The deal will give the beauty specialty retailer 83 locations in the United Kingdom and Ireland. Sephora has seven locations in the U.K. today, but plans to grow its store footprint in the country to over 20 by 2027. Ulta’s Space NK maneuver comes in a year when it’s striking out beyond the U.S. to Mexico with at least 10 stores in rapid succession in partnership with South American distributor Axo. Middle Eastern expansion will follow with two stores opening in Dubai and Kuwait City via a licensing agreement with franchise operator Alshaya Group.

Ulta’s Space NK transaction is being funded through cash and credit, with capacity from its existing credit facility. The purchase price wasn’t disclosed, but Reuters reports it was above 300 million pounds or more than about $407 million. Ulta gets Space NK from London-based private equity firm Manzanita Capital, which first explored a sale in 2018, 16 years after it purchased the retailer from founder Nicky Kinnaird, before pulling back and putting the retailer on the market again last year.

Joël Palix, founder of beauty M&A advisory firm Palix Unlimited and former CEO of British beauty e-tailer Feelunique, explains that the over $407 million purchase price makes sense because retail properties are generally valued at one to two times revenues. In the fiscal year ended March, Space NK’s sales were up 34% to 196.5 million pounds or approximately $266.6 million.

“It is a bold move for Ulta by confirming their ambitions to become a worldwide competitor against Sephora. First Mexico, then U.K., and I would not be surprised if more countries are announced in years to come,” says Palix. “Space NK was the only brick-and-mortar player of significant size in U.K. I expect Ulta to plan further expansion to become a more meaningful player.”

He adds, “It is a nice exit for Manzanita Capital, which wanted to sell Space NK for quite some time. Their focus today is more beauty brands with international traction rather than just a local beauty retailer.”

Neil Sauders, managing director of retail at data analytics firm GlobalData, says, “The acquisition of Space NK gives Ulta a ready-made international business that it can use to drive future growth. It also provides Ulta with a brand in a different tier of the market that complements its mainstream beauty operation in the U.S. This is important as Ulta’s organic growth potential in the U.S. is becoming slimmer.”

CEO and president Kecia Steelman, who succeeded Dave Kimbell in January this year, said in a statement, “We are excited to enter the U.K. market via the Space NK banner. International expansion is an integral part of our Ulta Beauty Unleashed [turnaround] plan, and the acquisition of Space NK offers a unique and strategically compelling opportunity to enter the growing UK market with a successful and growing brand. Along with our initiatives in Mexico and the Middle East, we are creating a broader platform for Ulta Beauty to unlock long-term, profitable growth.”

She added, “Space NK’s management team, with the backing of Manzanita Capital, has done an excellent job building a differentiated beauty experience that inspires consumers through tailored product mixes. We look forward to working with the Space NK team to support their continued growth and success.”

SpaceNK will continue to operate as a standalone business under the helm of CEO Andy Lightfoot. It carries over 180 prestige and luxury beauty brands, including Nars, Rare Beauty, Glossier, Kosas, Hourglass, Reome, Tata Harper, Sunday Riley, Milk Makeup, Starface, Skin Rocks and K18. Space NK sold a U.S. wholesale division to beauty distributor The PCA Companies last June for an undisclosed sum in a deal involving  600 points of distribution at Nordstrom, Nordstrom Rack, Bloomingdale’s, Hudson Bay and Walmart. In 2020, Space NK closed eight U.S. stores.

Space NK is a profitable business that’s been increasing its market share with younger beauty shoppers, a cohort that’s shrunk for Ulta at home for the past few years. In the six months ending in September 2024, Space NK’s sales were up 38% as the retailer drew gen Z and gen alpha shoppers. Shoppers under 25 were its fastest growing demographic in the period, jumping 164%.

Last year, Ulta’s sales rose a modest .8% to $11.3 billion, and its comparable-store sales eked up .7%. Gross profit was roughly flat at $4.39 billion. In the first quarter this year, Ulta’s sales ticked up 4.5% to $2.8 billion versus $2.7 billion a year ago. Same-store sales in the first quarter jumped up 2.9%, primarily driven by increased average ticket size versus transaction volume. Operating income was $401.8 million or 14.1% of net sales, compared to $400.9 million, or 14.7% of net sales, in the same year-ago period.

Buoyed by the results, Ulta raised its full-year guidance. Sales are expected to be in the range of $11.5 billion to $11.7 billion. Previously, it expected sales in the range of $11.5 billion to $11.6 billion.

Meanwhile, Space NK has been posting repeated yearly sales gains. Last year was its fourth year in a row of recording at least 30% annual sales growth. Both same-store and e-commerce sales increased 28% during the period, with pre-tax profits growing from 1.5 million pounds or $2.04 million to 7.5 million pounds or nearly $10.1 million.

Rich Gersten, co-founder and managing partner of early-stage beauty and wellness investment firm True Beauty Ventures, says Space NK will receive growth capital, heightened global reach and greater operational strength from its new parent company. Enhanced resources will certainly be handy as it contends with Sephora’s advancement in the U.K.

“With a substantial footprint in the U.K. under the Space NK brand, Ulta technically surpasses Sephora in scale within the U.K. market post-acquisition,” says Gersten. “Moreover, Space NK carries several Sephora U.S.-exclusive brands, potentially hindering Sephora’s efforts to introduce these brands in the U.K. However, it is important to acknowledge that Sephora remains a global powerhouse and the direct benefits to the Ulta brand from this acquisition are still uncertain.”

After opening six stores in the U.K. from 2000 to 2005, Sephora departed the country and returned to it in 2021 with the acquisition of Feelunique. Palix figures that Sephora has an e-commerce edge on Ulta in the U.K. due to the capabilities it acquired with Feelunique. To its credit, Space NK has made significant strides in developing its omnichannel business. Last year, online sales accounted for about 45% of its total business.

“Sephora will be able to play the European exclusivity card with some brands, at least until Ulta decides to also invest in continental Europe. There are plenty of perfumery chains to grab there, too,” says Palix. “International retail M&A is very tricky and subject to failure. Operating several retail brands is complex and harmonizing them can take a long time and is subject to consumer acceptance.”

Along with integration, merging Space NK’s prestige positioning with Ulta’s prestige-mass combination could present challenges for Ulta. Saunders argues that Ulta will need to maintain Space NK’s brand identity to keep its momentum humming and not push it “into the middle market as this is a very crowded and competitive space” in the U.K.

In the event that Ulta decides to rebrand Space NK stores to its own namesake down the line, Fiona Glen, director of projects at London beauty consultancy The Red Tree, says, “I can imagine a high level of consumer emotion associated with the loss of a brand like this. If both brands are to coexist, I would anticipate there to be a calibration of stores with a decision on whether to brand as Space NK or Ulta being based on customer base, competitive set and location segmentation.”

Ulta’s purchase of Space NK is the latest in a string of high-profile deals to make waves in the beauty industry this year. L’Oréal is spending billions for Medik8 and Color Wow, and Unilever pounced on buzzy men’s personal care brand Dr. Squatch in a deal valued at $1.5 billion. E.l.f. Beauty jumped into the billion-dollar deal fray by buying Hailey Bieber’s Rhode for up to $1 billion. Church & Dwight scooped up Touchland in a deal that could reach $880 million. In April, French beauty retailer Oh My Cream bought the British beauty e-commerce website Naturismo to expand its presence in the U.K.

At a time when omnichannel competition is steep and organic growth is difficult to ignite, beauty industry insiders predict retail consolidation will persist. “The question depends on what the secret sauce or IP of the acquisition brings,” says Glen. “For Ulta, while Space NK comes with an active customer database and trusted name, the really exciting play is the real estate capture. I think the retailer rationalization may continue, if there is considerable strategic importance.”

Gersten says, “We can expect more retailer-to-retailer M&A from companies seeking geographic diversification and fast access to market share. In both the U.S. and U.K., beauty growth is steady but not accelerating, making acquisition a viable path for revenue growth. This may indicate consolidation behavior in a maturing category.”

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