Ulta Beauty Announces Fourth Quarter 2015 Results

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Total Sales Increased 21.1%

Comparable Sales Increased 12.5%

Diluted EPS Increased 25.2% to $1.69

Announces $200 Million Accelerated Share Repurchase Plan

Provides FY2016 Outlook for 18% to 20% Earnings Per Share Growth

BOLINGBROOK, Ill.–(BUSINESS WIRE)–Ulta Beauty (NASDAQ:ULTA) today announced financial results for the
thirteen week period (“Fourth Quarter”) and fifty-two week period
(“Fiscal Year”) ended January 30, 2016, which compares to the same
periods ended January 31, 2015.

“Our fourth quarter results capped an exceptional year during which we
made significant progress against our strategic imperatives, while
achieving outstanding sales and earnings growth. We continue to benefit
from the powerful combination of strong demand in the beauty category
and Ulta Beauty’s highly differentiated offering that propels our
business to transcend prevailing trends across the retail landscape,”
said Mary Dillon, Chief Executive Officer. “Today we are pleased to
announce an accelerated share repurchase plan that demonstrates our
commitment to creating and returning value to shareholders.”

For the Fourth Quarter

  • Net sales increased 21.1% to $1,268.3 million from $1,047.6 million in
    the fourth quarter of fiscal 2014;
  • Comparable sales (sales for stores open at least 14 months and
    e-commerce sales) increased 12.5% compared to an increase of 11.1% in
    the fourth quarter of fiscal 2014. The 12.5% same store sales increase
    was driven by 8.6% growth in transactions and 3.9% growth in average
    ticket;
  • Retail comparable sales increased 10.4%, including salon comparable
    sales growth of 9.2%;
  • Salon sales increased 16.7% to $54.6 million from $46.8 million in the
    fourth quarter of fiscal 2014;
  • E-commerce sales grew 44.2% to $94.8 million from $65.7 million in the
    fourth quarter of fiscal 2014, representing 210 basis points of the
    total company comparable sales increase of 12.5%;
  • Gross profit increased 120 basis points to 34.6% from 33.4% in the
    fourth quarter of fiscal 2014, due to increased merchandise margins,
    an improvement in e-commerce profit contribution, and leverage in
    fixed store costs, offset by supply chain investments including the
    Greenwood, Indiana distribution center;
  • Selling, general and administrative (SG&A) expense as a percentage of
    net sales increased 100 basis points to 21.1% compared to 20.1% in the
    fourth quarter of 2014, due to planned investments in marketing to
    enhance brand awareness and in store payroll hours to improve the
    guest experience, and higher incentive compensation compared to the
    prior year;
  • Pre-opening expenses were $1.4 million, compared to $1.6 million in
    the fourth quarter of fiscal 2014. Real estate activity in the fourth
    quarter of fiscal 2015 included 14 new stores and one relocation
    compared to 10 new stores in the fourth quarter of fiscal 2014;
  • Operating income increased 23.3% to $169.5 million, or 13.4% of net
    sales, compared to $137.5 million, or 13.1% of net sales, in the
    fourth quarter of fiscal 2014;
  • Tax rate decreased to 36.5% compared to 36.6% in the fourth quarter of
    fiscal 2014;
  • Net income increased 23.6% to $107.8 million compared to $87.3 million
    in the fourth quarter of fiscal 2014; and
  • Income per diluted share increased 25.2% to $1.69 compared to $1.35 in
    the fourth quarter of fiscal 2014.

For the Fiscal Year 2015

  • Net sales increased 21.1% to $3,924.1 million from $3,241.4 million in
    fiscal 2014;
  • Comparable sales (sales for stores open at least 14 months and
    e-commerce sales) increased 11.8% compared to an increase of 9.9% in
    fiscal 2014. The 11.8% same store sales increase was driven by 8.4%
    growth in transactions and 3.4% growth in average ticket;
  • Retail comparable sales increased 10.0%, including salon comparable
    sales growth of 10.1%;
  • Salon sales increased 19.2% to $209.2 million from $175.5 million in
    fiscal 2014;
  • E-commerce sales grew 47.5% to $221.1 million from $149.9 million in
    fiscal 2014, representing 180 basis points of the total company same
    store sales increase of 11.8%;
  • Gross profit increased 20 basis points to 35.3% compared to 35.1% in
    fiscal 2014;
  • SG&A expense as a percentage of net sales was flat compared to fiscal
    2014 at 22.0%;
  • Pre-opening expense increased to $14.7 million compared to $14.4
    million in fiscal 2014; Real estate activity for fiscal 2015 included
    103 new stores, five relocations and four remodels compared to 100 new
    stores, two relocations and nine remodels in fiscal 2014;
  • Operating income increased 23.4% to $506.3 million, or 12.9% of net
    sales, compared to $410.4 million, or 12.7% of net sales, in fiscal
    2014;
  • Tax rate decreased to 36.9% compared to 37.5% in fiscal 2014;
  • Net income increased 24.5% to $320.0 million compared to $257.1
    million in fiscal 2014; and
  • Income per diluted share increased 25.1% to $4.98 compared to $3.98 in
    fiscal 2014.

Balance Sheet

Merchandise inventories at the end of the fourth quarter of fiscal 2015
totaled $761.8 million, compared to $581.2 million at the end of the
fourth quarter of fiscal 2014, representing an increase of $180.6
million. This increase was driven by 100 net new stores, the opening of
the Company’s fourth distribution center in Greenwood, Indiana, as well
as new brand additions. Average inventory per store increased 16.1%,
compared to the fourth quarter of fiscal 2014. This increase was
primarily driven by the new Greenwood, Indiana distribution center,
investments in inventory to ensure high in-stock levels to support sales
growth and incremental inventory for new brands and in-store prestige
brand boutiques.

Share Repurchase Program

During the fourth quarter, the Company repurchased 262,342 shares of its
stock at a cost of approximately $46 million under its 10b5-1 plan. For
fiscal 2015, the Company repurchased 1,034,418 shares of its stock at a
cost of approximately $167 million. As of January 30, 2016, $192.7
million remained available under the $400 million share repurchase
program.

The Company’s board of directors approved a new share repurchase
authorization of $425 million, effective March 15, 2016, which replaces
the prior authorization implemented in September 2014. The Company today
announced that it plans to enter into an accelerated share repurchase
agreement with Goldman, Sachs & Co. to repurchase $200 million of its
common stock. In addition, the Company plans to continue its open market
share repurchases consistent with its repurchase activities during
fiscal 2015.

Store Expansion

During the fourth quarter, the Company opened 14 stores located in
Ardmore, OK; Cullman, AL; Edinburg, TX; Franklin, TN; Gulfport, MS; Lady
Lake, FL; Lake Worth, TX; Manteca, CA; Orange City, FL; Renton, WA;
Riverside, CA; Rolling Hills Estates, CA; Staten Island, NY and West
Long Branch, NJ. The Company ended the fourth quarter with 874 stores
and square footage of 9,225,957 which represents a 13% increase in
square footage compared to the fourth quarter of fiscal 2014.

Outlook

For fiscal 2016, the Company plans to:

  • achieve comparable sales growth of approximately 8% to 10%, including
    the impact of the e-commerce business;
  • increase total sales in the mid to high teens percentage range;
  • grow e-commerce sales in the 40% range;
  • expand square footage by approximately 11% with the opening of 100 net
    new stores;
  • remodel 12 locations;
  • deliver earnings per share growth in the range of 18% to 20%,
    including the impact of the new Dallas distribution center, the
    accelerated rollout of prestige brand boutiques, the accelerated share
    repurchase program, and continued open market share repurchases; and
  • incur capital expenditures in the $390 million range in fiscal 2016,
    compared to $299 million in fiscal 2015. The planned increase in
    capital expenditures includes approximately $80 million to fund an
    accelerated rollout of prestige brand boutiques and enhancements to
    the Ulta Beauty Collection and fragrance fixtures in hundreds of
    stores.

For the first quarter of fiscal 2016, the Company currently expects net
sales in the range of $1.016 billion to $1.033 billion, compared to
actual net sales of $868.1 million in the first quarter of fiscal 2015.
Comparable sales for the first quarter of 2016, including e-commerce
sales, are expected to increase 9% to 11%. The Company reported a
comparable sales increase of 11.4% in the first quarter of 2015.

Income per diluted share for the first quarter of fiscal 2016 is
estimated to be in the range of $1.25 to $1.30. This compares to income
per diluted share for the first quarter of fiscal 2015 of $1.04.

Conference Call Information

A conference call to discuss fourth quarter results is scheduled for
today, March 10, 2016, 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 March 24, 2016 and can be accessed by
dialing (877) 870-5176 and entering conference ID number 13631319.

About Ulta Beauty

Ulta Beauty (NASDAQ: ULTA) is the largest beauty retailer in the United
States and the premier beauty destination for cosmetics, fragrance,
skin, hair care products and salon services. Since opening its first
store 25 years ago, Ulta Beauty has grown to become the top national
retailer providing All Things Beauty, All in One Place™. The Company
offers more than 20,000 products from over 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 and brow services. Ulta Beauty
is recognized for its commitment to personalized service, fun and
inviting stores and its industry-leading ULTAmate Rewards loyalty
program. As of January 30, 2016, Ulta Beauty operates 874 retail stores
across 48 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: the impact of weakness in the economy; changes in the
overall level of consumer spending; customer acceptance of our rewards
program and technological and marketing initiatives; 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 and the performance of our newly opened distribution
center 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 our common stock repurchase program or
implement future common stock repurchase programs; our ability to
sustain our growth plans and successfully implement our long-range
strategic and financial plan; 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 January 31, 2015. 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
January 30, January 31,
2016 2015
(Unaudited) (Unaudited)
Net sales $ 1,268,295     100.0 % $ 1,047,641     100.0 %
Cost of sales   829,259       65.4 %   697,904       66.6 %
Gross profit 439,036 34.6 % 349,737 33.4 %
 
Selling, general and administrative expenses 268,169 21.1 % 210,702 20.1 %
Pre-opening expenses   1,381       0.1 %   1,568       0.1 %
Operating income 169,486 13.4 % 137,467 13.1 %
Interest income, net   (273 )     0.0 %   (231 )     0.0 %
Income before income taxes 169,759 13.4 % 137,698 13.1 %
Income tax expense   61,936       4.9 %   50,434       4.8 %
Net income $ 107,823       8.5 % $ 87,264       8.3 %
 
Net income per common share:
Basic $ 1.69 $ 1.36
Diluted $ 1.69 $ 1.35
 
Weighted average common shares outstanding:
Basic 63,646 64,300
Diluted 63,967 64,657
 
 

Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

             
52 Weeks Ended 52 Weeks Ended
January 30, January 31,
2016 2015
(Unaudited)    
Net sales $ 3,924,116     100.0 % $ 3,241,369 100.0 %
Cost of sales   2,539,783       64.7 %   2,104,582       64.9 %
Gross profit 1,384,333 35.3 % 1,136,787 35.1 %
 
Selling, general and administrative expenses 863,354 22.0 % 712,006 22.0 %
Pre-opening expenses   14,682       0.4 %   14,366       0.4 %
Operating income 506,297 12.9 % 410,415 12.7 %
Interest income, net   (1,143 )     0.0 %   (894 )     0.0 %
Income before income taxes 507,440 12.9 % 411,309 12.7 %
Income tax expense   187,432       4.8 %   154,174       4.8 %
Net income $ 320,008       8.2 % $ 257,135       7.9 %
 
Net income per common share:
Basic $ 5.00 $ 4.00
Diluted $ 4.98 $ 3.98
 
Weighted average common shares outstanding:
Basic 63,949 64,335
Diluted 64,275 64,651
 
 

Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

           
January 30, January 31,
2016     2015
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 345,840 $ 389,149
Short-term investments 130,000 150,209
Receivables, net 64,992 52,440
Merchandise inventories, net 761,793 581,229
Prepaid expenses and other current assets 72,548 66,548
Deferred income taxes   –       20,780
Total current assets 1,375,173 1,260,355
 
Property and equipment, net 847,600 717,159
Deferred compensation plan assets   8,145       5,656
Total assets $ 2,230,918     $ 1,983,170
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 196,174 $ 190,778
Accrued liabilities 187,351 149,412
Accrued income taxes   12,702       19,404
Total current liabilities 396,227 359,594
 
Deferred rent 321,789 294,127
Deferred income taxes 59,527 74,498
Other long-term liabilities   10,489       7,442
Total liabilities 788,032 735,661
 
Commitments and contingencies
 
Total stockholders’ equity   1,442,886       1,247,509
Total liabilities and stockholders’ equity $ 2,230,918     $ 1,983,170
 
 

Exhibit 4

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Cash Flows

(In thousands)

             
52 Weeks Ended 52 Weeks Ended
January 30, January 31,
2016 2015
(Unaudited)
Operating activities
Net income $ 320,008 $ 257,135
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 165,049 131,764
Deferred income taxes 5,809 9,246
Non-cash stock compensation charges 15,594 14,923
Excess tax benefits from stock-based compensation (9,497 ) (3,229 )
Loss on disposal of property and equipment 3,690 4,468
Change in operating assets and liabilities:
Receivables (12,552 ) (5,391 )
Merchandise inventories (180,564 ) (123,296 )
Prepaid expenses and other current assets (6,000 ) (10,555 )
Income taxes 2,795 7,284
Accounts payable 5,396 42,496
Accrued liabilities 37,926 37,644
Deferred rent 27,662 32,497
Other assets and liabilities   558     1,606  
Net cash provided by operating activities 375,874 396,592
 
Investing activities
Purchases of short-term investments (130,000 ) (200,209 )
Proceeds from short-term investments 150,209 50,000
Purchases of property and equipment   (299,167 )   (249,067 )
Net cash used in investing activities (278,958 ) (399,276 )
 
Financing activities
Repurchase of common shares (167,396 ) (39,923 )
Stock options exercised 19,646 10,639
Excess tax benefits from stock-based compensation 9,497 3,229
Purchase of treasury shares   (1,972 )   (1,588 )
Net cash used in financing activities   (140,225 )   (27,643 )
 
Net decrease in cash and cash equivalents (43,309 ) (30,327 )
Cash and cash equivalents at beginning of period   389,149     419,476  
Cash and cash equivalents at end of period $ 345,840   $ 389,149  
 
 

Exhibit 5

2015 Store Expansion

                       
Total stores open Number of stores Number of stores
at beginning of opened during the closed during the Total stores open at
Fiscal 2015       the quarter       quarter       quarter       end of the quarter
1st Quarter 774 24 1 797
2nd Quarter 797 20 0 817
3rd Quarter 817 45 2 860
4th Quarter 860 14 0 874
 
Gross square feet for
Total gross square stores opened or Gross square feet Total gross square
feet at beginning expanded during the for stores closed feet at end of the
Fiscal 2015       of the quarter       quarter       during the quarter       quarter
1st Quarter 8,182,404 253,429 10,452 8,425,381
2nd Quarter 8,425,381 202,832 0 8,628,213
3rd Quarter 8,628,213 474,278 22,407 9,080,084
4th Quarter 9,080,084 145,873 0 9,225,957

Contacts

Ulta Beauty
Company Contacts:
Scott Settersten
Chief
Financial Officer
(630) 410-4807
or
Laurel Lefebvre
Vice
President, Investor Relations
(630) 410-5230
or
Karen May
Director,
Public Relations
(630) 410-5457

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