TGT
ULTA
Not all breakups are bad
Ulta is heading toward a pretty big shift: its shop-in-shop deal with Target is ending in August. But BofA Securities thinks this is less “ouch” and more “plot twist.”
The firm kept its Buy rating on Ulta and slapped on a $685 price target, arguing the beauty retailer could recapture a meaningful chunk of the sales that used to flow through Target stores. In other words, some of that demand may just come home.
Why Wall Street thinks this could work
BofA’s basic thesis is simple: if shoppers still want prestige beauty, they’ll find Ulta’s standalone stores, especially since many are already close to Target locations. That means:
- Ulta can pull in customers it was already basically co-signing through Target
- Recovered sales would show up more cleanly in Ulta’s own comparable-store numbers
- The company’s existing footprint can do the heavy lifting without needing a giant new expansion spree
The analyst also pointed to Ulta’s digital and logistics upgrades — like ship-from-store and its Uber Eats partnership — as extra glue helping keep customers in the Ulta orbit instead of wandering off to Amazon or elsewhere.
The math behind the makeover
BofA modeled several recapture scenarios and concluded that even a partial win-back could matter. The big idea: the sales Ulta regains could be worth more in EBIT than the royalty stream it replaces, which is Wall Street-speak for “this might be prettier than it looks.”
Big picture: when one door closes, sometimes a whole bunch of shoppers just walk into your own store instead.