Ulta Beauty
Ulta reached $11.3B through resource partitioning between Sephora and mass retail, now adding Space NK for ultra-prestige differentiation.
Ulta Beauty's 2024-2025 performance demonstrates resource partitioning mastery—occupying the niche between Sephora's prestige-only model and mass retailers. The company generated $11.3 billion in fiscal 2024 and $8.5 billion in the first nine months of fiscal 2025, with Q3 2025 comparable sales up 6.3%. The hybrid model (prestige + mass beauty + salon services) represents what ecologists call niche construction through differentiation: Ulta didn't compete directly with Sephora, it created an adjacent niche where different rules apply. Adding 66 stores in 2024 and targeting 1,800+ long-term shows the model's fitness in its chosen environment.
The Target partnership termination reveals strategic catabolism—deliberately killing tissue that consumes resources without providing value. The shop-in-shop model generated "well below 1% of net sales" but created brand confusion and margin dilution. CEO Dave Kimbell's decision to exit by 2026 parallels how organisms shed non-essential functions during resource stress. The $100 million freed up from the Target partnership now funds higher-return initiatives: Space NK acquisition (83 stores in Europe), Mexico expansion (50+ locations planned), and store renovations that drive 12.9% Q3 net sales growth. This is autophagy—programmed degradation of low-value assets to fuel high-value growth.
Ulta's biological lesson appears in metabolic flexibility. When the beauty market slowed in 2023-2024, the company didn't panic-cut or chase Sephora's prestige-only positioning. Instead, they doubled down on their hybrid advantage: the salon business creates foot traffic and services revenue that product-only retailers can't replicate, while the mass-to-prestige range captures customers across lifecycle stages. The Space NK acquisition adds ultra-prestige as a distinct niche within the portfolio—not integration, but differentiation. This is adaptive radiation: one ancestral form (beauty retail) evolving into multiple specialized forms (value beauty, prestige beauty, ultra-prestige beauty, beauty services) that reduce competition by exploiting different resources.