Ulta Beauty shares jump after ‘mutually beneficial’ partnership with Target announced



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THE RATINGS GAME

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Ulta Beauty Inc. shares jumped 7.4% in Tuesday trading after the retailer and Target Corp. announced a partnership that would bring Ulta shops to Target locations.

Ulta Beauty stock has rallied 16.9% for the week to date.

Target shares finished Tuesday up 2%.

The companies announced a deal in which Ulta will have shop-in-shops in 100 Target stores in 2021, with more to come. The 1,000-square-foot shops are located near Target’s existing beauty departments, and workers have been trained in prestige beauty to better serve customers.

See: Target adds ways for customers to go ‘contactless’

“Given shopping consolidation trends that have accelerated throughout 2020, this partnership brings Ulta closer to its customer as our analysis finds that 85% of Ulta customers shop at Target, while also opening the door for incremental customers as only ~20% of Target customers shop at Ulta,” wrote Cowen analysts led by Oliver Chen.

Cowen analysts say it will help Target to build on a category that is already important to the business.

“We expect the partnership will further cement Target’s strength with Gen-Z/millennials, and help make the retailer more relevant to new and younger shoppers,” Cowen said.

Cowen rates Ulta Beauty shares outperform with a $280 price target.

GlobalData Retail’s Neil Saunders calls the deal “mutually beneficial.”

“Putting together two very focused and successful retailers is a threat to other beauty players,” Saunders wrote.

“Specialists like Sephora will be able to hold their own because of the strength of their brands and the underlying loyalty of their shoppers. However, department stores and drug store chains – which have been losing [customers] for years – should think carefully about their response to this latest development.”

Also: Target’s holiday toy list includes Barbie, Nerf and an exclusive FAO Schwarz partnership

Raymond James analysts note the size of both retailers’ loyalty programs: Target has about 75 million members and Ulta has about 32 million.

For Ulta, the near-term financial impact might be “minimal,” but “the goal over time will be to drive spend per member higher by increasing brand awareness and being able to access the tens of millions of Target loyalty customers who are not currently Ulta loyalty customers.”

Raymond James rates Ulta shares market perform.

For Target, it brings access to brands that hadn’t been on its shelves previously.

“The agreement adds prestige beauty brands that were previously out of reach for the company, Ulta brings expertise in merchandising and service that Target could leverage more broadly in the category, and it further raises the profile of the product offering in the store overall,” said Wells Fargo in a note.

Wells Fargo rates both companies’ shares overweight.

Ulta stock is don 0.7% for the year to date. Target shares have rallied 25.4%. And the benchmark S&P 500 index is up 10.4% for the period.

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Experts explain why shopping early for holiday gifts is beneficial

The gift-buying season is very different this year, especially with COVID-19 cases continuing to rise across the country.

Some experts are concerned about potential shipping delays or inventory supplies.

“I would definitely recommend getting organized making a list, setting a budget because your finances may have changed this year versus last year,” said Trae Bodge, a lifestyle expert.

“I’m seeing a lot of deals already, I mean typically Black Friday, Cyber Monday kicks off the holiday shopping season but Amazon Prime Day popped up in mid-October, it kind of tipped everything on its head and so there are a lot of strong deals right now that you can take advantage of.”

Money saving expert Andrea Woroch agrees. Shopping early has it’s benefits.

READ: Tips for managing your money ahead of holiday season

“Retailers are rolling out Black Friday deals earlier than ever. Target has released Black Friday deals all month with new deals posted each week. Walmart has been hosting a series of Black Friday doorbusters leading up to Thanksgiving so it’s really changing and impacting what we can expect this holiday season,” Woroch said.

Woroch uses the following apps to help keep organized and spot the best deals during the holidays.

“Flipp” because it pulls at the store circulars enabling consumers to review deals in one place. It also alerts consumers to deals.

Pop cart offers price comparisons and Cently helps track available coupons.

“You also want to monitor price drops What I’m seeing is that a lot of retailers are extending their price adjustment policy,” Woroch said. “For instance, Target says that they will give you money back for any item you buy now that’s promoted as an early Black Friday deal if that price goes down before Christmas. So you have until Dec. 24, to ask for a price adjustment.”

READ: What will Black Friday look like amid the pandemic?

Shopping early can help spread purchases out over a longer period and avoid debt or racking up high credit card bills.

Woroch said some stores are offering incentives to shop now like cash back and gift cards that consumers could hold onto to use later in the holiday shopping season as well.

Bodge recommends looking at the deals available with your existing memberships.

“For instance, AARP has amazing number of benefits including discounts on holiday gifts and discounts on travel,” Bodge said.

Bodge said AARP is offering 30 percent off AVIS car rentals and 10 percent off Wyndam hotel and resort reservations.

Even if shopping online, consider using curbside pickup, there might be savings there as well.

READ: Pandemic pushes start of holiday shopping earlier than ever

“They may offer extra incentives with sale or coupon when you choose that delivery option, plus, that helps you avoid any potential shipping delays and you don’t have to deal with fighting for a parking spot or waiting in long line, so it’s kind of a win-win for everybody,” Woroch said.

No matter your shopping plan, consider shopping local and

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Ulta Beauty shares jump after ‘mutually beneficial’ partnership with Target

Both Target and Ulta will benefit from the beauty partnership they’ve announced, analysts say


Target

Ulta Beauty Inc.
ULTA,
+7.39%

shares jumped 7.4% in Tuesday trading after the retailer and Target Corp.
TGT,
+2.04%

announced a partnership that would bring Ulta shops to Target locations.

Ulta Beauty stock has rallied 23.5% for the week to date.

Target shares finished Tuesday up 2%.

The companies announced a deal in which Ulta will have shop-in-shops in 100 Target stores in 2021, with more to come. The 1,000-square-foot shops are located near Target’s existing beauty departments, and workers have been trained in prestige beauty to better serve customers.

See: Target adds ways for customers to go ‘contactless’

“Given shopping consolidation trends that have accelerated
throughout 2020, this partnership brings Ulta closer to its customer as our
analysis finds that 85% of Ulta customers shop at Target, while also opening
the door for incremental customers as only ~20% of Target customers shop at Ulta,”
wrote Cowen analysts led by Oliver Chen.

Cowen analysts say it will help Target to build on a category that is already important to the business.

“We expect the partnership will further cement Target’s strength
with Gen-Z/millennials, and help make the retailer more relevant to new and younger
shoppers,” Cowen said.

Cowen rates Ulta Beauty shares outperform with a $280 price
target.

GlobalData Retail’s Neil Saunders calls the deal “mutually
beneficial.”

“Putting together two very focused and successful retailers
is a threat to other beauty players,” Saunders wrote.

“Specialists like Sephora will be able to hold their own because of the strength of their brands and the underlying loyalty of their shoppers. However, department stores and drug store chains – which have been losing [customers] for years – should think carefully about their response to this latest development.”

Also: Target’s holiday toy list includes Barbie, Nerf and an exclusive FAO Schwarz partnership

Raymond James analysts note the size of both retailers’
loyalty programs: Target has about 75 million members and Ulta has about 32
million.

For Ulta, the near-term financial impact might be “minimal,”
but “the goal over time will be to drive spend per member higher by increasing
brand awareness and being able to access the tens of millions of Target loyalty
customers who are not currently Ulta loyalty customers.”

Raymond James rates Ulta shares market perform.

For Target, it brings access to brands that hadn’t been on
its shelves previously.

“The agreement adds prestige beauty brands that were
previously out of reach for the company, Ulta brings expertise in merchandising
and service that Target could leverage more broadly in the category, and it
further raises the profile of the product offering in the store overall,” said
Wells Fargo in a note.

Wells Fargo rates both companies’ shares overweight.

Ulta stock is up nearly 5% for the year to date. Target shares have rallied 23.3%. And the benchmark S&P 500 index
SPX,
-0.14%

is up 9.7% for the period.

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