Amazon's new beauty store for professionals poses a threat to beauty retailers

Amazon.com Inc on Monday unveiled its online professional beauty store to sell supplies to licensed professional stylists, barbers and estheticians, weighing on shares of other beauty retailers.

Shares of Sally Beauty Holdings, which targets industry professionals, sank 17%, while those of Ulta Beauty Inc fell about 3%.

They are the just the latest to suffer from Wall Street’s concern about moves by the world’s largest retailer into a series of niche or more regulated markets.

Last year, U.S. pharmacy chains and drug wholesalers such as CVS, Walgreen and McKesson Corp lost billions in market value when Amazon took its first step into online pharmacy by buying small existing player PillPack.

Amazon typically uses its scale and online profile to offer a wider range of products at lower prices, putting pressure on margins of existing players.

“Currently, stylists often travel to multiple cosmetology supply locations to get necessary supplies,” Jefferies analysts said. “We expect Amazon to quickly become an important enough channel for brands to carry their top offerings on the platform.”

Amazon said stylists would need to upload their state-issued licenses and create a business account to buy products from the new store, which the company said would stock brands including Wella Professionals and OPI Professional.

Its entry will directly threaten about 19% of Sally Beauty’s operating profit and an additional 33% was likely see pressure from more competition, according to DA Davidson analysts.

Ulta, however, will see lesser pain as it sells mostly cosmetics and styling tools, which account for only 19% of total sales, the analysts said.

The companies did not immediately respond to multiple requests for comment.
Shares of the e-commerce retailer were trading 0.2% higher at $1,913.16.