Dive Brief:
- Ulta Beauty on Thursday announced it is acquiring British beauty retailer Space NK from private equity firm Manzanita Capital, per a company press release. Terms of the deal were not disclosed.
- Through the deal, Ulta gains an 83-store presence in the United Kingdom and Ireland, as well as a website in the region. Space NK will function as a stand-alone subsidiary of Ulta and continue to be led by CEO Andy Lightfoot and the rest of its management team.
- Ulta paid for the deal with cash on hand and capacity under its existing credit facility. The acquisition will not interfere with Ulta’s other capital allocation plans for the year, the company said.
Dive Insight:
Ulta is expanding internationally in a big way with the acquisition of Space NK, a retailer that already has a substantial foothold in the U.K. and just a few years ago partnered with Walmart on a beauty offering in the U.S.
“International expansion is an integral part of our Ulta Beauty Unleashed plan, and the acquisition of Space NK offers a unique and strategically compelling opportunity to enter the growing UK market with a successful and growing brand,” Ulta CEO Kecia Steelman said in a statement. “Along with our initiatives in Mexico and the Middle East, we are creating a broader platform for Ulta Beauty to unlock long-term, profitable growth.”
Steelman praised Space NK for a “differentiated beauty experience” and “tailored product mixes” and said Ulta would continue to grow the banner.
This is one of multiple expansion efforts Ulta has invested in this year alone: The retailer said a year ago it would expand to Mexico in 2025, and in its latest quarterly earnings Steelman said the company would open its first stores in Mexico City, Kuwait City and the United Arab Emirates’ Dubai later this year.
Back in 2019, the beauty retailer had planned to expand to Canada, but dropped those plans a year later to focus on its U.S. operations.
Ulta, generally a strong performer, has struggled financially in recent quarters, but saw some stabilization in Q1 as sales rose 4.5%. The retailer said both 2024 and 2025 would be “transitional years” as the beauty category normalizes and it handles increased competition from the likes of Sephora’s Kohl’s shop-in-shops. Ulta even paused on expanding its own Target shop-in-shops recently to improve the existing locations.
While Ulta saw improvement in Q1 in stores that got hit by competitive openings, the broader consumer environment is still a threat to the space and executives warned that Ulta is not “immune” to those challenges.
Although Ulta is still growing, the pace of expansion has slowed in recent years, with the retailer planning to open about 66 stores per year for the next three years. That’s higher than the past few years but significantly below the 100 stores Ulta was opening every year for much of the 2010s. Acquiring Space NK gives the retailer another vehicle for growth with a business that has a significantly smaller store presence — and therefore more runway ahead of it.
GlobalData Managing Director Neil Saunders noted that the chain operates in a different tier of the beauty space than Ulta and is already a “ready-made international business,” allowing Ulta to focus its efforts on expanding the banner.
“Both things are important as, while Ulta is very successful, its headroom for organic expansion in the US is much slimmer than it once was,” Saunders said in emailed comments. “Space NK basically unlocks more potential and provides a compelling growth story for investors. It also fast-tracks Ulta’s international ambitions.”