Dive Brief:

• Mary Dillon's last earnings call as CEO of Ulta was marked by record quarterly results, with net sales increasing 65% to $1.94 billion from 2020 and 11% from 2019.

• Comparable sales surged 65.9%, compared to falling 35% last year and growing 7% in 2019, according to a company press release. Profits also swung back into the black, with the beauty retailer notching $230 million of net income, after a loss of $78.5 million during the pandemic.

• "I cannot express how much of an honor serving as the CEO of Ulta Beauty has been for me," Dillon said on a call with analysts. "I'm proud of what we've accomplished over the last eight years and the amazing team and culture that we've built."

Dive Insight:

In what Dillon referred to as a "bittersweet" moment, she officially prepared to pass the torch to President Dave Kimbell on Thursday. She will become executive chair of the board next week after the retailer's annual meeting with shareholders.

"His role as chief marketing officer, chief merchandising officer and president has given him a much better understanding of the category, demand creation and the needs of our guests than I had when I assumed the CEO role eight years ago," Dillon said of Kimbell. "I know his knowledge and commitment will position him well to lead Ulta Beauty through its next chapter of growth."

Ulta has thrived under Dillon's leadership, with net sales, operating income, net income, comps and store count increasing each year she led the retailer, except for 2020. Kimbell is hoping to continue that success, with a focus on four priorities: culture, members, omnichannel experiences and operational excellence.

Already, the record Q1 results have set Ulta on a path to recovery from a difficult 2020. Kimbell noted that the lifting of restrictions, increased consumer confidence and a desire for "newness" have driven consumer spending in the category. The services business has also recovered significantly from 2020, with sales in that area growing 50% over last year, but still lower than 2019 due to social distancing measures. 

Makeup as a category still hasn't recovered, with "above the mask" areas like eyes staying popular, but Kimbell suggested the business might be on the upswing soon.

"Although it remains difficult to predict the specific timing of a full recovery in makeup, we are seeing early signs that guests are engaging more with the category," Kimbell said.

During the quarter, the retailer also expanded its Conscious Beauty initiative, certifying 27 additional brands in the period, which brings the total to 250. The retailer also debuted a "wellness shop" that features a curated selection of products in areas like relaxation and sleep. When it comes to the blockbuster Target partnership that Ulta announced in November, the retailer is staying quiet, but assured analysts it's in progress.

"I know there are many questions about the assortment and the experience, but our focus now is on building guest anticipation and excitement for the launch," Kimbell said.