News Release Details

Ulta Beauty Announces Fourth Quarter Fiscal 2019 Results

03/12/20

Net Sales Increased 8.5%
Comparable Sales Increased 4.0%
Diluted EPS Increased 7.8% to $3.89

BOLINGBROOK, Ill.--(BUSINESS WIRE)-- Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the thirteen-week period (“Fourth Quarter”) and fifty-two week period (“Fiscal Year”) ended February 1, 2020 compared to the same periods ended February 2, 2019.

“The Ulta Beauty team delivered results for the fourth quarter at the high end of our expectations, and I am proud of how our teams worked together to serve our guests this holiday season,” said Mary Dillon, Chief Executive Officer. “Our enhanced omnichannel capabilities, combined with our merchandise exclusives, cross-category marketing events, and great execution by our store teams, enabled us to expand our market share and deliver a successful quarter.”

For the Fourth Quarter of Fiscal 2019

  • Net sales increased 8.5% to $2,305.9 million compared to $2,124.7 million in the fourth quarter of fiscal 2018;
  • Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 4.0% compared to an increase of 9.4% in the fourth quarter of fiscal 2018. The 4.0% comparable sales increase was driven by 1.8% transaction growth and 2.2% growth in average ticket;
  • Gross profit as a percentage of net sales increased 10 basis points to 35.0% compared to 34.9% in the fourth quarter of fiscal 2018, primarily due to improvement in merchandise margins driven by marketing and merchandising strategies, partially offset by investments in salon services;
  • Selling, general and administrative (SG&A) expenses as a percentage of net sales increased 90 basis points to 22.4% compared to 21.5% in the fourth quarter of fiscal 2018, primarily due to investments to support future growth, deleverage in marketing expense, and higher payroll and benefit-related expenses, partially offset by lower incentive compensation expense;
  • Pre-opening expenses increased to $3.6 million compared to $2.4 million in the fourth quarter of fiscal 2018. Real estate activity in the fourth quarter of fiscal 2019 included 13 new stores and two relocations, compared to 12 new stores in the fourth quarter of fiscal 2018;
  • Operating income increased 2.3% to $287.8 million, or 12.5% of net sales, compared to $281.2 million, or 13.2% of net sales, in the fourth quarter of fiscal 2018;
  • Tax rate was 22.7% compared to 24.0% in the fourth quarter of fiscal 2018. The lower effective tax rate is due to federal income tax credits;
  • Net income increased 3.7% to $222.7 million compared to $214.7 million in the fourth quarter of fiscal 2018; and
  • Diluted earnings per share increased 7.8% to $3.89, which included a $0.06 per share benefit due to an increase in federal income tax credits, compared to $3.61 in the fourth quarter of fiscal 2018.

For the Full Year of Fiscal 2019

  • Net sales increased 10.1% to $7,398.1 million compared to $6,716.6 million in fiscal 2018;
  • Comparable sales increased 5.0% compared to an increase of 8.1% in fiscal 2018. The 5.0% comparable sales increase was driven by 3.3% transaction growth and 1.7% growth in average ticket;
  • Gross profit as a percentage of net sales increased 30 basis points to 36.2% compared to 35.9% in 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;
  • SG&A expenses as a percentage of net sales increased 90 basis points to 23.8% compared to 22.9% in fiscal 2018, primarily due to investments to support future growth and higher payroll and benefit-related expenses, partially offset by lower incentive compensation expense and leverage in marketing expense;
  • Pre-opening expenses decreased to $19.3 million compared to $19.8 million in fiscal 2018. Real estate activity in fiscal 2019 included 86 new stores, 12 remodels, and eight relocations, compared to 107 new stores, 13 remodels, and two relocations in fiscal 2018;
  • Operating income increased 5.5% to $901.1 million, or 12.1% of net sales, compared to $854.1 million, or 12.7% of net sales, in fiscal 2018;
  • Tax rate decreased to 22.1% compared to 23.3% in 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 7.2% to $705.9 million compared to $658.6 million in fiscal 2018; and
  • Diluted earnings per share increased 11.1% to $12.15 which included a $0.30 per share benefit primarily due to income tax accounting for share-based compensation and federal income tax credits, compared to $10.94 in 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 fiscal 2019 totaled $1,293.7 million compared to $1,214.3 million at the end of fiscal 2018, representing an increase of $79.4 million. The increase in total inventory was driven by 80 net new stores. Average inventory per store was flat compared to fiscal 2018.

The Company ended fiscal 2019 with $502.3 million in cash, cash equivalents, and short-term investments.

On March 11, 2020, the Company entered into an Amendment No. 1 to Second Amended and Restated Loan Agreement, which amended and restated the existing agreement. The new loan agreement extends the maturity of the facility to March 11, 2025, provides maximum revolving loans equal to the lesser of $1.0 billion or a percentage of eligible owned inventory, contains a $50 million sub-facility for letters of credit and allows the Company to increase the revolving facility by an additional $100 million.

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 fourth quarter of 2019, the Company repurchased 681,458 shares of its common stock at a cost of $174.1 million. During fiscal 2019, the Company repurchased 2,320,896 shares of its common stock at a cost of $681.0 million. As of February 1, 2020, $214.6 million remained available under the $875.0 million share repurchase program announced in March 2019.

On March 10, 2020, the Company’s board of directors approved a new share repurchase authorization of $1.6 billion, which replaces the prior authorization implemented in March 2019. Under the new program, as under the previous program, the Company may repurchase outstanding shares of the Company's common stock from time to time through accelerated share repurchases, privately negotiated transactions, or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934. The new program has no expiration date but may be terminated by the Board at any time. Since 2014, Ulta Beauty has returned $2.2 billion to shareholders through its share repurchase program, while continuing to make strategic growth investments.

Store Expansion

During the fourth quarter of 2019, the Company opened 13 stores located in Allen, TX; Blaine, MN; Dallas, TX; Gonzalez, LA; Houston, TX; Louisville, KY; Madison, AL; Meridian, MS; Moore, OK; Phoenix, AZ (2); Sioux Falls, SD; and Wentzville, MO.

The Company ended fiscal 2019 with 1,254 stores and square footage of 13,193,076, representing a 6.9% increase in square footage compared to fiscal 2018.

Outlook

For fiscal 2020, the Company plans to:

  • open approximately 75 net new stores, execute approximately 15 remodel or relocation projects, and complete approximately 42 store refreshes;
  • increase total sales by approximately 7.0% to 8.0%;
  • achieve comparable sales growth of approximately 3.0% to 4.0%;
  • deleverage operating income margin rate in the range of 70 to 80 basis points;
  • deliver diluted earnings per share in the range of $12.55 to $12.75, including the impact of approximately $1.3 billion in share repurchases and assuming an effective tax rate of between 24% and 24.5%;
  • incur capital expenditures between $280 million and $300 million;
  • incur depreciation and amortization expense between $310 million and $320 million; and
  • incur net interest expense of approximately $9.0 million.

The Company’s guidance does not include assumptions for any impact related to Coronavirus.

Conference Call Information

A conference call to discuss fourth quarter of fiscal 2019 results is scheduled for today, March 12, 2020, 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 March 26, 2020 and can be accessed by dialing (844) 512‑2921 and entering conference ID number 13699174.

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 February 1, 2020, Ulta Beauty operates 1,254 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, epidemics, or pandemics like the Coronavirus 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

 

 

February 1,

 

February 2,

 

 

2020

 

2019

 

 

(Unaudited)

 

(Unaudited)

Net sales

 

$

2,305,918

 

100.0%

 

$

2,124,716

 

100.0%

Cost of sales

 

 

1,499,033

 

65.0%

 

 

1,383,857

 

65.1%

Gross profit

 

 

806,885

 

35.0%

 

 

740,859

 

34.9%

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

515,542

 

22.4%

 

 

457,245

 

21.5%

Pre-opening expenses

 

 

3,587

 

0.2%

 

 

2,404

 

0.1%

Operating income

 

 

287,756

 

12.5%

 

 

281,210

 

13.2%

Interest income, net

 

 

(439)

 

0.0%

 

 

(1,275)

 

0.1%

Income before income taxes

 

 

288,195

 

12.5%

 

 

282,485

 

13.3%

Income tax expense

 

 

65,476

 

2.8%

 

 

67,811

 

3.2%

Net income

 

$

222,719

 

9.7%

 

$

214,674

 

10.1%

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

3.91

 

 

 

$

3.64

 

 

Diluted

 

$

3.89

 

 

 

$

3.61

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

56,992

 

 

 

 

59,053

 

 

Diluted

 

 

57,195

 

 

 

 

59,431

 

 

Exhibit 2

 

Ulta Beauty, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

52 Weeks Ended

 

 

February 1,

 

February 2,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

Net sales

 

$

7,398,068

 

100.0%

 

$

6,716,615

 

100.0%

Cost of sales

 

 

4,717,004

 

63.8%

 

 

4,307,304

 

64.1%

Gross profit

 

 

2,681,064

 

36.2%

 

 

2,409,311

 

35.9%

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

1,760,716

 

23.8%

 

 

1,535,464

 

22.9%

Pre-opening expenses

 

 

19,254

 

0.3%

 

 

19,767

 

0.3%

Operating income

 

 

901,094

 

12.1%

 

 

854,080

 

12.7%

Interest income, net

 

 

(5,056)

 

0.1%

 

 

(5,061)

 

0.1%

Income before income taxes

 

 

906,150

 

12.2%

 

 

859,141

 

12.8%

Income tax expense

 

 

200,205

 

2.7%

 

 

200,582

 

3.0%

Net income

 

$

705,945

 

9.5%

 

$

658,559

 

9.8%

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

12.21

 

 

 

$

11.00

 

 

Diluted

 

$

12.15

 

 

 

$

10.94

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,840

 

 

 

 

59,864

 

 

Diluted

 

 

58,105

 

 

 

 

60,181

 

 

Exhibit 3

 

Ulta Beauty, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

 

 

 

 

 

 

February 1,

 

February 2,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

392,325

 

$

409,251

Short-term investments

 

 

110,000

 

 

Receivables, net

 

 

139,337

 

 

136,168

Merchandise inventories, net

 

 

1,293,701

 

 

1,214,329

Prepaid expenses and other current assets

 

 

103,567

 

 

138,116

Prepaid income taxes

 

 

16,387

 

 

16,997

Total current assets

 

 

2,055,317

 

 

1,914,861

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,205,524

 

 

1,226,029

Operating lease assets

 

 

1,537,565

 

 

Goodwill

 

 

10,870

 

 

10,870

Other intangible assets, net

 

 

3,391

 

 

4,317

Deferred compensation plan assets

 

 

27,849

 

 

20,511

Other long-term assets

 

 

23,356

 

 

14,584

Total assets

 

$

4,863,872

 

$

3,191,172

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

414,009

 

$

404,016

Accrued liabilities

 

 

246,088

 

 

220,666

Deferred revenue

 

 

237,535

 

 

199,054

Current operating lease liabilities

 

 

239,629

 

 

Total current liabilities

 

 

1,137,261

 

 

823,736

 

 

 

 

 

 

 

Non-current operating lease liabilities

 

 

1,698,718

 

 

Deferred rent

 

 

 

 

434,980

Deferred income taxes

 

 

89,367

 

 

83,864

Other long-term liabilities

 

 

36,432

 

 

28,374

Total liabilities

 

 

2,961,778

 

 

1,370,954

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

1,902,094

 

 

1,820,218

Total liabilities and stockholders’ equity

 

$

4,863,872

 

$

3,191,172

Exhibit 4

 

Ulta Beauty, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

 

 

 

 

 

 

52 Weeks Ended

 

 

February 1,

 

February 2,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

 

Operating activities

 

 

 

 

 

 

Net income

 

$

705,945

 

$

658,559

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

 

 

 

 

 

 

Depreciation and amortization

 

 

295,599

 

 

279,472

Non-cash lease expense

 

 

278,820

 

 

Deferred income taxes

 

 

5,503

 

 

34,080

Stock-based compensation expense

 

 

25,045

 

 

26,636

Loss on disposal of property and equipment

 

 

5,850

 

 

2,885

Change in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(20,637)

 

 

(36,387)

Merchandise inventories

 

 

(79,372)

 

 

(122,019)

Prepaid expenses and other current assets

 

 

9,289

 

 

(39,450)

Income taxes

 

 

610

 

 

(29,609)

Accounts payable

 

 

9,993

 

 

78,256

Accrued liabilities

 

 

28,183

 

 

29,265

Deferred revenue

 

 

38,481

 

 

50,684

Operating lease liabilities

 

 

(256,910)

 

 

Deferred rent

 

 

 

 

27,064

Other assets and liabilities

 

 

54,894

 

 

(3,309)

Net cash provided by operating activities

 

 

1,101,293

 

 

956,127

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Short-term investments, net

 

 

(110,000)

 

 

120,000

Capital expenditures

 

 

(298,534)

 

 

(319,400)

Acquisitions, net of cash acquired

 

 

 

 

(13,606)

Purchases of equity investments

 

 

(62,946)

 

 

(2,101)

Net cash used in investing activities

 

 

(471,480)

 

 

(215,107)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Repurchase of common shares

 

 

(680,979)

 

 

(616,194)

Stock options exercised

 

 

43,780

 

 

13,121

Purchase of treasury shares

 

 

(9,540)

 

 

(6,141)

Net cash used in financing activities

 

 

(646,739)

 

 

(609,214)

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(16,926)

 

 

131,806

Cash and cash equivalents at beginning of year

 

 

409,251

 

 

277,445

Cash and cash equivalents at end of year

 

$

392,325

 

$

409,251

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

4th Quarter

 

1,241

 

13

 

0

 

1,254

 

 

 

 

 

 

 

 

 

 

 

 

 

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

4th Quarter

 

13,061,791

 

131,285

 

0

 

13,193,076

Exhibit 6

 

Sales by category

 

The following table sets forth the approximate percentage of net sales by primary category:

 

 

 

 

 

 

 

13 weeks ended

 

 

February 1,

 

February 2,

 

 

2020

 

2019

Cosmetics

 

48%

 

51%

Skincare, bath, and fragrance

 

25%

 

23%

Haircare products and styling tools

 

18%

 

18%

Services

 

4%

 

4%

Other (nail products, accessories, and other)

 

5%

 

4%

 

 

100%

 

100%

 

 

 

 

 

 

 

52 weeks ended

 

 

February 1,

 

February 2,

 

 

2020

 

2019

Cosmetics

 

50%

 

51%

Skincare, bath, and fragrance

 

22%

 

21%

Haircare products and styling tools

 

19%

 

19%

Services

 

5%

 

5%

Other (nail products, accessories, and other)

 

4%

 

4%

 

 

100%

 

100%

 

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.