Ulta Beauty (NASDAQ:ULTA) today announced financial results for the thirteen week period ended May 3, 2014 (“First Quarter”), which compares to the same period ended May 4, 2013.

“Ulta Beauty delivered strong sales and earnings growth in the first quarter,” said Mary Dillon, Chief Executive Officer. “The team’s accomplishments included improving retail transactions which turned positive, driving continued momentum in our online business, successfully rolling out new brands, completing a smooth conversion of our loyalty program members onto one platform, and managing inventory very well.”

For the First Quarter:

  • Net sales increased 22.5% to $713.8 million from $582.7 million in the first quarter of fiscal 2013;
  • Comparable store sales (sales for stores open at least 14 months and e-commerce sales) increased 8.7%, compared to an increase of 6.7% in the first quarter of fiscal 2013;
  • E-commerce comparable sales grew 72.3%, representing 190 basis points of the total company comparable sales increase of 8.7%;
  • Gross profit decreased 50 basis points to 34.5% from 35.0% in the first quarter of fiscal 2013, primarily driven by product and channel mix shifts, converting the remaining 50% of the loyalty program members to the ULTAmate Rewards program, and deleverage of fixed store costs resulting from a large number of new stores in the portfolio;
  • Selling, general and administrative (SG&A) expense as a percentage of net sales was equal to first quarter of fiscal 2013 at 22.8%;
  • Preopening expenses decreased to $2.6 million, compared to $3.2 million in the first quarter of fiscal 2013. Real estate activity in the first quarter included 21 new stores compared to 28 new stores in the first quarter of fiscal 2013;
  • Operating income increased 19.5% to $80.9 million, or 11.3% of net sales, compared to $67.7 million, or 11.6% of net sales, in the first quarter of fiscal 2013;
  • Net income increased 19.4% to $50.0 million compared to $41.8 million in the first quarter of fiscal 2013; and
  • Income per diluted share increased 18.5% to $0.77 compared to $0.65 in the first quarter of fiscal 2013.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the first quarter totaled $531.4 million, compared to $442.1 million at the end of the first quarter of fiscal 2013, representing an increase of $89.3 million. Average inventory per store declined 50 basis points compared to prior year. The increase in total inventory was primarily due to the 120 net new stores opened since May 4, 2013.

Store Expansion

During the first quarter, the Company opened 21 stores located in Albany, GA; Corvallis, OR; Cranberry Township, PA; Deerfield Beach, FL; Falls Church, VA; Fort Wayne, IN; Fresno, CA; Harrisburg, PA; Holyoke, MA; Los Angeles, CA; Morrisville, NC; North Little Rock, AR; Orem, UT; Overland Park, KS; Pittsfield, MA; Port Richey, FL; Slidell, LA; Southgate, CA; St. Augustine, FL; Vero Beach, FL and Wauwatosa, WI. The Company ended the first quarter with 696 stores and square footage of 7,375,270, which represents a 20% increase in square footage compared to the first quarter of fiscal 2013.

Outlook

For the second quarter of fiscal 2014, the Company currently expects net sales in the range of $706 million to $717 million, compared to actual net sales of $601.0 million in the second quarter of fiscal 2013. Comparable store sales for the second quarter of 2014 are expected to increase 5% to 7%. The Company reported a comparable store sales increase of 8.4% in the second quarter of 2013.

Income per diluted share for the second quarter of fiscal 2014 is estimated to be in the range of $0.78 to $0.83. This compares to income per diluted share for the second quarter of fiscal 2013 of $0.70.

The Company is reiterating its previously announced fiscal 2014 guidance. The Company plans to:

  • achieve comparable store sales growth of approximately 4% to 6%, including the impact of the e-commerce business;
  • expand square footage by 15% with the opening of 100 net new stores;
  • increase total sales in the mid-teens percentage range;
  • remodel 12 locations;
  • deliver earnings per share growth in the mid-teens percentage range;
  • incur capital expenditures of approximately $265 million in fiscal 2014, compared to $226 million in fiscal 2013; and
  • generate free cash flow in excess of $100 million.

Conference Call Information

A conference call to discuss first quarter results is scheduled for today, June 10, 2014, 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 June 25, 2014 and can be accessed by dialing (877) 870-5176 and entering conference ID number 13583358.

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 May 3, 2014, Ulta operates 696 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; our ability to sustain our growth plans and successfully develop and implement our long-range financial and strategic plan; 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 1, 2014. 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
May 3, May 4,
2014 2013
(Unaudited) (Unaudited)
Net sales $ 713,770   100.0% $ 582,712   100.0%
Cost of sales   467,817   65.5%   378,763   65.0%
Gross profit 245,953 34.5% 203,949 35.0%
 
Selling, general and administrative expense 162,443 22.8% 133,048 22.8%
Pre-opening expenses   2,629   0.4%   3,206   0.6%
Operating income 80,881 11.3% 67,695 11.6%
Interest income   (200)   0.0%   (24)   0.0%
Income before income taxes 81,081 11.4% 67,719 11.6%
Income tax expense   31,128   4.4%   25,893   4.4%
Net income $ 49,953   7.0% $ 41,826   7.2%
 
Net income per common share:
Basic $ 0.78 $ 0.66
Diluted $ 0.77 $ 0.65
 
Weighted average common shares outstanding:
Basic 64,273 63,842
Diluted 64,607 64,495
 
 

Exhibit 2

 
Ulta Salon, Cosmetics & Fragrance, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
       
May 3, February 1, May 4,
2014 2014 2013
(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 456,709 $ 419,476 $ 293,214
Receivables, net 26,722 47,049 29,925
Merchandise inventories, net 531,427 457,933 442,085
Prepaid expenses and other current assets 53,391 55,993 48,106
Deferred income taxes   22,241     22,246     15,285
Total current assets 1,090,490 1,002,697 828,615
 
Property and equipment, net 603,933 595,736 499,395
Deferred compensation plan assets   4,802     4,294     3,567
Total assets $ 1,699,225   $ 1,602,727   $ 1,331,577
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 184,148 $ 148,282 $ 148,488
Accrued liabilities 90,343 103,180 78,847
Accrued income taxes   27,928     15,349     20,732
Total current liabilities 302,419 266,811 248,067
 
Deferred rent 264,679 261,630 220,003
Deferred income taxes 67,019 66,718 55,988
Other long-term liabilities   5,352     4,474     3,795
Total liabilities 639,469 599,633 527,853
 
Commitments and contingencies
 
Total stockholders’ equity   1,059,756     1,003,094     803,724
Total liabilities and stockholders’ equity $ 1,699,225   $ 1,602,727   $ 1,331,577
 
 

Exhibit 3

 
Ulta Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Cash Flows
(In thousands)
   
13 Weeks Ended
May 3,     May 4,
2014     2013
(Unaudited)
Operating activities
Net income $ 49,953 $ 41,826
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 30,473 24,779
Deferred income taxes 306 99
Non-cash stock compensation charges 4,063 3,048
Excess tax benefits from stock-based compensation (901) (3,901)
Loss on disposal of property and equipment 874 1,577
Change in operating assets and liabilities:
Receivables 20,327 11,590
Merchandise inventories (73,494) (80,960)
Prepaid expenses and other current assets 2,602 2,346
Income taxes 13,480 14,579
Accounts payable 35,866 29,602

Accrued liabilities

(13,275) (13,968)
Deferred rent 3,049 12,000

Other assets and liabilities

  370       218
Net cash provided by operating activities 73,693 42,835
 
Investing activities
Purchases of property and equipment   (39,106)       (42,004)
Net cash used in investing activities (39,106) (42,004)
 
Financing activities
Repurchase of common shares – (37,337)
Excess tax benefits from stock-based compensation 901 3,901
Stock options exercised 2,998 5,416

Purchase of treasury shares

  (1,253)       (72)
Net cash provided by (used in) financing activities   2,646       (28,092)
 
Net increase (decrease) in cash and cash equivalents 37,233 (27,261)
Cash and cash equivalents at beginning of period   419,476       320,475
Cash and cash equivalents at end of period $ 456,709     $ 293,214
             
 

Exhibit 4

 

2014 Store Expansion

 
Total stores open at Number of stores Number of stores
beginning of the opened during the closed during the Total stores open at
Fiscal 2014         quarter   quarter   quarter   end of the quarter
1st Quarter 675 21 0 696
 
Gross square feet
Total gross square for stores opened Gross square feet Total gross square
feet at beginning or expanded during for stores closed feet at end of the
Fiscal 2014         of the quarter   the quarter   during the quarter   quarter
1st Quarter 7,158,286 216,984 0 7,375,270