Ulta Tops Amazon as Decade’s Best Performing Large Retail Stock

NEW YORK, United States — Ulta Beauty Inc. is on pace to close out the decade as the top-performing stock in the S&P 500 Retailing Index, beating out Amazon.com Inc.

Since Dec. 31, 2009, Ulta shares have climbed 1,271 percent compared to Amazon’s advance of 1,236 percent. The S&P 500 has grown 189 percent for the same period, outperforming just eight of 26 large-cap retail index members.

For Ulta, the real inflexion point came in 2013 with the hiring of Chief Executive Officer Mary Dillon, according to Loop Capital’s Anthony Chukumba. “Mary has been the driving force behind the stock outperformance — she really has had the golden touch,” the analyst said in a phone interview.

Under Dillon’s leadership, the beauty retailer’s fundamental performance improved, in part due to the relaunched customer loyalty program, called Ultamate Rewards. Ultamate loyalty members represent more than 95 percent of the company’s total revenue.

Ulta has also greatly improved the in-store experience over the years with remodels that have created a more inviting, upscale feel, Chukumba said. That has attracted more high-end beauty brands, which in turn attracts customers, he said.

Ulta has benefited from the continued decline in foot traffic at the mall, where most of its competitors are located, Chukumba said. The company also has an “amazing” e-commerce business and has been helped by the rise of beauty influencers and changing cosmetic trends, he said. Loop Capital has a hold rating on the shares as valuation “is not that cheap” and same-store sales gains have started to slow.

Meanwhile Amazon has been able to hold its high valuation multiples for a decade by “consistently outperforming elevated expectations,” said Jitendra Waral, an analyst with Bloomberg Intelligence.

The online giant has made “decade-long bets in logistics, cloud and content that have created a moat around its business.” While competition has now started to respond swiftly, it’s likely that only a few large players will capture most of the growth in the coming decade. Waral estimates Amazon’s gross sales will reach $1 trillion by 2025.

On the other end of the spectrum, Gap Inc. is the worst-performing S&P 500 Retailing Index stock of the decade with a 15 percent slide. Its downtrend began after shares hit a record high in 2014. A series of negative comparable sales results followed, then a couple of CEO changes, even as recently as last month. The shares face continued pressure as weak sales cast doubt on the company's plan to spin off its Old Navy business.

By Janet Freund; Editors: Catherine Larkin, Jennifer Bissell-Linsk