Target to Expand Beauty Business Through Acquisition of DermStore

Target to Expand Beauty Business Through Acquisition of DermStore

Target Corp. announced Aug. 6 an agreement to acquire the DermStore Beauty Group. The acquisition positions Target to expand its share of the rapidly evolving online beauty market and will further differentiate the company’s offerings in this important retail segment.

Following the transaction closing, DermStore will become a new, wholly owned subsidiary of Target. DermStore will continue to operate as a separate entity under its online name, DermStore.com. Target believes that the transaction presents a strategic-growth opportunity; however, there won't be any material impact to Target’s 2013 results.

“There is no doubt that the online beauty industry is growing rapidly, and this unique opportunity enables Target to gain insight into the superior, online customer experience DermStore provides,” says Target's Casey Carl. He is president of multichannel and senior vice president of enterprise strategy at Target. “Not only will DermStore’s 750-plus brands offer Target expanded breadth across the beauty and skincare industries, but also access to exceptional content and helpful resources we know consumers want.”

Dan Obegi, current CEO of DermStore (who was on the cover of the July issue of Beauty Store Business), will be president of the wholly owned subsidiary. He will report to Carl.

Obegi states, “DermStore’s success was built on understanding the beauty market and catering to a shopper who’s seeking a wide array of prestige products, exceptional service and product expertise. Our customers have come to trust us to consistently deliver a quality experience, and we are confident that this acquisition will benefit Target’s guests and expand Target’s online market share.”

The transaction is expected to close within 60 days. Financial terms aren't being disclosed. The announcement follows Target’s recent acquisition of CHEFS Catalog and Cooking.com earlier in 2013.

DermStore—founded in 1999 by a board-certified dermatologist—features more than 26,000 SKUs from 750-plus authorized prestige and professional brands, and has more than 1 million active customers. The company recently launched two additional websites—HairEnvy.com and blush.com—extending its reach to cosmetics and hair care.

Target serves guests at 1,856 stores—1,788 in the United States and 68 in Canada—and at Target.com.

Wells Fargo Securities is serving as the exclusive financial adviser to DermStore on the transaction. Latham & Watkins is serving as legal counsel to DermStore.

Faegre Baker Daniels is acting as legal adviser to Target on the transaction.

[Image courtesy of DermStore Beauty Group]