Target and Ulta Beauty to End Partnership. The Stocks Are Down.

The decision to end the partnership was mutual, the companies said. (Brandon Bell/Getty Images)

Target and Ulta Beauty stocks dropped after the companies said they were ending a partnership that saw Target open hundreds of Ulta outposts within its stores.

The decision to end the partnership, which was scheduled to expire in August 2026, was mutual, the companies said. Customers will be able to shop Ulta at Target until then, as well as continue to earn Ulta Beauty Rewards on eligible Target purchases.

Since announcing the deal in 2021, Ulta has opened more than 600 shop-in-shops at Target, according to the company’s March annual filing. It is unclear what will fill the space occupied by Ulta’s outputs, at roughly 1,000 square feet each.

“We look forward to what’s ahead and remain committed to offering the beauty experience consumers have come to expect from Target—one centered on an exciting mix of beauty brands with continuous newness, all at an unbeatable value,” said Rick Gomez, Target’s chief commercial officer, in a press release.

Ulta stock was down 1% Thursday morning to $527.10, while Target fell 1.6% to $103.65.

Ulta hinted as early as this April that the company was re-evaluating its Target stores. Speaking at J.P. Morgan investor conference, CEO Kecia Steelman said the company was taking “a little bit of a pause in opening more stores.”

“We’ve made the decision to really lean into the 600 plus stores that are open this next year and really look at how do we continue to drive efficiencies and leverage the learnings that we’ve had to really unlock value for both of us collectively,” she said at the time.

Oppenheimer analyst Rupesh Parikh believes the move may be a positive one for Ulta in the long run. The decision to shut the Target stores may lift Ulta’s same-store sales starting in late 2026 as the core business recaptures some of the revenue that was being generated at the Target stores.

“We continue to see a strong case for outperformance from here,” he wrote. He has an Outperform rating on Ulta with a $600 price target.

The implications for Target may be slightly less favorable. Beauty has been one of the retailer’s fastest-growing categories in recent years, with sales nearly doubling from 2019 to 2024. While the company has been expanding its own assortment of beauty brands, Ulta store-in-stores played a big role in driving that growth.

“Our partnership with Ulta Beauty and our assortment that includes some of the leading brands in the industry have combined to make Target an undisputed Beauty destination,” Gomez said at the company’s investor day in March.

On Thursday, the company said it would “continue to curate a differentiated beauty assortment,” which means it could keep expanding its private label beauty products or bring on new vendors to replace the Ulta brands. In fiscal 2024, beauty products were 12% of Target’s total sales, but private label brands represented a mid-single digit percentage of the company’s total beauty portfolio.

Write to Sabrina Escobar at sabrina.escobar@barrons.com