta’s foot traffic at same-store locations declined by 1.1% during the quarter. Specifically, same-store visits dropped in June and July by 4.6% and 5.4%, respectively.
Ulta Beauty CEO addresses a harsh decision
In addition to waning foot traffic in stores, last month, Ulta and Target (TGT) announced that they mutually agreed to end their five-year-long partnership in August 2026. The partnership involved adding Ulta shop-in-shops in hundreds of Target stores.
The news came after several Target employees took to Reddit to claim that the Ulta shops attracted theft and suffered from understaffing as they generated high foot traffic. One Ulta shop-in-shop location reportedly was losing $10,000 a month due to retail theft.
During an earnings call on Aug. 28, Ulta Beauty CEO Kecia Steelman said that royalty revenue from Ulta’s partnership with Target in fiscal 2024 was “well below 1% of net sales.”
“We’ve achieved a lot together, and we remain committed to supporting the shopping experience for guests through the end of the partnership as well as continuing to support our teams and partners during the transition,” said Steelman.
Image source: Jones/Bloomberg via Getty Images
In the meantime, she said Ulta will look for new ways to “maximize key growth opportunities in beauty and wellness,” especially as consumers grow more cautious about their spending amid heightened concerns about the impact tariffs will have on prices for everyday goods.
“Our insight suggests consumers continue to prudently manage their day-to-day spending and are watchful of pricing trends in response to tariffs,” said Steelman. “At the same time, beauty enthusiasts tell us that they’re prioritizing their beauty regimens and remain strongly engaged within the category. While we continue to manage the business thoughtfully amid ongoing macroeconomic uncertainty, we believe beauty and wellness offer a unique sense of comfort and escape, which we expect will continue to support the beauty category resilience.”
Ulta Beauty makes a bold move to attract more customers
To boost sales, Ulta is planning to expand its wellness section in its stores. The section, which first launched in 2023, sells products such as supplements, bath and body care, sleep aids, etc.
“Our goal is to establish ourselves as a one-stop shop for relevant products to support living a well-balanced lifestyle through improvements to the mind, body, and spirit,” said Steelman. “During the second quarter, we launched several new wellness brands and expanded the in-store footprint of the wellness shop in about 370 stores. In the third quarter, we will introduce a larger enhanced guest experience with new elevated fixtures in 50 additional stores.”
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She said Ulta’s wellness section will focus more on “everyday care, supplements, ingestibles, relax and renew, down there care, and intimate wellness.” Currently, Ulta has 150 brands and 700 products that are focused on self-care.
Steelman believes that the wellness market is growing faster than beauty.
“We do recognize this wellness market is large and growing, and it’s really driven by consumer engagement and product innovation,” said Steelman. “The market itself is about a $410 billion market, that was in 2024, and it’s growing faster than beauty right now, but it’s complex and it’s personal. We believe this is an opportunity for us to really leverage our brand credibility and scale growth drivers in this wellness category. So we do believe in the long term that wellness can be a billion-dollar business over time.”
Wellness is attracting a vital group of consumers
The wellness market is indeed booming, especially in the U.S. According to a recent report from McKinsey & Company, wellness in the U.S. is estimated to represent over $500 billion in annual spend, growing at 4% to 5% per year.
Also, 84% of Americans said in a survey in the report that wellness is a “top” or “important” priority. This belief is more popular among younger generations.
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In the survey, almost 30% of Gen Zers and millennials in the U.S. said they prioritize wellness “a lot more” compared to one year ago, while only 23% of older generations agree with this statement.
The report flags that this growing consumer trend could be due to “several factors.”
“Younger generations self-report higher levels of burnout and worse overall health compared with older people but are also more exposed to health-related content on social media (where they are more likely to be influenced to make a wellness-related purchase than older generations are),” reads the report.
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