News Release

<< Back
Ulta Beauty Announces Second Quarter 2013 Results

Total Sales Increased 24.8%

Comparable Store Sales Increased 8.4%

Diluted EPS Increased 29.6% to $0.70

BOLINGBROOK, Ill.--(BUSINESS WIRE)--Sep. 12, 2013-- Ulta Beauty (NASDAQ:ULTA) today announced financial results for the thirteen week period (“Second Quarter”) and twenty-six week period (“First Six Months”) ended August 3, 2013, which compares to the same periods ended July 28, 2012.

“The Ulta Beauty team delivered a very strong quarter while moving our growth strategy forward,” stated Mary Dillon, Chief Executive Officer. “Ulta Beauty added several new brands to its stores; we further expanded the number of Clinique and Lancôme boutiques; we drove rapid growth in our e-commerce business; and we achieved record membership in our loyalty program. I am incredibly excited about the future potential of Ulta Beauty, and I look forward to working with the team to build on the solid foundation they have built.”

For the Second Quarter:

  • Net sales increased 24.8% to $601.0 million from $481.7 million in the second quarter of fiscal 2012;
  • Comparable store sales (sales for stores open at least 14 months) increased 8.4% compared to an increase of 9.7% in the second quarter of fiscal 2012, including the impact of e-commerce sales;
  • Gross profit increased 50 basis points to 35.3% from 34.8% in the second quarter of fiscal 2012;
  • Selling, general and administrative (SG&A) expense as a percentage of net sales increased 40 basis points to 22.4% compared to 22.0% in the second quarter of fiscal 2012;
  • Preopening expenses increased to $4.8 million, compared to $4.1 million in the second quarter of fiscal 2012. Real estate activity in the second quarter of fiscal 2013 included 33 new stores, 1 relocation and 1 remodel compared to 22 new stores, 1 relocation and 9 remodels in the second quarter of fiscal 2012;
  • Operating income increased 26.8% to $72.9 million, or 12.1% of net sales, compared to $57.5 million, or 11.9% of net sales, in the second quarter of fiscal 2012;
  • Net income increased 28.3% to $44.9 million compared to $35.0 million in the second quarter of fiscal 2012; and
  • Income per diluted share increased 29.6% to $0.70 compared to $0.54 in the second quarter of fiscal 2012.
  • The Company added 39 Clinique boutiques to end the second quarter with 90 stores featuring Clinique, and expects to add 10 more Clinique boutiques during fiscal 2013. Five Lancôme boutiques were added, bringing the total number of stores offering Lancôme products to 85, with 20 additional boutiques underway.
  • The Company continued to add new products and brands, including the recent launches of IT Cosmetics, Jane Cosmetics, Mally Girl, and Meaningful Beauty.
  • The Company’s loyalty program membership grew to 12 million active members, an increase of 19% compared to the second quarter of fiscal 2012.
  • Ulta.com achieved sales growth of 72%, representing 130 basis points of the total company same store sales increase of 8.4%.

For the First Six Months:

  • Net sales increased 23.8% to $1,183.7 million from $955.8 million in the first six months of fiscal 2012;
  • Comparable store sales (sales for stores open at least 14 months) increased 7.6% compared to an increase of 10.1% in the first six months of fiscal 2012, including the impact of e-commerce sales;
  • Gross profit decreased 30 basis points to 35.1% from 35.4% in the first six months fiscal 2012;
  • SG&A expense as a percentage of net sales decreased 10 basis points to 22.6% compared to 22.7% in the first six months in fiscal 2012;
  • Pre-opening expense increased to $8.0 million compared to $6.6 million in the second quarter of fiscal 2012. Real estate activity in the first six months of 2013 included 61 new stores, 1 relocation and 1 remodel compared to 40 new stores, 2 relocations and 9 remodels in the first six months fiscal 2012;
  • Operating income increased 22.3% to $140.6 million, or 11.9% of net sales, compared to $114.9 million, or 12.0% of net sales, in the first six months of fiscal 2012;
  • Net income increased 24.1% to $86.7 million compared to $69.9 million in the first six months of fiscal 2012; and
  • Income per diluted share increased 23.9% to $1.35 compared to $1.09 in the first six months of fiscal 2012.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the second quarter of fiscal 2013 totaled $461.2 million, compared to $316.7 million at the end of the second quarter of fiscal 2012, representing an increase of $144.5 million. The increase in inventory is primarily due to the addition of 120 net new stores opened since July 28, 2012. Average inventory per store increased 16.9% for the second quarter of fiscal 2013 compared to the second quarter of fiscal 2012. This increase is primarily due to incremental inventory related to the recently added prestige brand boutiques, new brand additions and the expansion of e-commerce fulfillment to the Chambersburg, PA distribution center.

Store Expansion

During the second quarter, the Company opened 33 stores located in Alameda, CA; Benton Harbor, MI; Billings, MT; Canton, OH; Chicago, IL; Cincinnati, OH; Clarksville, TN; Delray Beach, FL; Eastvale, CA; El Centro, CA; Foxborough, MA; Gaylord, MI; Gilroy, CA; Grand Rapids, MI; Helena, MT; Leesburg, VA; Martinsburg, WV; Midlothian, VA; Morehead City, NC; Newport, KY; Norcross, GA; North Port, FL; Petaluma, CA; Philadelphia, PA; Pocatello, ID; Portland, OR; Rock Hill, SC; Royal Oak, MI; St. Joseph, MO; State College, PA; Tracy, CA; Vineland, NJ and Visalia, CA and relocated one store in Sacramento, CA. The Company ended the second quarter with 609 stores and square footage of 6,476,445, which represents a 25% increase in square footage compared to the second quarter of fiscal 2012.

Outlook

For the third quarter of fiscal 2013, the Company currently expects net sales in the range of $613 million to $623 million, compared to actual net sales of $505.6 million in the third quarter of fiscal 2012. Comparable store sales for the third quarter of 2013 are expected to increase 5% to 7%. The Company reported a comparable store sales increase of 8.4% in the third quarter of 2012.

Income per diluted share for the third quarter of fiscal 2013 is estimated to be in the range of $0.71 to $0.74. This compares to income per diluted share for the third quarter of fiscal 2012 of $0.59.

The Company is confirming its previously announced fiscal 2013 earnings guidance. The Company plans to:

  • achieve comparable store sales growth of approximately 5% to 7%, including the impact of the e-commerce business;
  • expand square footage by 22% with the opening of 125 net new stores;
  • remodel 7 locations;
  • deliver earnings per share growth, on a 52 week adjusted basis, at the low end of the Company’s long term target of 25% - 30%, including the impact of approximately $0.13 of income per diluted share in incremental investments associated with the planned new store program, supply chain, warehouse systems, and e-commerce site investments, the expansion of prestige brand boutiques, and investments in store labor to support rapid growth in the prestige cosmetics and skincare categories;
  • incur capital expenditures of approximately $225 million in fiscal 2013, compared to $189 million in fiscal 2012; and
  • continue to generate free cash flow.

Conference Call Information

A conference call to discuss second quarter results is scheduled for today, September 12, 2013, at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 705-6003. The conference call will also be web-cast live at http://ir.ulta.com and remain available for 90 days. A replay of this call will be available until 11:59 p.m. (ET) on September 26, 2013 and can be accessed by dialing (877) 870-5176 and entering conference ID number 420117.

About Ulta Beauty

Ulta Beauty is the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States. Ulta Beauty provides affordable indulgence to its customers by combining unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer. Ulta Beauty offers a unique combination of over 20,000 prestige and mass beauty products across the categories of cosmetics, fragrance, haircare, skincare, bath and body products and salon styling tools, as well as salon haircare products. Ulta Beauty also offers a full-service salon in all of its stores. As of August 3, 2013, Ulta operates 609 retail stores across 46 states and also distributes its products through the Company’s website: www.ulta.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” or other comparable words. Any forward-looking statements contained in this press release are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales; our ability to attract and retain key executive personnel; our ability to successfully execute and implement our common stock repurchase program; and other risk factors detailed in our public filings with the Securities and Exchange Commission (SEC), including risk factors contained in our Annual Report on Form 10-K for the fiscal year ended February 2, 2013. Our filings with the SEC are available at www.sec.gov. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

 

Exhibit 1

 

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

   
13 Weeks Ended 13 Weeks Ended
August 3, July 28,
2013 2012
(Unaudited) (Unaudited)
Net sales $ 600,998   100.0 % $ 481,683   100.0 %
Cost of sales   388,921     64.7 %   314,058   65.2 %
Gross profit 212,077 35.3 % 167,625 34.8 %
 
Selling, general and administrative expense 134,400 22.4 % 106,040 22.0 %
Pre-opening expenses   4,809     0.8 %   4,126   0.9 %
Operating income 72,868 12.1 % 57,459 11.9 %
Interest (income) expense   (18 )   0.0 %   104   0.0 %
Income before income taxes 72,886 12.1 % 57,355 11.9 %
Income tax expense   27,975     4.7 %   22,357   4.6 %
Net income $ 44,911     7.5 % $ 34,998   7.3 %
 
Net income per common share:
Basic $ 0.70 $ 0.55
Diluted $ 0.70 $ 0.54
 
Weighted average common shares outstanding:
Basic 63,834 63,070
Diluted 64,331 64,293
 

Exhibit 2

 

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

   
26 Weeks Ended 26 Weeks Ended
August 3, July 28,
2013 2012
(Unaudited) (Unaudited)
Net sales $ 1,183,710   100.0 % $ 955,781   100.0 %
Cost of sales   767,684     64.9 %   617,244   64.6 %
Gross profit 416,026 35.1 % 338,537 35.4 %
 
Selling, general and administrative expense 267,448 22.6 % 216,983 22.7 %
Pre-opening expenses   8,015     0.7 %   6,649   0.7 %
Operating income 140,563 11.9 % 114,905 12.0 %
Interest (income) expense   (42 )   0.0 %   125   0.0 %
Income before income taxes 140,605 11.9 % 114,780 12.0 %
Income tax expense   53,868     4.6 %   44,914   4.7 %
Net income $ 86,737     7.3 % $ 69,866   7.3 %
 
Net income per common share:
Basic $ 1.36 $ 1.11
Diluted $ 1.35 $ 1.09
 
Weighted average common shares outstanding:
Basic 63,838 62,782
Diluted 64,362 64,202
 
Dividends declared per common share $ - $ 1.00
 

Exhibit 3

 

Ulta Salon, Cosmetics & Fragrance, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

     
August 3, February 2, July 28,
2013   2013   2012
(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 286,210 $ 320,475 $ 197,401
Receivables, net 30,998 41,515 32,279
Merchandise inventories, net 461,156 361,125 316,734
Prepaid expenses and other current assets 51,992 50,452 46,345
Prepaid income taxes 1,111 12,690
Deferred income taxes   15,320     15,757     12,257
Total current assets 846,787 789,324 617,706
 
Property and equipment, net 541,557 483,059 421,063
Deferred compensation plan assets   3,648     2,866    
Total assets $ 1,391,992   $ 1,275,249   $ 1,038,769
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 130,738 $ 118,886 $ 88,881
Accrued liabilities 102,007 92,127 80,507
Accrued income taxes       10,054    
Total current liabilities 232,745 221,067 169,388
 
Deferred rent 239,179 208,003 186,486
Deferred income taxes 55,492 56,361 43,210
Other long-term liabilities   4,114     2,876    
Total liabilities 531,530 488,307 399,084
 
Commitments and contingencies
 
Total stockholders’ equity   860,462     786,942     639,685
Total liabilities and stockholders’ equity $ 1,391,992   $ 1,275,249   $ 1,038,769
 

Exhibit 4

 

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 
26 Weeks Ended
August 3,   July 28,
2013   2012
(Unaudited)
Operating activities
Net income $ 86,737 $ 69,866
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 50,747 42,614
Deferred income taxes (432 ) (978 )
Non-cash stock compensation charges 7,539 6,346
Excess tax benefits from stock-based compensation (6,699 ) (27,788 )
Loss on disposal of property and equipment 2,030 447
Change in operating assets and liabilities:
Receivables 10,517 (6,126 )
Merchandise inventories (100,031 ) (72,087 )
Prepaid expenses and other current assets (1,540 ) (2,915 )
Income taxes (4,466 ) 11,096
Accounts payable 11,852 2,439
Accrued liabilities (3,366 ) (9,705 )
Deferred rent 31,176 23,023

Other assets and liabilities

  456      
Net cash provided by operating activities 84,520 36,232
 
Investing activities
Purchases of property and equipment   (98,029 )   (71,338 )
Net cash used in investing activities (98,029 ) (71,338 )
 
Financing activities
Repurchase of common shares (37,337 )
Dividends paid (62,482 )
Excess tax benefits from stock-based compensation 6,699 27,788
Stock options exercised 10,007 13,514

Purchase of treasury shares

  (125 )   (51 )
Net cash used in financing activities   (20,756 )   (21,231 )
 
Net decrease in cash and cash equivalents (34,265 ) (56,337 )
Cash and cash equivalents at beginning of period   320,475     253,738  
Cash and cash equivalents at end of period $ 286,210   $ 197,401  
 

Exhibit 5

 

2013 Store Expansion

       
Total stores open Number of stores Number of stores
at beginning of opened during the closed during the Total stores open at
Fiscal 2013   the quarter   quarter   quarter   end of the quarter
1st Quarter 550 28 2 576
2nd Quarter 576 33 0 609
 
Gross square feet for
Total gross square stores opened or Gross square feet Total gross square
feet at beginning expanded during the for stores closed feet at end of the
Fiscal 2013   of the quarter   quarter   during the quarter   quarter
1st Quarter 5,847,393 298,083 24,077 6,121,399
2nd Quarter 6,121,399 355,046 0 6,476,445
 

Source: Ulta Beauty

Ulta Beauty
Company Contacts:
Scott Settersten
Chief Financial Officer
(630) 410-4807
or
Laurel Lefebvre
Vice President, Investor Relations
(630) 410-5230
or
Media Contact:
DKC
Juliet Horn
(212) 981-5221