Walgreens takes minority stake in deal with beauty company Birchbox

Most notably, Target is in the midst of remodeling hundreds of existing stores, which includes a major overhaul to the beauty aisles: fewer shelves, more open fixtures, a counter for a beauty specialist who can help a shopper try on products, and an overall sleeker black and white design that mimics the inside of a Sephora.

“The new beauty redesigns Target is doing are going in very good, and Target has the right audience already for beauty,” Neil Saunders, Target’s managing director for GlobalData retail, told CNBC. “I really think the drugstores are behind the curve in terms of what they actually offer, also in terms of perception.”

Names like Walgreens and CVS still struggle with being considered a “destination” for make-up, Saunders said. But these companies are “very conscious” they need to do more because they see the growth from Ulta and Sephora, he added.

Walgreens’ efforts are starting to pay off. Executives have said on recent quarterly earnings calls that beauty sales have increased and beauty differentiation stores are outperforming traditional stores, declining to provide more details.

In these stores, same-store sales have been positive, compared with the company average of a 2 percent decline, according to Jefferies analyst Brian Tanquilut. Gross margin has increased to the mid-30 percent range from the 20-percent range, he said. This has helped offset pressure on the pharmacy side, he said.

Not everything that has worked for Boots has worked for Walgreens. Boots is known for its “3 for 2” program. When Walgreens introduced it here with the same language, consumers didn’t get it.

They tweaked the language to “Buy 2 Get 3rd Free.” Once consumers understood it, they started buying it.

“We’re using the Boots model, but we need to localize it,” Brindley said. “The companies are different and the geographies are different.”

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