News Release Details

Ulta Beauty Announces Third Quarter Fiscal 2019 Results

12/05/19

Net Sales Increased 7.9%
Comparable Sales Increased 3.2%
Diluted EPS Increased 3.2% to $2.25
Company Updates Fiscal 2019 Guidance

BOLINGBROOK, Ill.--(BUSINESS WIRE)-- Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the thirteen-week period (“Third Quarter”) and thirty-nine week period (“First Nine Months”) ended November 2, 2019 compared to the same periods ended November 3, 2018.

“Our differentiated model is winning in the marketplace,” said Mary Dillon, Chief Executive Officer. “The Ulta Beauty team delivered another quarter of solid top-line performance, gross margin expansion, and EPS growth, despite the current challenges facing the U.S. cosmetics category. We continue to gain market share across all major beauty categories, and we are extending our leadership position by creating stronger connections with our guests and engaging with them in better and more exciting ways.”

For the Third Quarter of Fiscal 2019

  • Net sales increased 7.9% to $1,682.5 million compared to $1,560.0 million in the third quarter of fiscal 2018;
  • Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 3.2% compared to an increase of 7.8% in the third quarter of fiscal 2018. The 3.2% comparable sales increase was driven by 2.3% transaction growth and 0.9% growth in average ticket;
  • Gross profit as a percentage of net sales increased 40 basis points to 37.1% compared to 36.7% in the third quarter of fiscal 2018, primarily due to improvement in merchandise margins driven by marketing and merchandising strategies and leverage of fixed store costs, partially offset by investments in salon services;
  • Selling, general and administrative (SG&A) expenses as a percentage of net sales increased 140 basis points to 26.7% compared to 25.3% in the third quarter of fiscal 2018, primarily due to deleverage of corporate overhead related to investments in growth initiatives and store labor, partially offset by lower incentive compensation expense and leverage in marketing expense;
  • Pre-opening expenses decreased to $6.5 million compared to $7.6 million in the third quarter of fiscal 2018. Real estate activity in the third quarter of fiscal 2019 included 31 new stores, three remodels, and two relocations, compared to 42 new stores, four remodels, and one relocation in the third quarter of fiscal 2018;
  • Operating income was $167.8 million, or 10.0% of net sales, compared to $169.2 million, or 10.8% of net sales, in the third quarter of fiscal 2018;
  • Tax rate was 23.1%, flat as compared to the third quarter of fiscal 2018;
  • Net income was $129.7 million compared to $131.2 million in the third quarter of fiscal 2018; and
  • Diluted earnings per share increased 3.2% to $2.25, which included a $0.02 per share benefit primarily due to an increase in federal income tax credits, compared to $2.18 in the third quarter of fiscal 2018, which included a $0.02 per share benefit due to income tax accounting for share-based compensation.

For the First Nine Months of Fiscal 2019

  • Net sales increased 10.9% to $5,092.2 million compared to $4,591.9 million in the first nine months of fiscal 2018;
  • Comparable sales increased 5.4%, compared to an increase of 7.5% in the first nine months of fiscal 2018. The 5.4% comparable sales increase was driven by 4.0% transaction growth and 1.4% growth in average ticket;
  • Gross profit as a percentage of net sales increased 50 basis points to 36.8% compared to 36.3% in the first nine months of fiscal 2018, primarily due to improvement in merchandise margins driven by marketing and merchandising strategies and leverage of fixed store costs, partially offset by investments in salon services and supply chain operations;
  • SG&A expenses as a percentage of net sales increased 100 basis points to 24.5% compared to 23.5% in the first nine months of fiscal 2018, primarily due to deleverage of corporate overhead related to investments in growth initiatives and store labor, partially offset by leverage in marketing expense;
  • Pre-opening expenses decreased to $15.7 million compared to $17.4 million in the first nine months of fiscal 2018. Real estate activity in first nine months of fiscal 2019 included 73 new stores, 12 remodels, and six relocations, compared to 95 new stores, 13 remodels, and two relocations in the first nine months of fiscal 2018;
  • Operating income increased to $613.3 million, or 12.0% of net sales, compared to $572.9 million, or 12.5% of net sales, in the first nine months of fiscal 2018;
  • Tax rate decreased to 21.8% compared to 23.0% in the first nine months of fiscal 2018. The lower effective tax rate is primarily due to income tax accounting for share-based compensation and federal income tax credits;
  • Net income increased to $483.2 million compared to $443.9 million in the first nine months of fiscal 2018; and
  • Diluted earnings per share increased 12.5% to $8.27, which included a $0.24 per share benefit primarily due to income tax accounting for share-based compensation, compared to $7.35 in the first nine months of fiscal 2018, which included a $0.09 per share benefit due to income tax accounting for share-based compensation.

Balance Sheet

Merchandise inventories, net at the end of the third quarter of fiscal 2019 totaled $1,616.9 million compared to $1,484.6 million at the end of the third quarter of fiscal 2018, representing an increase of $132.4 million. The increase in total inventory was driven by 78 net new stores and timing of shipments ahead of the holiday season. Average inventory per store increased 2.1% compared to the third quarter of fiscal 2018.

The Company ended the third quarter of fiscal 2019 with $208.8 million in cash and cash equivalents.

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 third quarter of fiscal 2019, the Company repurchased 529,404 shares of its common stock at a cost of $128.6 million. During the first nine months of fiscal 2019, the Company repurchased 1,639,438 shares of its common stock at a cost of $506.9 million. As of November 2, 2019, $388.8 million remained available under the $875.0 million share repurchase program announced in March 2019.

Store Expansion

During the third quarter of fiscal 2019, the Company opened 31 stores located in Albuquerque, NM; Bethlehem, GA; Cleveland, TN; Columbus, OH; Conroe, TX; Davenport, FL; El Segundo, CA; Georgetown, TX; Germantown, TN; Grand Rapids, MI; Jacksonville, NC; Jeffersonville, IN; Johns Creek, GA; Kearny, NJ; Lake Stevens, WA; Lakewood, WA; Matthews, NC; Millbury, MA; Parsippany, NJ; Pasadena, MD; Perris, CA; Philadelphia, PA; Raleigh, NC; Shirley, NY; Southfield, MI; Topeka, KS; Wareham, MA; West Mifflin, PA; Wheat Ridge, CO; Williamsville, NY; and Yuma, AZ. In addition, the Company closed three stores.

The Company ended the third quarter of fiscal 2019 with 1,241 stores and square footage of 13,061,791, representing a 6.9% increase in square footage compared to the third quarter of fiscal 2018.

Outlook

The Company has updated its fiscal 2019 outlook and now expects to:

  • open approximately 80 new stores, execute approximately 20 remodel or relocation projects, and complete approximately 270 store refreshes;
  • increase total sales by approximately 10% (previously between 9% and 12%);
  • achieve comparable sales growth in the range of 4.7% to 5.0% (previously 4% to 6%), including e-commerce growth of 20% to 30%;
  • deleverage operating income margin rate in the range of 60 to 70 basis points;
  • deliver diluted earnings per share in the range of $11.93 to $12.03 (previously $11.86 to $12.06), including the impact of approximately $700 million in share repurchases and assuming an effective tax rate of approximately 23%;
  • incur capital expenditures between $305 million and $315 million (previously $340 million to $350 million); and
  • incur depreciation and amortization expense of approximately $300 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 third quarter of fiscal 2019 results is scheduled for today, December 5, 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 December 19, 2019 and can be accessed by dialing (844) 512‑2921 and entering conference ID number 13696497.

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 November 2, 2019, Ulta Beauty operates 1,241 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

 

 

November 2,

 

November 3,

 

 

2019

 

2018

 

 

(Unaudited)

 

(Unaudited)

Net sales

 

$

1,682,514

 

100.0%

 

$

1,560,011

 

100.0%

Cost of sales

 

 

1,059,081

 

62.9%

 

 

987,733

 

63.3%

Gross profit

 

 

623,433

 

37.1%

 

 

572,278

 

36.7%

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

449,198

 

26.7%

 

 

395,453

 

25.3%

Pre-opening expenses

 

 

6,455

 

0.4%

 

 

7,612

 

0.5%

Operating income

 

 

167,780

 

10.0%

 

 

169,213

 

10.8%

Interest income, net

 

 

(900)

 

0.1%

 

 

(1,318)

 

0.1%

Income before income taxes

 

 

168,680

 

10.1%

 

 

170,531

 

10.9%

Income tax expense

 

 

38,933

 

2.3%

 

 

39,365

 

2.5%

Net income

 

$

129,747

 

7.7%

 

$

131,166

 

8.4%

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.25

 

 

 

$

2.20

 

 

Diluted

 

$

2.25

 

 

 

$

2.18

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,568

 

 

 

 

59,724

 

 

Diluted

 

 

57,763

 

 

 

 

60,062

 

 

Exhibit 2

Ulta Beauty, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39 Weeks Ended

 

 

 

November 2,

 

November 3,

 

 

 

2019

 

2018

 

 

 

(Unaudited)

 

(Unaudited)

 

Net sales

 

$

5,092,150

 

100.0%

 

$

4,591,899

 

100.0%

 

Cost of sales

 

 

3,217,971

 

63.2%

 

 

2,923,447

 

63.7%

 

Gross profit

 

 

1,874,179

 

36.8%

 

 

1,668,452

 

36.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

1,245,174

 

24.5%

 

 

1,078,219

 

23.5%

 

Pre-opening expenses

 

 

15,667

 

0.3%

 

 

17,363

 

0.4%

 

Operating income

 

 

613,338

 

12.0%

 

 

572,870

 

12.5%

 

Interest income, net

 

 

(4,617)

 

0.1%

 

 

(3,786)

 

0.1%

 

Income before income taxes

 

 

617,955

 

12.1%

 

 

576,656

 

12.6%

 

Income tax expense

 

 

134,729

 

2.6%

 

 

132,771

 

2.9%

 

Net income

 

$

483,226

 

9.5%

 

$

443,885

 

9.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

8.31

 

 

 

$

7.38

 

 

 

Diluted

 

$

8.27

 

 

 

$

7.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

58,123

 

 

 

 

60,135

 

 

 

Diluted

 

 

58,396

 

 

 

 

60,432

 

 

 

Exhibit 3

Ulta Beauty, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

November 2,

 

February 2,

 

November 3,

 

 

2019

 

2019

 

2018

 

 

(Unaudited)

 

 

 

 

(Unaudited)

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

208,843

 

$

409,251

 

$

296,944

Receivables, net

 

 

112,888

 

 

136,168

 

 

102,353

Merchandise inventories, net

 

 

1,616,920

 

 

1,214,329

 

 

1,484,565

Prepaid expenses and other current assets

 

 

118,343

 

 

138,116

 

 

119,817

Prepaid income taxes

 

 

40,474

 

 

16,997

 

 

22,294

Total current assets

 

 

2,097,468

 

 

1,914,861

 

 

2,025,973

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,233,412

 

 

1,226,029

 

 

1,257,775

Operating lease assets

 

 

1,529,524

 

 

 

 

Goodwill

 

 

10,870

 

 

10,870

 

 

9,084

Other intangible assets, net

 

 

3,622

 

 

4,317

 

 

6,985

Deferred compensation plan assets

 

 

26,269

 

 

20,511

 

 

21,397

Other long-term assets

 

 

27,683

 

 

14,584

 

 

11,477

Total assets

 

$

4,928,848

 

$

3,191,172

 

$

3,332,691

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

594,993

 

$

404,016

 

$

574,480

Accrued liabilities

 

 

249,112

 

 

220,666

 

 

255,156

Deferred revenue

 

 

190,188

 

 

199,054

 

 

154,447

Current operating lease liabilities

 

 

222,627

 

 

 

 

Total current liabilities

 

 

1,256,920

 

 

823,736

 

 

984,083

 

 

 

 

 

 

 

 

 

 

Non-current operating lease liabilities

 

 

1,706,806

 

 

 

 

Deferred rent

 

 

 

 

434,980

 

 

432,052

Deferred income taxes

 

 

83,856

 

 

83,864

 

 

50,045

Other long-term liabilities

 

 

34,110

 

 

28,374

 

 

30,775

Total liabilities

 

 

3,081,692

 

 

1,370,954

 

 

1,496,955

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

1,847,156

 

 

1,820,218

 

 

1,835,736

Total liabilities and stockholders’ equity

 

$

4,928,848

 

$

3,191,172

 

$

3,332,691

Exhibit 4

Ulta Beauty, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

 

 

 

 

 

 

 

 

39 Weeks Ended

 

 

November 2,

 

November 3,

 

 

2019

 

2018

 

 

(Unaudited)

 

(Unaudited)

Operating activities

 

 

 

 

 

 

Net income

 

$

483,226

 

$

443,885

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

219,207

 

 

207,652

Non-cash lease expense

 

 

219,220

 

 

Deferred income taxes

 

 

(8)

 

 

(408)

Stock-based compensation expense

 

 

19,108

 

 

20,308

Loss on disposal of property and equipment

 

 

4,821

 

 

1,339

Change in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

5,812

 

 

(2,594)

Merchandise inventories

 

 

(402,591)

 

 

(388,141)

Prepaid expenses and other current assets

 

 

(5,487)

 

 

(19,603)

Income taxes

 

 

(23,477)

 

 

(34,906)

Accounts payable

 

 

190,977

 

 

248,719

Accrued liabilities

 

 

23,109

 

 

42,151

Deferred revenue

 

 

(8,866)

 

 

1,963

Operating lease liabilities

 

 

(198,181)

 

 

Deferred rent

 

 

 

 

24,136

Other assets and liabilities

 

 

30,636

 

 

(2,287)

Net cash provided by operating activities

 

 

557,506

 

 

542,214

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Purchases of short-term investments

 

 

(245,000)

 

 

(386,193)

Proceeds from short-term investments

 

 

245,000

 

 

506,193

Purchases of property and equipment

 

 

(241,136)

 

 

(256,415)

Acquisitions, net of cash acquired

 

 

 

 

(13,606)

Purchases of equity investments

 

 

(43,757)

 

 

Net cash used in investing activities

 

 

(284,893)

 

 

(150,021)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Repurchase of common shares

 

 

(506,868)

 

 

(379,423)

Stock options exercised

 

 

43,211

 

 

12,668

Purchase of treasury shares

 

 

(9,364)

 

 

(5,939)

Net cash used in financing activities

 

 

(473,021)

 

 

(372,694)

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(200,408)

 

 

19,499

Cash and cash equivalents at beginning of period

 

 

409,251

 

 

277,445

Cash and cash equivalents at end of period

 

$

208,843

 

$

296,944

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

3rd Quarter

 

1,213

 

31

 

3

 

1,241

 

 

 

 

 

 

 

 

 

 

 

 

 

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

3rd Quarter

 

12,753,598

 

339,469

 

31,276

 

13,061,791

 

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:
Olivia Mata
Senior Manager, Public Relations
(630) 410-5408

Source: Ulta Beauty, Inc.