• Cosmetics accounted for 43% of Ulta's total sales in fiscal year 2021, the biggest segment share by far, but they dipped from the year-earlier period.
• The beauty retailer said during its fourth-quarter earnings report that brands like Olaplex, Fenty and Supergoop should help boost performance in its flagship segment.
• CEO Dave Kimbell said as sales have recovered from a 2020 slump, the company's makeup segment has proven more volatile and lagged behind other categories.

Ulta Beauty is banking on new brand partnerships to boost lagging makeup sales.

Cosmetics accounted for 43% of Ulta's total sales in fiscal year 2021, the biggest segment share by far, but they dipped from the year-earlier period. The company said during its fourth-quarter earnings report that brands like Olaplex, Fenty and Supergoop should help push performance in its flagship segment.

Net sales rose 40% year over year in the year ended Jan. 30, to $8.6 billion, and rose 24% year over year during the fiscal fourth quarter to $2.7 billion, matching Wall Street expectations for both periods, according to Refinitiv consensus estimates.

CEO Dave Kimbell said as sales have recovered from a 2020 slump, the company's makeup segment has proven more volatile and lagged behind other categories. The makeup business felt greater fluctuations from Covid-related changes in shopping and rising prices for consumers, he said.

"As we look at the beauty category, even with these headwinds, we remain positive. The category is healthy. It is growing. It's emotionally important and connected to our consumers," Kimbell said.

In August, the company opened its first mini-shop locations via a partnership with Target. Ulta has opened more than 100 shops inside of Target stores to date, and hopes to add another 250 locations this year.

Executives said the partnership has helped spark growth in Ulta's loyalty program, Ultamate Rewards, which added 4 million members during the fiscal year for a total of 37 million.

The company's growing rewards base lays a "foundation for ongoing momentum as 2022 reopens," according to Barclays Capital analyst Adrienne Yih.

"The combination of increasing brand awareness, the Target partnership, and new brand additions such as Olaplex, N1 de Chanel and Fenty, are driving new customer acquisition," Yih said in a research note.

Ulta also has launched a diversity initiative to support beauty brands by and for consumers who identify as Black, indigenous and people of color. Fenty, founded by pop star and entrepreneur Rihanna, is one of several Black-owned brands that the retailer has introduced in recent months.

"We're not here just to get these brands on the shelf. It's one thing to arrive on our shelves — it's another thing to thrive. And that's how we're measuring success," Kimbell said on the company's earnings call.

"We're doing this to drive engagement with our guests and we're seeing it for our brands. So we're optimistic about beauty — about makeup, and BIPOC will be one of the elements that will help us drive growth going forward."

Looking ahead to fiscal 2022, Ulta expects earnings per share of between $18.20 and $18.70 on revenue of between $9.05 billion and $9.15 billion. Analysts had forecast 2022 earnings per share of $17.84 and revenue of $9.14 billion, according to Refinitiv.

Shares of Ulta fell nearly 3% Friday following the earnings release and are up roughly 6% over the last 12 months.

Correction: Shares of Ulta fell nearly 3% Friday. An earlier version misstated the stock move.