Bath & Body Works Inc (NYSE:BBWI) is preparing to launch a curated assortment of products at Ulta Beauty stores and online in July, a move that analysts at Jefferies said could broaden the retailer's distribution and customer discovery opportunities while facing limitations from store overlap and competition.
The partnership is scheduled to begin on July 12 and will bring more than 55 Bath & Body Works stock-keeping units, including select exclusive products such as Juniper Breeze, to more than 600 Ulta locations and Ulta's e-commerce platform. The rollout will cover roughly 40% of Ulta's store base.
Jefferies noted that the Ulta partnership is expected to contribute to Bath & Body Works' fiscal 2026 guidance for approximately $50 million in revenue from new distribution channels, although the firm expects Amazon to remain the larger contributor due to its broader product assortment.
The firm wrote that Bath & Body Works enters Ulta from a position of strength in several categories, citing the company's estimated 22.4% share of the roughly $2 billion U.S. mass fragrance market and a 21.5% share of the approximately $6 billion home air care market, including about 34% of the candle segment.
However, Jefferies wrote that Bath & Body Works will compete against established brands already sold at Ulta, including Sol de Janeiro, Snif, Saltair and Touchland.
The firm added that fragrance remains one of Ulta's strongest categories, posting high-teen comparable sales growth in the first quarter.
Jefferies also highlighted the potential for sales to shift between channels rather than generate entirely new demand. According to the firm's analysis, about 63% of Bath & Body Works stores are located within one mile of an Ulta store in urban areas or within five miles in rural markets. Bath & Body Works has been expanding its off-mall store footprint and aims to increase the proportion of off-mall locations to about 75%, up from roughly 60% currently.
"While the partnership broadens BBWI's discovery funnel, we anticipate much of the impact to be channel shift rather than true customer acquisition," Jefferies wrote.
The Ulta rollout is part of Bath & Body Works' strategy to expand beyond its traditionally company-operated retail model through wholesale partnerships and additional distribution channels. Jefferies wrote that the company is likely to focus on scaling categories and products that perform well at Ulta rather than significantly broadening its assortment in the near term.
For Ulta, the addition of Bath & Body Works products could help strengthen its body care and home fragrance offerings, categories where management has previously identified opportunities for expansion.
The analysts believe that Bath & Body Works' loyal customer base may help support traffic trends following softer growth in Ulta's body care business during the first quarter.
Bath & Body Works shares traded 5% higher on Wednesday afternoon, while Ulta Beauty stock was up almost 4%.