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Ulta Beauty Announces Fourth Quarter 2012 Results

  Ulta Beauty Announces Fourth Quarter 2012 Results

                         Total Sales Increased 30.3%

                    Comparable Store Sales Increased 8.0%

                         EPS Increased 37.0% to $1.00

Business Wire

BOLINGBROOK, Ill. -- March 14, 2013

Ulta Beauty (NASDAQ:ULTA) today announced financial results for the fourteen
week period (“Fourth Quarter”) and fifty-three week period (“Fiscal Year”)
ended February 2, 2013, which compares to the thirteen and fifty-two week
periods ended January 28, 2012.

For the Fourth Quarter:

  *Net sales, including the benefit of the 14th week in the quarter,
    increased 30.3% to $758.8 million from $582.5 million in the fourth
    quarter of fiscal 2011;
  *Comparable store sales (sales for stores open at least 14 months)
    increased 8.0% compared to an increase of 11.5% in the fourth quarter of
    fiscal 2011;
  *Gross profit increased 10 basis points to 34.2% from 34.1% in the fourth
    quarter of fiscal 2011;
  *Selling, general and administrative (SG&A) expense as a percentage of net
    sales decreased 100 basis points to 20.3% compared to 21.3% in the fourth
    quarter of fiscal 2011;
  *Preopening expenses increased to $1.9 million, compared to $1.0 million in
    the fourth quarter of fiscal 2011. Real estate activity in the fourth
    quarter included 13 new stores and 1 remodel compared to 7 new stores in
    the fourth quarter of fiscal 2011;
  *Operating income increased 41.7% to $103.8 million, or 13.7% of net sales,
    compared to $73.2 million, or 12.6% of net sales, in the fourth quarter of
    fiscal 2011;
  *The tax rate was 37.8% compared to 36.7% in the fourth quarter of fiscal
    2011;
  *Net income increased 39.4% to $64.5 million compared to $46.3 million in
    the fourth quarter of fiscal 2011; and
  *Income per diluted share increased 37.0% to $1.00 compared to $0.73 in the
    fourth quarter of fiscal 2011. Excluding the $0.05 earnings per share
    benefit of the 14^th week, income per diluted share increased 30.1%.

Dennis Eck, Interim Chief Executive Officer, stated, “The Ulta team achieved
strong fourth quarter results to complete an exceptional year in 2012.
Excellent execution of our multi-year growth strategy was evident in the
milestones achieved during the year: we increased square footage by 23% with
the addition of 101 net new stores, we greatly enhanced our offering with
newness across the board, we implemented a new Customer Relationship
Management platform, broadened our marketing reach and brand awareness, and
improved our digital capabilities including rapid growth in our e-commerce
business.”

“We believe that Ulta will continue to drive rapid sales and earnings growth,
while continuing to invest inthe infrastructure needed to sustain the growth
of our retail and digital businesses. We are on track to open 125 stores this
year, and continue to see a strong pipeline of new brands, products and
services to enhance our offering. We are excited to announce that we will be
continuing the expansion of Clinique boutiques this year, in addition to the
43 boutiques rolled out at the end of 2012. To provide a solid foundation for
Ulta’s growth in the years ahead, we plan to invest in several areas of the
business. This will include upgrading our warehouse management systems,
preparing for an additional distribution center in 2014, redesigning our
e-commerce site, and building the additional Clinique boutiques as well as
investing in labor to support the growth of our prestige categories. We are
confident that Ulta will continue to gain market share and grow its position
as a beauty and trend authority. We have a strong, tenured team in place to
drive outstanding results in the quarters and years to come.”

For the Fiscal Year 2012:

  *Net sales, including the benefit of the 53rd week, increased 25.0% to
    $2,220.3 million from $1,776.2 million in fiscal 2011;
  *Comparable store sales (sales for stores open at least 14 months)
    increased 8.8% compared to an increase of 10.9% in fiscal 2011;
  *Gross profit increased 60 basis points to 35.3% from 34.7% in fiscal 2011;
  *SG&A expense as a percentage of net sales decreased 110 basis points to
    22.0% compared to 23.1% in fiscal 2011;
  *Pre-opening expense increased to $14.8 million, compared to $10.0 million
    in fiscal 2011. Real estate activity for fiscal 2012 included 102 new
    stores, three relocations and 21 remodels compared to 61 new stores, two
    relocations and 17 remodeled stores in fiscal 2011;
  *Operating income increased 42.7% to $280.0 million, or 12.6% of net sales,
    compared to $196.2 million, or 11.0% of net sales, in fiscal 2011;
  *The tax rate was 38.3% compared to 38.5% for fiscal 2011;
  *Net income increased 43.5% to $172.5 million compared to $120.3 million in
    fiscal 2011; and
  *Income per diluted share increased 41.1% to $2.68 compared to $1.90 in
    fiscal 2011. Excluding the $0.05 earnings per share benefit of the 53^rd
    week, income per diluted share increased 38.4%.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the fourth quarter totaled $361.1
million, compared to $244.6 million at the end of the fourth quarter of fiscal
2011, representing an increase of $116.5 million. Average inventory per store
increased 20.5% compared to prior year. The increase in total inventory was
primarily due to the 101 net new stores opened since January 28, 2012, but
also includes incremental inventory related to the recently added prestige
brand boutiques, as well as the planned fourth quarter strategic inventory
investments in core product categories to ensure strong in-stock levels
throughout the holiday season and into early 2013.

For the fiscal year 2012, the Company generated over $50 million of free cash
flow and paid a $63 million special cash dividend.

The Company did not utilize its credit facility during the fiscal year ended
February 2, 2013.

Store Expansion

During the fourth quarter, the Company opened 13 stores located in Bangor, ME;
Colma, CA; Coral Springs, FL; Fairview, TX; Florissant, MO; Glen Allen, VA;
Harahan, LA; Houston, TX (River Oaks); Lisbon, CT; Newington, NH; Port
Chester, NY; Roanoke, VA and San Ysidro, CA. The Company ended the fourth
quarter with 550 stores and square footage of 5,847,393, which represents a
23% increase in square footage compared to the fourth quarter of fiscal 2011.

Outlook

For the first quarter of fiscal 2013, the Company currently expects net sales
in the range of $568 million to $577 million, compared to actual net sales of
$474.1 million in the first quarter of fiscal 2012. Starting in the first
quarter of 2013, comparable store sales will be reported including the
Company’s e-commerce business. This is expected to have a positive impact of
less than 100 basis points on the reported comparable store sales increase.
Comparable store sales for the first quarter of 2013 are expected to increase
4% to 6%. The Company reported a comparable store sales increase of 10.1% in
the first quarter of 2012.

Income per diluted share for the first quarter of fiscal 2013 is estimated to
be in the range of $0.60 to $0.63. This compares to income per diluted share
for first quarter of fiscal 2012 of $0.54.

For fiscal 2013, 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 22% with the opening of 125 net new stores;
  *remodel 7 locations;
  *deliver earnings per share growth, on a 52 week adjusted basis, at the low
    end of the Company’s long term target of 25% - 30%, including the impact
    of approximately $0.13 of income per diluted share in incremental
    investments associated with the planned new store program, supply chain,
    warehouse systems, and e-commerce site investments, the expansion of
    prestige brand boutiques, and investments in store labor to support rapid
    growth in the prestige cosmetics and skincare categories;
  *incur capital expenditures of approximately $225 million in fiscal 2013,
    compared to $189 million in fiscal 2012; and
  *continue to generate free cash flow.

Conference Call Information

A conference call to discuss fourth quarter results is scheduled for today,
March 14, 2013, 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 21, 2013 and can be accessed by dialing (877) 870-5176 and
entering conference ID number 409937.

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 February 2, 2013, Ulta
operates 550 retail stores across 45 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; 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 January 28, 2012. 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.
Statements of Income
(In thousands, except per share amounts)
                                                         
                                     14 Weeks Ended        13 Weeks Ended
                                     February 2,           January 28,
                                     2013                  2012
                                     (Unaudited)           (Unaudited)
Net sales                            $ 758,835  100.0 %   $ 582,511  100.0 %
Cost of sales                         499,191  65.8  %    384,046  65.9  %
Gross profit                           259,644   34.2  %     198,465   34.1  %
                                                                       
Selling, general and administrative    153,963   20.3  %     124,235   21.3  %
expense
Pre-opening expenses                  1,915    0.3   %    983      0.2   %
Operating income                       103,766   13.7  %     73,247    12.6  %
Interest expense                      21       0.0   %    91       0.0   %
Income before income taxes             103,745   13.7  %     73,156    12.6  %
Income tax expense                    39,213   5.2   %    26,861   4.6   %
Net income                           $ 64,532   8.5   %   $ 46,295   7.9   %
                                                                       
Net income per common share:
Basic                                $ 1.01                $ 0.75
Diluted                              $ 1.00                $ 0.73
                                                                       
Weighted average common shares
outstanding:
Basic                                  63,901                61,905
Diluted                                64,675                63,681
                                                                       

Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Income
(In thousands, except per share amounts)
                                                       
                                 53 Weeks Ended          52 Weeks Ended
                                 February 2,             January 28,
                                 2013                    2012
                                 (Unaudited)                         
Net sales                        $ 2,220,256  100.0 %   $ 1,776,151   100.0 %
Cost of sales                     1,436,582  64.7  %    1,159,311  65.3  %
Gross profit                       783,674     35.3  %     616,840     34.7  %
                                                                       
Selling, general and               488,880     22.0  %     410,658     23.1  %
administrative expense
Pre-opening expenses              14,816     0.7   %    9,987      0.6   %
Operating income                   279,978     12.6  %     196,195     11.0  %
Interest expense                  185        0.0   %    587        0.0   %
Income before income taxes         279,793     12.6  %     195,608     11.0  %
Income tax expense                107,244    4.8   %    75,344     4.2   %
Net income                       $ 172,549    7.8   %   $ 120,264    6.8   %
                                                                       
Net income per common share:
Basic                            $ 2.73                  $ 1.96
Diluted                          $ 2.68                  $ 1.90
                                                                       
Weighted average common shares
outstanding:
Basic                              63,250                  61,259
Diluted                            64,396                  63,334
                                                                       
Dividends declared per common    $ 1.00                  $ –
share
                                                                       

Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.


Condensed Balance Sheets
(In thousands)

                                           February 2,  January 28,
                                           2013         2012
                                           (Unaudited)
Assets
Current assets:
Cash and cash equivalents                  $ 320,475     $  253,738
Receivables, net                             41,515         26,153
Merchandise inventories, net                 361,125        244,647
Prepaid expenses and other current assets    50,452         43,430
Deferred income taxes                       15,757       12,264
Total current assets                         789,324        580,232
                                                            
Property and equipment, net                  483,059        376,985
Deferred compensation plan assets           2,866        –
Total assets                               $ 1,275,249  $  957,217
                                                            
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable                           $ 118,886     $  86,442
Accrued liabilities                          92,127         74,411
Accrued income taxes                        10,054       4,002
Total current liabilities                    221,067        164,855
                                                            
Deferred rent                                208,003        163,463
Deferred income taxes                        56,361         44,195
Other long-term liabilities                 2,876        –
Total liabilities                            488,307        372,513
                                                            
Commitments and contingencies
                                                            
Total stockholders’ equity                  786,942      584,704
Total liabilities and stockholders’ equity $ 1,275,249  $  957,217
                                                            

Exhibit 4

Ulta Salon, Cosmetics & Fragrance, Inc.
Statements of Cash Flows
(In thousands)
                                                              
                                              53 Weeks Ended   52 Weeks Ended
                                               February 2,      January 28,
                                               2013             2012
                                               (Unaudited)
Operating activities
Net income                                     $   172,549      $   120,264
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization                      88,233           75,931
Deferred income taxes                              8,673            10,827
Non-cash stock compensation charges                13,375           11,605
Excess tax benefits from stock-based               (47,345)         (25,899)
compensation
Loss on disposal of property and equipment         1,074            1,324
Change in operating assets and liabilities:
Receivables                                        (15,362)         (3,861)
Merchandise inventories                            (116,478)        (26,131)
Prepaid expenses and other current assets          (9,888)          (10,640)
Income taxes                                       53,397           40,585
Accounts payable                                   32,444           (651)
Accrued liabilities                                13,789           (1,358)
Deferred rent                                     44,540          28,891
Net cash provided by operating activities          239,001          220,887
                                                                    
Investing activities
Purchases of property and equipment               (188,578)       (128,636)
Net cash used in investing activities              (188,578)        (128,636)
                                                                    
Financing activities
Dividend paid                                      (62,482)         –
Excess tax benefits from stock-based               47,345           25,899
compensation
Stock options exercised                            31,530           27,639
Common stock repurchased                          (79)            (3,236)
Net cash provided by financing activities         16,314          50,302
                                                                    
Net increase in cash and cash equivalents          66,737           142,553
Cash and cash equivalents at beginning of         253,738         111,185
period
Cash and cash equivalents at end of period     $   320,475      $   253,738
                                                                    

Exhibit 5

2012 Store Expansion

           Total stores                         Number of      Total stores
Fiscal     open at          Number of stores    stores         open at end
2012      beginning of    opened during the  closed        of the
           the quarter      quarter             during the     quarter
                                                quarter
1^st      449             18                 0             467
Quarter
2^nd       467              22                  0              489
Quarter
3^rd       489              49                  1              537
Quarter
4^th       537              13                  0              550
Quarter
                                                                             
                            Gross square feet   Gross square
           Total gross      for stores opened   feet for       Total gross
Fiscal    square feet at  or expanded        stores        square feet
2012       beginning of     during the          closed         at end of the
           the quarter      quarter             during the     quarter
                                                quarter
1^st       4,747,148        202,706             0              4,949,854
Quarter
2^nd       4,949,854        238,274             0              5,188,128
Quarter
3^rd       5,188,128        525,203             10,134         5,703,197
Quarter
4^th       5,703,197        144,196             0              5,847,393
Quarter
                                                                             

Contact:

Ulta Beauty
Company Contacts:
Scott Settersten
Chief Financial Officer
(630) 410-4807
Laurel Lefebvre
Vice President, Investor Relations
(630) 410-5230
Media Contact:
DKC
Juliet Horn
(212) 981-5221