Ulta Beauty rides strong consumer spending, taps new financial leadership

Dive Brief:

Long-time Ulta Beauty CFO Scott Settersten will be retiring from his role following 11 years spent at its financial helm, the beauty retailer announced in a Thursday press release.
Settersten, a 20-year veteran of the Bolingbrook, Illinois-based company, will step down from his positions as CFO, treasurer and assistant secretary effective April 1, 2024, according to a company filing with the Securities and Exchange Commission. Paula Oyibo, presently Ulta’s SVP, finance, will succeed Settersten in the role, according to the filing.
The company’s financial leadership transition was announced as the beauty retailer reported net sales jumped 6.4% to $2.5 billion in its fiscal third quarter ending Oct. 28, compared to $2.3 billion in the prior year period. Robust consumer spending in the beauty segment helped to contribute to the boost in sales, with Ulta anticipating healthy spending to continue.

Dive Insight:

Oyibo, 44, first joined the beauty retailer in 2019 as its VP of finance for merchandise, marketing and e-commerce, before being appointed to SVP, finance in February 2022, according to the filing. Prior to moving to Ulta, she served in a number of executive finance roles at Whirlpool Corp., including as its commercial finance leader and as controller and head of FP&A for North America, according to her LinkedIn profile.

“As a passionate senior leader, she has played a significant role within our finance organization and possesses a deep understanding of our business and a commitment to our vision, mission and values,” an Ulta Beauty spokesperson said of Oyibo’s appointment in an email. “Paula is the right leader to drive long-term sustainable growth for Ulta Beauty as our next Chief Financial Officer.”

Settersten first joined the company in 2005, serving as its VP of accounting, director of financial reporting and director of investor relations until his appointment as CFO in 2012, according to his LinkedIn profile. Settersten helped to take the beauty retailer public with its 2007 IPO and has had a “tremendous” impact on the success of the company during his decade in the CFO seat, CEO Dave Kimbell said Thursday. Settersten received total compensation of approximately $4.6 million in his role as CFO for 2022, compared to $3.5 million the previous year, according to Ulta’s most recent proxy.

“He's been a passionate steward of our business and the strong, and constant shareholder returns achieved during his tenure are a testament to his leadership and disciplined approach to driving profitable growth,” Kimbell said during Ulta’s Q3 earnings call of Settersten’s financial leadership.

Ulta’s financial leadership shift is coming as the retailer looks to capitalize on continued strong consumer spending in the beauty industry. Following a dip during the Great Recession, spending on beauty saw a surge of double-digit growth during the pandemic years of 2021 and 2022, and “as we lap the strong growth this year, consumer spend has remained healthy,” Kimbell said during the call. “While we expect growth will continue to normalize to historic ranges, we remain confident the category will continue to grow, barring a macroeconomic event.”

Consumer spending has cooled in recent months as the Federal Reserve continues to work to dampen inflation, gaining 0.2% in October, compared to 0.7% in September, CFO Dive recently reported. While consumers may be pulling back spending in other areas, however, beauty has remained resilient especially among younger consumers, something that some beauty insiders refer to as the “lipstick index.”

While individuals may cut spending in certain areas during a downturn, the lipstick index suggests they will still spend on smaller luxuries, such as a make-up item; a theory bolstered by robust spending in the space throughout the year despite economic headwinds, according to a March report by Business Insider. Younger consumers especially are splurging on beauty; while overall spending among the demographic is down, spending on core beauty categories such as cosmetics, skincare and fragrance surged by 23% year-over-year, according to a recent survey by Piper Sandler of 9,193 teens with an average age of 15.7 years.

Ulta remains optimistic about continued robust spending going into the holiday season, executives said Thursday, but the beauty retailer is still hedging its bets given persistent economic uncertainty.

The company retooled its expectations for Q4 “to reflect the expected resilience of the beauty category as well as potential risks from cautious consumer spending, increased points of distribution for Prestige Beauty and higher promotional activity,” Settersen said Thursday. “We continue to expect comp sales will be flat to up modestly for the fourth quarter.”

For the full fiscal year, Ulta expects net sales between $11.1 billion and $11.15 billion, he said, compared to previous guidance of $11.05 billion to $11.15 billion, according to the company’s earnings results.

“Small changes in consumer reaction could have a bigger impact on our business,” Settersten said in response to questions. “So we're just being prudent, giving ourselves room to maneuver, I guess.”