What Sephora's New Growth Prospects Mean For Ulta Beauty

Beauty retailer Sephora expects 2020 to be its largest year of retail growth as the LVMH Moet Hennessy Louis Vuitton SA LVMUY-owned chain plans to open 100 new stores, the company told CNBC.

Exec On Sephora's Retail Strategy

Jeff Gaul, Sephora's senior vice president of real estate and store development, told CNBC in an interview the company will focus on growing its off-mall locations.

Doing so would better position the beauty retailer to be closer to where its core clients live and work, he said. It also makes it easier for customers to merely "pull right up and grab something."

Sephora plans on focusing more on non-urban markets, such as Charlotte, North Carolina and Nashville, Tennessee.

Gaul also commented on Sephora's relationship with the struggling department store J C Penney Company Inc JCP.

Sephora's store-in-a-store concept inside JCPenney remains an "ongoing" partnership, and the beauty chain has no major closures planned, the exec said. Exposure inside JCPenney also gives Sephora exposure to new customers.

LVMH, Ulta Price Action

According to CNBC, Sephora's growth plans will put it in direct competition with Ulta Beauty Inc ULTA whose stores are more often located away from large malls.

Ulta shares were down 0.52% at $273.52 at the close Tuesday, while LVMH shares were higher by 3.74% at $90.62.

Sephora will focus on opening stores that are slightly smaller, at around 4,000 square feet compared to its current average of 5,500. The stores will also focus on fragrances and hair care, which represent two notable growth segments.

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Photo by Rjwmccaffrey via Wikimedia.