Net Sales Increased 12.0%
Comparable Sales Increased 6.2%
Diluted EPS Increased 12.2% to $2.76
Company Updates Fiscal 2019 Guidance
Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial
results for the thirteen week period (“Second Quarter”) and
twenty-six week period (“First Six Months”) ended August 3, 2019
compared to the same periods ended August 4, 2018.
“The Ulta Beauty team
delivered another quarter of solid top-line performance, gross
margin expansion, and double-digit earnings growth,” said Mary
Dillon, Chief Executive Officer. “Looking forward, we have updated
our fiscal 2019 outlook to reflect the headwinds we are currently
seeing in the US cosmetics market. We remain confident that our
guest-centric, differentiated business model will drive continued
market share gains and strong returns for our shareholders over the
long term.”
For the Second Quarter of Fiscal
2019
- Net sales increased 12.0% to $1,666.6 million compared to
$1,488.2 million in the second quarter of fiscal 2018;
- Comparable sales (sales for stores open at least 14 months and
e-commerce sales) increased 6.2% compared to an increase of 6.5% in
the second quarter of fiscal 2018. The 6.2% comparable sales
increase was driven by 5.4% transaction growth and 0.8% growth in
average ticket;
- Gross profit as a percentage of net sales increased 40 basis
points to 36.4% compared to 36.0% in the second quarter of fiscal
2018, primarily due to improvement in merchandise margins driven by
our marketing and merchandising strategies and leverage of fixed
store costs, partially offset by investments in our salon
services;
- Selling, general and administrative (SG&A) expenses as a
percentage of net sales increased 90 basis points to 23.6% compared
to 22.7% in the second quarter of fiscal 2018, primarily due to
deleverage of corporate overhead related to investments in growth
initiatives and store labor;
- Pre-opening expenses increased to $5.0 million compared to $4.5
million in the second quarter of fiscal 2018. Real estate activity
in the second quarter of fiscal 2019 included 20 new stores, eight
remodels, and four relocations, compared to 19 new stores, seven
remodels, and one relocation in the second quarter of fiscal
2018;
- Operating income increased 7.3% to $208.0 million, or 12.5% of
net sales, compared to $193.8 million, or 13.0% of net sales, in
the second quarter of fiscal 2018;
- Tax rate decreased to 23.1% compared to 23.9% in the second
quarter of fiscal 2018. The lower effective tax rate is primarily
due to an increase in federal income tax credits;
- Net income increased 8.7% to $161.3 million compared to $148.3
million in the second quarter of fiscal 2018; and
- Diluted earnings per share increased 12.2% to $2.76, which
included a $0.04 benefit primarily due to an increase in federal
income tax credits, compared to $2.46 in the second quarter of
fiscal 2018, which included a $0.02 benefit due to income tax
accounting for share-based compensation.
For the First Six Months of Fiscal 2019
- Net sales increased 12.5% to $3,409.6 million compared to
$3,031.9 million in the first six months of fiscal 2018;
- Comparable sales increased 6.6% compared to an increase of 7.3%
in the first six months of fiscal 2018. The 6.6% comparable sales
increase was driven by 4.8% transaction growth and 1.8% growth in
average ticket;
- Gross profit as a percentage of net sales increased 50 basis
points to 36.7% compared to 36.2% in the first six months of fiscal
2018, primarily due to improvement in merchandise margins driven by
our marketing and merchandising strategies and leverage of fixed
store costs, partially offset by investments in our salon services
and supply chain operations;
- SG&A expenses as a percentage of net sales increased 80
basis points to 23.3% compared to 22.5% in the first six months of
fiscal 2018, primarily due to deleverage of corporate overhead
related to investments in growth initiatives and store labor,
partially offset by improvement in variable store and marketing
expense attributed to cost efficiencies and higher sales
volume;
- Pre-opening expenses decreased to $9.2 million compared to $9.8
million in the first six months of fiscal 2018. Real estate
activity in first six months of fiscal 2019 included 42 new stores,
nine remodels, and four relocations, compared to 53 new stores,
nine remodels, and one relocation in the first six months of fiscal
2018;
- Operating income increased 10.4% to $445.6 million, or 13.1% of
net sales, compared to $403.7 million, or 13.3% of net sales, in
the first six months of fiscal 2018;
- Tax rate decreased to 21.3% compared to 23.0% in the first six
months of fiscal 2018. The lower effective tax rate is primarily
due to income tax accounting for share-based compensation;
- Net income increased 13.0% to $353.5 million compared to $312.7
million in the first six months of fiscal 2018; and
- Diluted earnings per share increased 16.7% to $6.02, which
included a $0.21 benefit primarily due to income tax accounting for
share-based compensation, compared to $5.16 in the first six months
of fiscal 2018, which included a $0.07 benefit due to income tax
accounting for share-based compensation.
Balance Sheet
Merchandise inventories, net at the end of the second quarter of
fiscal 2019 totaled $1,316.0 million compared to $1,219.7 million
at the end of the second quarter of fiscal 2018, representing an
increase of $96.3 million. The increase in total inventory was
driven by 89 net new stores. Average inventory per store was flat
compared to the second quarter of fiscal 2018.
The Company ended the second quarter of fiscal 2019 with $327.4
million in cash and cash equivalents and short-term
investments.
Recent Accounting Pronouncement –
Leases
On February 3, 2019, the Company
adopted Accounting Standards Codification (ASC) 842 using the
modified retrospective approach. The new standard requires leases
to be recorded on the balance sheet as lease liabilities with
corresponding right-of-use assets. Upon adoption, the Company
recognized and measured leases without revising comparative period
information or disclosures. The adoption of ASC 842 resulted in the
recording of operating lease assets and liabilities of $1.46
billion and $1.84 billion, respectively, as of February 3, 2019. As
part of the adoption, the Company recorded an adjustment to
retained earnings of $2.4 million.
Share Repurchase Program
During the second quarter of fiscal 2019, the Company
repurchased 791,603 shares of its common stock at a cost of $270.9
million. During the first six months of fiscal 2019, the Company
repurchased 1,110,034 shares of its common stock at a cost of
$378.3 million. As of August 3, 2019, $517.3 million remained
available under the $875.0 million share repurchase program
announced in March 2019.
Store Expansion
During the second quarter of fiscal 2019, the Company opened 20
stores located in Bridgehampton, NY; Buena Park, CA; Collierville,
TN; Colorado Springs, CO; Dallas, TX; Granbury, TX; Hamden, CT;
Hilliard, OH; Lewiston, ID; Moses Lake, WA; Porter Ranch, CA; Reno,
NV; Rio Grande, NJ; San Antonio, TX; San Ramon, CA; Sugar Land, TX;
Terrell, TX; Trinity, FL; Troy, MI; and Wylie, TX. In addition, the
Company closed three stores.
The Company ended the second quarter of fiscal 2019 with 1,213
stores and square footage of 12,753,598, representing a 7.9%
increase in square footage compared to the second quarter of fiscal
2018.
Outlook
The Company has updated its fiscal
2019 outlook to reflect anticipated industry-wide sales headwinds
in cosmetics and currently expects to:
- open approximately 80 new stores, execute approximately 20
remodel or relocation projects and complete approximately 270 store
refreshes;
- increase total sales between 9% and 12% (previously low
double-digit growth);
- achieve comparable sales growth of approximately 4% to 6%
(previously 6% to 7%), including e-commerce growth of 20% to
30%;
- deleverage operating profit margin rate in the range of 60 to
70 basis points (previously leverage in the range of 10 to 20 basis
points);
- deliver diluted earnings per share in the range of $11.86 to
$12.06 (previously $12.83 to $13.03), including the impact of
approximately $700 million in share repurchases and assuming a 23%
effective tax rate (previously 24%);
- incur capital expenditures of $340 million to $350 million
(previously $380 million to $400 million); and
- incur depreciation and amortization expense of approximately
$300 million (previously $315 million).
As previously discussed, to more
closely align with industry practices the Company no longer
provides a quarterly outlook. The Company will continue to provide
an annual outlook, which it will update on a quarterly basis, as
appropriate.
Conference Call
Information
A conference call to discuss second
quarter of fiscal 2019 results is scheduled for today, August 29,
2019, at 5:00 p.m. Eastern Time / 4:00 p.m. Central Time. Investors
and analysts interested in participating in the call are invited to
dial (877) 705‑6003. The conference call will also be webcast live
at http://ir.ultabeauty.com. A replay of the webcast will remain
available for 90 days. A replay of the conference call will be
available until 11:59 p.m. ET on September 12, 2019 and can be
accessed by dialing (844) 512‑2921 and entering conference ID
number 13693346.
About Ulta Beauty
At Ulta Beauty (NASDAQ: ULTA), the possibilities are beautiful.
Ulta Beauty is the largest U.S. beauty retailer and the premier
beauty destination for cosmetics, fragrance, skin care products,
hair care products and salon services. In 1990, the Company
reinvented the beauty retail experience by offering a new way to
shop for beauty – bringing together all things beauty, all in one
place. Today, Ulta Beauty has grown to become the top national
retailer offering the complete beauty experience.
Ulta Beauty brings possibilities to life through the power of
beauty each and every day in our stores and online with more than
25,000 products from approximately 500 well-established and
emerging beauty brands across all categories and price points,
including Ulta Beauty’s own private label. Ulta Beauty also offers
a full-service salon in every store featuring hair, skin, brow, and
make-up services.
Ulta Beauty is recognized for its commitment to personalized
service, fun and inviting stores and our industry-leading Ultamate
Rewards loyalty program. As of August 3, 2019, Ulta Beauty operates
1,213 retail stores across 50 states and also distributes its
products through its website, which includes a collection of tips,
tutorials, and social content. For more information, visit
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,” “targets,”
“strategies” 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, targets, strategies or
expectations contemplated by us will be achieved. Such
forward-looking statements are subject to various risks and
uncertainties, which include, without limitation: changes in the
overall level of consumer spending and volatility in the economy;
the possibility that we may be unable to compete effectively in our
highly competitive markets; the possibility that the capacity of
our distribution and order fulfillment infrastructure and the
performance of our newly opened and to be opened distribution
centers may not be adequate to support our recent growth and
expected future growth plans; our ability to sustain our growth
plans and successfully implement our long-range strategic and
financial plan; the ability to execute our Efficiencies for Growth
cost optimization program; the possibility that cybersecurity
breaches and other disruptions could compromise our information or
result in the unauthorized disclosure of confidential information;
the possibility of material disruptions to our information systems;
our ability to gauge beauty trends and react to changing consumer
preferences in a timely manner; changes in the wholesale cost of
our products; the possibility that new store openings and existing
locations may be impacted by developer or co-tenant issues; our
ability to attract and retain key executive personnel; natural
disasters that could negatively impact sales; our ability to
successfully execute our common stock repurchase program or
implement future common stock repurchase programs; and other risk
factors detailed in our public filings with the Securities and
Exchange Commission (the “SEC”), including risk factors contained
in our Annual Report on Form 10‑K for the fiscal year ended
February 2, 2019, as such may be amended or supplemented in our
subsequently filed Quarterly Reports on Form 10‑Q. Our filings with
the SEC are available at www.sec.gov. Except to the extent required
by the federal securities laws, 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 Beauty, Inc.
Consolidated Statements of
Income
(In thousands, except per
share data)
13 Weeks Ended
August 3,
August 4,
2019
2018
(Unaudited)
(Unaudited)
Net sales
$
1,666,607
100.0
%
$
1,488,221
100.0
%
Cost of sales
1,060,708
63.6
%
952,760
64.0
%
Gross profit
605,899
36.4
%
535,461
36.0
%
Selling, general and administrative
expenses
392,843
23.6
%
337,142
22.7
%
Pre-opening expenses
5,038
0.3
%
4,504
0.3
%
Operating income
208,018
12.5
%
193,815
13.0
%
Interest income, net
(1,671
)
0.1
%
(1,143
)
0.1
%
Income before income taxes
209,689
12.6
%
194,958
13.1
%
Income tax expense
48,431
2.9
%
46,635
3.1
%
Net income
$
161,258
9.7
%
$
148,323
10.0
%
Net income per common share:
Basic
$
2.77
$
2.47
Diluted
$
2.76
$
2.46
Weighted average common shares
outstanding:
Basic
58,171
60,070
Diluted
58,446
60,375
Exhibit 2
Ulta Beauty, Inc.
Consolidated Statements of
Income
(In thousands, except per
share data)
26 Weeks Ended
August 3,
August 4,
2019
2018
(Unaudited)
(Unaudited)
Net sales
$
3,409,636
100.0
%
$
3,031,888
100.0
%
Cost of sales
2,158,890
63.3
%
1,935,714
63.8
%
Gross profit
1,250,746
36.7
%
1,096,174
36.2
%
Selling, general and administrative
expenses
795,976
23.3
%
682,766
22.5
%
Pre-opening expenses
9,212
0.3
%
9,751
0.3
%
Operating income
445,558
13.1
%
403,657
13.3
%
Interest income, net
(3,717
)
0.1
%
(2,468
)
0.1
%
Income before income taxes
449,275
13.2
%
406,125
13.4
%
Income tax expense
95,796
2.8
%
93,406
3.1
%
Net income
$
353,479
10.4
%
$
312,719
10.3
%
Net income per common share:
Basic
$
6.05
$
5.18
Diluted
$
6.02
$
5.16
Weighted average common shares
outstanding:
Basic
58,401
60,340
Diluted
58,718
60,630
Exhibit 3
Ulta Beauty, Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
August 3,
February 2,
August 4,
2019
2019
2018
(Unaudited)
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
177,398
$
409,251
$
237,107
Short-term investments
150,000
—
149,000
Receivables, net
107,263
136,168
103,666
Merchandise inventories, net
1,315,999
1,214,329
1,219,685
Prepaid expenses and other current
assets
131,171
138,116
103,618
Prepaid income taxes
38,769
16,997
17,082
Total current assets
1,920,600
1,914,861
1,830,158
Property and equipment, net
1,219,948
1,226,029
1,212,978
Operating lease assets
1,499,556
—
—
Goodwill
10,870
10,870
—
Other intangible assets, net
3,854
4,317
—
Deferred compensation plan assets
24,665
20,511
19,585
Other long-term assets
30,882
14,584
10,628
Total assets
$
4,710,375
$
3,191,172
$
3,073,349
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
450,117
$
404,016
$
409,849
Accrued liabilities
224,202
220,666
202,999
Deferred revenue
182,354
199,054
145,907
Current operating lease liabilities
208,261
—
—
Total current liabilities
1,064,934
823,736
758,755
Non-current operating lease
liabilities
1,683,743
—
—
Deferred rent
—
434,980
422,455
Deferred income taxes
86,598
83,864
49,700
Other long-term liabilities
35,649
28,374
29,961
Total liabilities
2,870,924
1,370,954
1,260,871
Commitments and contingencies
Total stockholders’ equity
1,839,451
1,820,218
1,812,478
Total liabilities and stockholders’
equity
$
4,710,375
$
3,191,172
$
3,073,349
Exhibit 4
Ulta Beauty, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
26 Weeks Ended
August 3,
August 4,
2019
2018
(Unaudited)
(Unaudited)
Operating activities
Net income
$
353,479
$
312,719
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
144,951
137,815
Non-cash lease expense
152,134
—
Deferred income taxes
2,734
612
Stock-based compensation expense
12,766
13,172
Loss on disposal of property and
equipment
3,215
499
Change in operating assets and
liabilities:
Receivables
11,437
(3,947
)
Merchandise inventories
(101,670
)
(123,261
)
Prepaid expenses and other current
assets
(18,315
)
(4,952
)
Income taxes
(21,772
)
(29,694
)
Accounts payable
46,101
84,091
Accrued liabilities
(2,629
)
(6,572
)
Deferred revenue
(16,700
)
(6,577
)
Operating lease liabilities
(138,557
)
—
Deferred rent
—
14,539
Other assets and liabilities
20,162
(441
)
Net cash provided by operating
activities
447,336
388,003
Investing activities
Purchases of short-term investments
(245,000
)
(558,163
)
Proceeds from short-term investments
95,000
529,163
Purchases of property and equipment
(151,213
)
(141,691
)
Purchases of equity investments
(33,339
)
—
Net cash used in investing activities
(334,552
)
(170,691
)
Financing activities
Repurchase of common shares
(378,300
)
(260,452
)
Stock options exercised
42,935
8,448
Purchase of treasury shares
(9,272
)
(5,646
)
Net cash used in financing activities
(344,637
)
(257,650
)
Net decrease in cash and cash
equivalents
(231,853
)
(40,338
)
Cash and cash equivalents at beginning of
period
409,251
277,445
Cash and cash equivalents at end of
period
$
177,398
$
237,107
Exhibit 5
2019 Store
Expansion
Total stores open
Number of stores
Number of stores
Total stores
at beginning of the
opened during the
closed during the
open at
Fiscal 2019
quarter
quarter
quarter
end of the quarter
1st Quarter
1,174
22
0
1,196
2nd Quarter
1,196
20
3
1,213
Gross square feet for
Total gross square
stores opened or
Gross square feet for
Total gross square
feet at beginning of
expanded during the
stores closed
feet at end of the
Fiscal 2019
the quarter
quarter
during the quarter
quarter
1st Quarter
12,337,145
236,596
0
12,573,741
2nd Quarter
12,573,741
209,469
29,612
12,753,598
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190829005711/en/
Investor Contacts: Kiley Rawlins, CFA Vice President, Investor
Relations krawlins@ulta.com (331) 757-2206
Patrick Flaherty Senior Manager, Investor Relations
pflaherty@ulta.com (331) 253-3521
Media Contact: Karen May Director, Public Relations (630)
410-5457
Ulta Beauty (NASDAQ:ULTA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ulta Beauty (NASDAQ:ULTA)
Historical Stock Chart
From Apr 2023 to Apr 2024
