Ulta plans Times Square flagship as beauty rivalry intensifies

Ulta Beauty plans to open its first flagship store in New York’s Times Square late next year, Fortune reported, putting the strip-mall mainstay into one of retail’s most visible districts. The project matters because Ulta is trying to sharpen its image against Sephora while testing whether high-cost flagships can still pay off.

The store will cover 27,000 square feet across four levels, according to Fortune. The Real Deal reported that Ulta is paying $400 million for a 15-year lease at the Midtown Manhattan site, Fortune said.

Ulta has offered few details about the store’s design, Fortune reported. CEO Kecia Steelman told investors last month that the location would expand the company’s brand-building and marketing abilities, with LED billboards and other features not used across its roughly 1,500 U.S. stores, according to Fortune.

Fortune reported that Ulta generated $12.4 billion in annual revenue last year and posted 11% revenue growth in the first quarter of this year. The company has grown for more than 15 years, Fortune said, but faces heavy competition in beauty, where shoppers often want to try products in stores and social-media influencers can sway demand.

Sephora remains Ulta’s main rival, Fortune reported. Fortune described Sephora as more international than Ulta and said its stores have strong appeal with Gen Z shoppers.

Amiee Bayer-Thomas, Ulta’s chief retail officer, told Fortune during a CommerceNext conference panel in New York that Times Square gives the company a global platform as Ulta expands. Fortune reported that Ulta, long focused on the U.S., has moved into Mexico and the Middle East.

Bayer-Thomas told Fortune that the flagship will show the next stage of Ulta’s store experience and serve as a testing site for new products and marketing. She also told Fortune that stores need to offer customers more than a place to buy products and that the flagship is meant to build loyalty and customer relationships.

Retail analyst Stacey Widlitz, president of SW Retail Advisors, told Fortune that Ulta’s flagship needs to feel entertaining and immersive, comparing the goal to a makeup version of Willy Wonka’s Candy Land. Widlitz told Fortune that a successful flagship could help Ulta strengthen its authority around newer brands and win more business in the higher-end beauty market.

Steve Dennis, a former Neiman Marcus executive and president of SageBerry Consulting, told Fortune that a flagship has to offer more than size and a prominent address. Dennis said some flagships amount to oversized stores in famous locations and do little beyond acting as billboards, according to Fortune.

Fortune reported that several retailers have pulled back from flagships in recent years because of their costs. The report cited Abercrombie & Fitch, Gap and Victoria’s Secret among brands that have closed some large-format locations after finding that shoppers did not get enough extra value from them.

Fortune noted that other retailers have tried to make flagships more distinctive. American Eagle and Aerie’s Soho flagship includes rotating art and photo booths, while Levi’s Manhattan flagship highlights premium goods and New York-only merchandise, according to Fortune.

Ulta is betting the Times Square store can raise awareness across the chain, Fortune reported. Bayer-Thomas told Fortune that stores remain central to how beauty products come alive for shoppers.

This story draws on original reporting from Fortune.