Net Sales of $2.5 Billion Compared to $2.3
Billion in the Year-Ago Quarter
Comparable Sales Increased 8.0%
Net Income of $300.1 Million or $6.02 Per
Diluted Share
Company Raises Outlook for Fiscal Year
2023
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 July 29, 2023
compared to the same periods ended July 30, 2022.
13 Weeks Ended
26 Weeks Ended
July 29,
July 30,
July 29,
July 30,
(Dollars in
millions, except per share data)
2023
2022
2023
2022
Net sales
$
2,529.8
$
2,297.1
$
5,164.1
$
4,643.0
Comparable sales
8.0%
14.4%
8.7%
16.2%
Gross profit (as a percentage of net
sales)
39.3%
40.4%
39.7%
40.3%
Selling, general and administrative
expenses
$
600.7
$
534.5
$
1,212.8
$
1,035.4
Operating income (as a percentage of net
sales)
15.5%
17.0%
16.1%
17.9%
Diluted earnings per share
$
6.02
$
5.70
$
12.90
$
12.00
New store openings, net
3
7
7
17
“The Ulta Beauty team delivered another quarter of strong
performance, with sales, gross profit, and SG&A expenses all
better than our internal expectations. During the quarter, we drove
growth across all major categories, increased the number of loyalty
members, and strengthened engagement with the Ulta Beauty brand. In
addition, our teams achieved important milestones for our
multi-year, transformational investment agenda designed to drive
efficiencies and support our future growth,” said Dave Kimbell,
chief executive officer. “The beauty category has continued to
deliver healthy growth, as consumers maintain their post-pandemic
routines and expand their definition of beauty. Our proven business
model, diverse assortment, best-in-class loyalty program, and
outstanding teams have enabled us to deliver stronger-than expected
results for the first half of fiscal 2023, and I remain confident
we can deliver against our updated expectations for the rest of the
year.”
For the Second Quarter of Fiscal 2023
- Net sales increased 10.1% to $2.5 billion compared to $2.3
billion in the second quarter of fiscal 2022 primarily due to
increased comparable sales, strong new store performance, and
growth in other revenue.
- Comparable sales (sales for stores open at least 14 months and
e-commerce sales) increased 8.0% compared to an increase of 14.4%
in the second quarter of fiscal 2022, driven by a 9.0% increase in
transactions and a 1.0% decrease in average ticket.
- Gross profit increased 7.1% to $993.6 million compared to
$928.2 million in the second quarter of fiscal 2022. As a
percentage of net sales, gross profit decreased to 39.3% compared
to 40.4% in the second quarter of fiscal 2022, primarily due to
lower merchandise margin, higher inventory shrink, and higher
supply chain costs, partially offset by strong growth in other
revenue and leverage of store fixed costs.
- Selling, general and administrative (SG&A) expenses
increased 12.4% to $600.7 million compared to $534.5 million in the
second quarter of fiscal 2022. As a percentage of net sales,
SG&A expenses increased to 23.7% compared to 23.3% in the
second quarter of fiscal 2022, primarily due to higher corporate
overhead due to strategic investments, higher store payroll and
benefits, and higher store expenses, partially offset by leverage
of incentive compensation.
- Operating income increased to $391.6 million, or 15.5% of net
sales, compared to $391.4 million, or 17.0% of net sales.
- Net interest income increased to $4.4 million compared to $0.1
million in the second quarter of fiscal 2022, due to higher average
interest rates on cash balances.
- The tax rate decreased to 24.2% compared to 24.5% in the second
quarter of fiscal 2022.
- Net income increased to $300.1 million compared to $295.7
million.
- Diluted earnings per share increased 5.6% to $6.02 compared to
$5.70, including a $0.01 benefit due to income tax accounting for
stock-based compensation.
For the First Six Months of Fiscal 2023
- Net sales increased 11.2% to $5.2 billion compared to $4.6
billion in the first six months of fiscal 2022, primarily due to
increased comparable sales, strong new store performance, and
growth in other revenue.
- Comparable sales increased 8.7% compared to an increase of
16.2% in the first six months of fiscal 2022, driven by a 10.1%
increase in transactions and a 1.4% decrease in average
ticket.
- Gross profit increased 9.6% to $2.0 billion compared to $1.9
billion in the first six months of fiscal 2022. As a percentage of
net sales, gross profit decreased to 39.7% compared to 40.3% in the
first six months of fiscal 2022, primarily due to higher inventory
shrink, lower merchandise margin, and higher supply chain costs,
partially offset by strong growth in other revenue and leverage of
store fixed costs.
- SG&A expenses increased 17.1% to $1.2 billion compared to
$1.0 billion in the first six months of fiscal 2022. As a
percentage of net sales, SG&A expenses increased to 23.5%
compared to 22.3% in the first six months of fiscal 2022, primarily
due to higher corporate overhead due to strategic investments,
higher store payroll and benefits, and higher marketing expenses,
partially offset by leverage of incentive compensation.
- Net interest income increased to $11.8 million compared to net
interest expense of $0.3 million in the first six months of fiscal
2022, due to higher average interest rates on cash balances.
- Operating income increased to $833.7 million, or 16.1% of net
sales, compared to $829.1 million, or 17.9% of net sales.
- The tax rate decreased to 23.5% compared to 24.3%.
- Net income increased to $647.2 million compared to $627.1
million.
- Diluted earnings per share increased 7.5% to $12.90, including
a $0.14 benefit due to income tax accounting for stock-based
compensation, compared to $12.00, including a $0.03 benefit due to
income tax accounting for stock-based compensation.
Balance Sheet
Cash and cash equivalents at the end of the second quarter of
fiscal 2023 totaled $388.6 million.
Merchandise inventories, net at the end of the second quarter of
fiscal 2023 increased 9.0% to $1.82 billion compared to $1.67
billion at the end of the second quarter of fiscal 2022. The
increase was primarily due to inventory to support higher sales
demand, 37 net new stores, product cost increases, and new brand
launches.
Share Repurchase Program
During the second quarter of fiscal 2023, the Company
repurchased 593,629 shares of its common stock at a cost of $275.5
million. During the first six months of fiscal 2023, the Company
repurchased 1.1 million shares of its common stock at a cost of
$559.0 million. As of July 29, 2023, $541.0 million remained
available under the $2.0 billion share repurchase program announced
in March 2022.
Store Update
Real estate activity in the second quarter of fiscal 2023
included three new stores located in Crestview, FL; Lebanon, TN;
and Lynchburg, VA. In addition, the Company relocated two stores
and remodeled three stores. During the first six months of fiscal
2023, the Company opened eight new stores, relocated three stores,
remodeled five stores, and closed one store.
At the end of the second quarter of fiscal 2023, the Company
operated 1,362 stores totaling 14.3 million square feet.
Fiscal 2023 Outlook
The Company has updated its outlook for fiscal 2023.
Prior FY23 Outlook
Updated FY23 Outlook
Net sales
$11.0 billion to $11.1
billion
$11.05 billion to $11.15
billion
Comparable sales
4% to 5%
4.5% to 5.5%
New stores, net
25-30
no change
Remodel and relocation projects
20-30
no change
Operating margin
14.5% to 14.8%
14.6% to 14.8%
Diluted earnings per share
$24.70 to $25.40
$25.10 to $25.60
Share repurchases
approximately $900 million
no change
Interest income
approximately $17 million
no change
Effective tax rate
approximately 23.9%
no change
Capital expenditures
$400 million to $475 million
no change
Depreciation and amortization expense
$245 million to $250 million
no change
Conference Call Information
A conference call to discuss second quarter of fiscal 2023
results is scheduled for today, August 24, 2023, at 4:30 p.m. ET /
3:30 p.m. CT. Investors and analysts interested in participating in
the call are invited to dial (877) 704-4453. The conference call
will also be webcast live at https://ulta.com/investor. 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
7, 2023 and can be accessed by dialing (844) 512‑2921 and entering
conference ID number 13739561.
About Ulta Beauty
At Ulta Beauty (NASDAQ: ULTA), the possibilities are beautiful.
Ulta Beauty is the largest specialty 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 operates 1,362 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 the
Company’s current views with respect to, among other things, future
events and financial performance. These statements can be
identified 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 the
Company’s historical performance and on current plans, estimates
and expectations. The inclusion of this forward-looking information
should not be regarded as a representation by the Company or any
other person that the future plans, estimates, targets, strategies
or expectations contemplated by the Company will be achieved. Such
forward-looking statements are subject to various risks and
uncertainties, which include, without limitation:
- macroeconomic conditions, including inflation, rising interest
rates and recessionary concerns, as well as ongoing labor
pressures, transportation and shipping cost pressures, and the
COVID-19 pandemic, have had, and may continue to have, a negative
impact on our business, financial condition, profitability, and
cash flows (including future uncertain impacts);
- changes in the overall level of consumer spending and
volatility in the economy, including as a result of the
macroeconomic conditions and geopolitical events;
- our ability to sustain our growth plans and successfully
implement our long-range strategic and financial plan;
- the ability to execute our operational excellence priorities,
including continuous improvement, Project SOAR (our replacement
enterprise resource planning platform), and supply chain
optimization;
- our ability to gauge beauty trends and react to changing
consumer preferences in a timely manner;
- the possibility that we may be unable to compete effectively in
our highly competitive markets;
- the possibility of significant interruptions in the operations
of our distribution centers, fast fulfillment centers, and market
fulfillment centers;
- the possibility that cybersecurity or information security
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, including our Ulta.com website and mobile
applications;
- the failure to maintain satisfactory compliance with applicable
privacy and data protection laws and regulations;
- changes in the good relationships we have with our brand
partners and/or our ability to continue to offer permanent or
temporary exclusive products of our brand partners;
- changes in the wholesale cost of our products and/or
interruptions at our brand partners’ or third-party vendors’
operations;
- future epidemics, pandemics or natural disasters could
negatively impact sales;
- 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;
- the impact of climate change on our business operations and/or
supply chain;
- our ability to successfully execute our common stock repurchase
program or implement future common stock repurchase programs;
- a decline in operating results may lead to asset impairment and
store closure charges; and
- other risk factors detailed in the Company’s public filings
with the Securities and Exchange Commission (the SEC), including
risk factors contained in its Annual Report on Form 10‑K for the
fiscal year ended January 28, 2023, as such may be amended or
supplemented in its subsequently filed Quarterly Reports on Form
10-Q.
The Company’s 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
July 29,
July 30,
2023
2022
(Unaudited)
(Unaudited)
Net sales
$
2,529,809
100.0
%
$
2,297,113
100.0
%
Cost of sales
1,536,197
60.7
%
1,368,949
59.6
%
Gross profit
993,612
39.3
%
928,164
40.4
%
Selling, general and administrative
expenses
600,692
23.7
%
534,459
23.3
%
Pre-opening expenses
1,278
0.1
%
2,277
0.1
%
Operating income
391,642
15.5
%
391,428
17.0
%
Interest income, net
(4,449
)
(0.2
%)
(108
)
(0.0
%)
Income before income taxes
396,091
15.7
%
391,536
17.0
%
Income tax expense
95,989
3.8
%
95,859
4.2
%
Net income
$
300,102
11.9
%
$
295,677
12.9
%
Net income per common share:
Basic
$
6.05
$
5.73
Diluted
$
6.02
$
5.70
Weighted average common shares
outstanding:
Basic
49,617
51,607
Diluted
49,849
51,900
Exhibit 2
Ulta Beauty, Inc.
Consolidated Statements of
Income
(In thousands, except per
share data)
26 Weeks Ended
July 29,
July 30,
2023
2022
(Unaudited)
(Unaudited)
Net sales
$
5,164,072
100.0
%
$
4,643,014
100.0
%
Cost of sales
3,115,603
60.3
%
2,773,824
59.7
%
Gross profit
2,048,469
39.7
%
1,869,190
40.3
%
Selling, general and administrative
expenses
1,212,821
23.5
%
1,035,429
22.3
%
Pre-opening expenses
1,936
0.0
%
4,625
0.1
%
Operating income
833,712
16.1
%
829,136
17.9
%
Interest (income) expense, net
(11,797
)
(0.2
%)
293
0.0
%
Income before income taxes
845,509
16.4
%
828,843
17.9
%
Income tax expense
198,356
3.8
%
201,771
4.3
%
Net income
$
647,153
12.5
%
$
627,072
13.5
%
Net income per common share:
Basic
$
12.97
$
12.08
Diluted
$
12.90
$
12.00
Weighted average common shares
outstanding:
Basic
49,885
51,928
Diluted
50,157
52,237
Exhibit 3
Ulta Beauty, Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
July 29,
January 28,
July 30,
2023
2023
2022
(Unaudited)
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
388,627
$
737,877
$
434,226
Receivables, net
174,444
199,422
180,514
Merchandise inventories, net
1,815,539
1,603,451
1,666,130
Prepaid expenses and other current
assets
110,524
130,246
123,014
Prepaid income taxes
30,114
38,308
39,029
Total current assets
2,519,248
2,709,304
2,442,913
Property and equipment, net
1,073,144
1,009,273
912,017
Operating lease assets
1,549,146
1,561,263
1,509,246
Goodwill
10,870
10,870
10,870
Other intangible assets, net
718
1,312
1,075
Deferred compensation plan assets
40,087
35,382
33,393
Other long-term assets
55,547
43,007
36,480
Total assets
$
5,248,760
$
5,370,411
$
4,945,994
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
521,315
$
559,527
$
586,851
Accrued liabilities
328,247
444,278
323,939
Deferred revenue
354,253
394,677
316,571
Current operating lease liabilities
287,359
283,293
274,693
Total current liabilities
1,491,174
1,681,775
1,502,054
Non-current operating lease
liabilities
1,593,040
1,619,883
1,582,003
Deferred income taxes
56,012
55,346
40,029
Other long-term liabilities
56,657
53,596
52,840
Total liabilities
3,196,883
3,410,600
3,176,926
Commitments and contingencies
Total stockholders’ equity
2,051,877
1,959,811
1,769,068
Total liabilities and stockholders’
equity
$
5,248,760
$
5,370,411
$
4,945,994
Exhibit 4
Ulta Beauty, Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
26 Weeks Ended
July 29,
July 30,
2023
2022
(Unaudited)
(Unaudited)
Operating activities
Net income
$
647,153
$
627,072
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
119,862
123,721
Non-cash lease expense
152,867
146,251
Deferred income taxes
666
336
Stock-based compensation expense
21,539
22,875
Loss on disposal of property and
equipment
3,878
2,277
Change in operating assets and
liabilities:
Receivables
24,978
53,168
Merchandise inventories
(212,088
)
(166,912
)
Prepaid expenses and other current
assets
19,722
(12,200
)
Income taxes
8,194
(45,906
)
Accounts payable
(38,752
)
40,051
Accrued liabilities
(102,763
)
(49,364
)
Deferred revenue
(40,424
)
(37,008
)
Operating lease liabilities
(163,527
)
(163,302
)
Other assets and liabilities
(12,497
)
(392
)
Net cash provided by operating
activities
428,808
540,667
Investing activities
Capital expenditures
(204,748
)
(120,500
)
Other investments
(1,687
)
(1,249
)
Net cash used in investing activities
(206,435
)
(121,749
)
Financing activities
Repurchase of common shares
(559,011
)
(434,448
)
Stock options exercised
9,147
24,521
Purchase of treasury shares
(21,759
)
(6,325
)
Net cash used in financing activities
(571,623
)
(416,252
)
Net (decrease) increase in cash and cash
equivalents
(349,250
)
2,666
Cash and cash equivalents at beginning of
period
737,877
431,560
Cash and cash equivalents at end of
period
$
388,627
$
434,226
Exhibit 5
Ulta Beauty, Inc.
Store Update
Total stores open
Number of stores
Number of stores
Total stores
at beginning of the
opened during the
closed during the
open at
Fiscal 2023
quarter
quarter
quarter
end of the quarter
1st Quarter
1,355
5
1
1,359
2nd Quarter
1,359
3
0
1,362
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 2023
the quarter
quarter
during the quarter
quarter
1st Quarter
14,200,403
54,495
9,984
14,244,914
2nd Quarter
14,244,914
27,530
0
14,272,444
Exhibit 6
Ulta Beauty, Inc.
Sales by Category
The following tables set forth the
approximate percentage of net sales by primary category:
13 Weeks Ended
July 29,
July 30,
2023
2022
Cosmetics
40
%
42
%
Haircare products and styling tools
21
%
22
%
Skincare
20
%
17
%
Fragrance and bath
12
%
12
%
Services
4
%
4
%
Accessories and other
3
%
3
%
100
%
100
%
26 Weeks Ended
July 29,
July 30,
2023
2022
Cosmetics
42
%
43
%
Haircare products and styling tools
19
%
21
%
Skincare
20
%
17
%
Fragrance and bath
12
%
12
%
Services
4
%
4
%
Accessories and other
3
%
3
%
100
%
100
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230824800150/en/
Investor Contacts: Kiley Rawlins, CFA Vice President, Investor
Relations krawlins@ulta.com
Media Contact: Crystal Carroll Director, Public Relations
ccarroll@ulta.com
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