Retail Leader - May/June 2018 - 20

> COVER STORY

The Business Case
for Diversity
ULTA BEAUTY BROKE INTO THE FORTUNE 500 THIS YEAR THANKS TO A DIFFERENTIATED
BUSINESS MODEL AND A RARE APPROACH TO GENDER DIVERSITY. > By Mike Troy

I

In her nearly five years as President and CEO of Ulta Beauty Mary
Dillon has led her company to some impressive accomplishments.
On her watch, Ulta's store count has more than doubled to nearly
1,100 units, sales have nearly tripled to $5.9 billion and e-commerce sales have grown from $96 million to $569 million. The
growth has been profitable too with net income up 221 percent to
$555 million compared to the fiscal year ended prior to Dillon's
arrival as CEO in July 2013. Shareholders have rewarded Ulta's financial performance with a stock price that has increased roughly
160 percent - triple the S&P 500 return during the comparable
period - even after Ulta shares pulled back about $50 after topping $300 last summer.
The success is due to a differentiated business model that
promises "all things beauty, all in one place," a nationwide network
of stores located off the mall and well-positioned to gain share
in a fragmented market, and a popular loyalty program that will
surpass 30 million members this year. However, no assessment of
Ulta's success is complete without recognizing that the company is
a true outlier in the retail industry and larger business world.
For starters, Dillon entered an exclusive club this year when
she became one of the approximately 5 percent of female
executives to lead a Fortune 500 company. In addition,
more than 90 percent of Ulta's 37,000 employees are
women and during the past five years the company's
growth has enabled it to promote 6,000 women to
management roles. The predominance of women
in store associate positions is understandable
given Ulta's merchandise assortment, salon
services offering and mostly female customer
base. More noteworthy then is the composition
of Ulta's board and C-suite. Sixty percent of
Ulta's corporate officers are women, 50 percent
of Dillon's 55 person senior leadership
team is female and 50 percent of the
retailer's 12 member board are women.
If ever there were a case study
for gender diversity, Ulta Beauty
is it. However, having a female
CEO and gender parity among
the board and senior executives doesn't guarantee success.
Ulta has a rock solid strategy

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Retail Leader.com MAY/JUNE 2018

and highly differentiated approach to serving the U.S. beauty
market.
"We use the phrase all things beauty all in one place for a reason. We have the largest collection of beauty categories, brands,
products and price points that you can get anywhere," Dillon said
earlier this year during a presentation at Shoptalk. "Beauty is a
great place to be and we are in an industry that is always going to
be important to peoples' lives."
Ulta could be just getting started despite its impressive performance to date. The company contends it has only about a 4 percent
share of a highly fragmented market valued at $138 billion. Ulta's
share of the $82 billion beauty products segment is 6 percent and in
the $56 billion salon services segment that is even more fragmented
it has only a 1 percent share, according to the company.

FOUNDATION FOR GROWTH
Ulta was founded in 1990 as a discount beauty retailer at a time
when prestige, mass and salon products were sold through distinct
channels. Nine years later, Ulta got its first female CEO when Lyn
Kirby joined the company and began executing the "all things
beauty, all in one place," strategy, although it was not
called that at the time. When Kirby left Ulta in 2010,
former Office Depot executive Chuck Rubin was
named CEO in September 2010. He was in the role
for only 18 months before leaving to become CEO
of Michaels Stores. That led Ulta to Mary Dillon
who was serving as CEO of U.S. Cellular at the
time. Hiring an executive from a wireless carrier
might have seemed an odd choice, but the bulk
of Dillon's career previously had been spent in
retail and consumer goods roles. Prior to U.S.
Cellular, she was global chief marketing officer
for McDonalds and prior to that was president of PepsiCo's Quaker Foods division.
She had also served on the Target board
beginning in 2007.
Dillon may not have conceived of
the "all things beauty, all in one place,"
strategy, but she has taken execution
of the distinctive value proposition
Mary Dillon, CEO of Ulta Beauty


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Table of Contents for the Digital Edition of Retail Leader - May/June 2018

Contents
Retail Leader - May/June 2018 - Cover1
Retail Leader - May/June 2018 - Cover2
Retail Leader - May/June 2018 - 3
Retail Leader - May/June 2018 - Contents
Retail Leader - May/June 2018 - 5
Retail Leader - May/June 2018 - 6
Retail Leader - May/June 2018 - 7
Retail Leader - May/June 2018 - 8
Retail Leader - May/June 2018 - 9
Retail Leader - May/June 2018 - 10
Retail Leader - May/June 2018 - 11
Retail Leader - May/June 2018 - 12
Retail Leader - May/June 2018 - 13
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Retail Leader - May/June 2018 - 15
Retail Leader - May/June 2018 - 16
Retail Leader - May/June 2018 - 17
Retail Leader - May/June 2018 - 18
Retail Leader - May/June 2018 - S1
Retail Leader - May/June 2018 - S2
Retail Leader - May/June 2018 - S3
Retail Leader - May/June 2018 - S4
Retail Leader - May/June 2018 - S5
Retail Leader - May/June 2018 - S6
Retail Leader - May/June 2018 - S7
Retail Leader - May/June 2018 - S8
Retail Leader - May/June 2018 - 19
Retail Leader - May/June 2018 - 20
Retail Leader - May/June 2018 - 21
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Retail Leader - May/June 2018 - Cover3
Retail Leader - May/June 2018 - Cover4
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