The news: Ulta Beauty acquired upscale UK beauty retailer Space NK for an undisclosed amount, the company said, as it turns to new markets to offset slowing US growth.

The strategy: In the US, Ulta is contending with both normalizing demand and intensifying competition from the likes of Amazon, Sephora, and TikTok Shop—pressures which caused the retailer to lose market share for the first time last year. With increased competition for US spending, Ulta has made international expansion a key part of its turnaround plan.

• The retailer will open stores in Mexico this year via a joint venture with distributor Axo.
• Expansion to the Middle East is also forthcoming, with stores in Dubai and Abu Dhabi set to open in the coming months.

Will it work? While the beauty landscape in the UK is hardly less crowded than the US, Ulta’s acquisition of Space NK, with its 83 stores in the UK and Ireland and established ecommerce business, gives it readymade entry to the market. There is also ample room to grow, not only in the UK but also in other European markets.

Space NK’s largely premium product assortment is another benefit, allowing Ulta to attract clientele with more disposable income and boost its bottom line.

Our take: The US beauty market is becoming increasingly saturated as more retailers lean on the category to boost sluggish sales. While expanding to new markets comes with its own set of challenges, Ulta’s decision to rely on acquisitions and distribution partnerships will help smooth its path.

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