Target CEO: We are taking 'enormous' market share in cosmetics

Brian Sozzi

Step aside Sephora, Macy’s and Ulta, Yahoo Finance’s 2019 Company of the Year Target is steamrolling into the cosmetics aisle.

Armed with hundreds of remodeled cosmetics shops featuring the latest hot trends and upstart brands, Target (TGT) has finally begun to plant its flag in the lucrative cosmetics industry. Target CEO Brian Cornell tells Yahoo Finance it is winning big in cosmetics, benefitting from shoppers wandering over to the beauty department for good deals after coming to visit for groceries.

Cornell adds that Target’s scale and better trained cosmetics staff are helping to get it first looks at new products from emerging brands that are generating a lot of industry buzz.

“One of the areas we have really focused on is beauty,” Cornell says. “It’s one of our fastest-growing categories and where we are taking enormous market share each and every week. “It’s coming from certainly department stores, but I think we are also starting to win against specialty.”

For years the cosmetics industry has been dominated by department stores with their vast selections and attentive customer service. But with department stores struggling to adapt to online shopping, many have cut back on staff in the cosmetics department. Yet, the price points at department stores for cosmetics have continued to be high.

Not a recipe for financial success in cosmetics right now.

That has sent cosmetics buyers to the likes of specialty players such as Ulta and Sephora. While these names offer more affordable prices and better customer service than department stores, even they have started to become pricier trips.

Enter a discounter in Target with its flashy beauty department shopping experience and cheap prices which to Cornell’s point, is driving market share gains.

In this May 30, 2018, photo, shoppers look through the updated cosmetic department at a Target store in San Antonio. Success of specialty chains like Sephora and Ulta has pushed discounters like Walmart and Target as well as drugstores like CVS to revamp their cosmetics areas with more open spaces, brighter lighting and more attractive fixtures. (AP Photo/Eric Gay)

Target’s same-store sales in the cosmetics category rose by a high single digit percentage in the third quarter versus a 3.2% gain for Ulta—a clear sign of market share gain. Meanwhile, Macy’s executives acknowledged on an earnings call with analysts in November that its beauty department was challenged in the third quarter because of overall reduced traffic to its stores.

“I launched in department stores, I love department stores, but I don’t shop in department stores anymore. I am someone who buys almost everything online. I just think the world is changing. If I need butter and apple cider vinegar I am going to order it because I don’t have time to go to the store,” renowned makeup artist Bobbi Brown told Yahoo Finance on why cosmetics are under pressure at department stores.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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