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Ulta Beauty Announces First Quarter 2013 Results



  Ulta Beauty Announces First Quarter 2013 Results

                         Total Sales Increased 22.9%

                    Comparable Store Sales Increased 6.7%

                         EPS Increased 20.4% to $0.65

Business Wire

BOLINGBROOK, Ill. -- June 11, 2013

Ulta Beauty (NASDAQ:ULTA) today announced financial results for the thirteen
week period ended May 4, 2013 (“First Quarter”), which compares to the same
period ended April 28, 2012.

For the First Quarter:

  * Net sales increased 22.9% to $582.7 million from $474.1 million in the
    first quarter of fiscal 2012;
  * Comparable store sales (sales for stores open at least 14 months)
    increased 6.7% including the impact of e-commerce sales, compared to an
    increase of 10.1% in the first quarter of fiscal 2012;
  * Gross profit decreased 100 basis points to 35.0% from 36.0% in the first
    quarter of fiscal 2012;
  * Selling, general and administrative (SG&A) expense as a percentage of net
    sales decreased 60 basis points to 22.8% compared to 23.4% in the first
    quarter of fiscal 2012;
  * Preopening expenses increased to $3.2 million, compared to $2.5 million in
    the first quarter of fiscal 2012. Real estate activity in the first
    quarter included 28 new stores compared to 18 new stores and one
    relocation in the first quarter of fiscal 2012;
  * Operating income increased 17.8% to $67.7 million, or 11.6% of net sales,
    compared to $57.4 million, or 12.1% of net sales, in the first quarter of
    fiscal 2012;
  * The tax rate was 38.2% compared to 39.3% in the first quarter of fiscal
    2012;
  * Net income increased 20.0% to $41.8 million compared to $34.9 million in
    the first quarter of fiscal 2012; and
  * Income per diluted share increased 20.4% to $0.65 compared to $0.54 in the
    first quarter of fiscal 2012.

Dennis Eck, Interim Chief Executive Officer, stated, “We are pleased to
announce a strong start to fiscal 2013, with better than expected sales and
margin performance. We are on track to add 125 stores this year, and continue
to drive outstanding new store productivity. We opened Clinique boutiques in
eight more stores, ending the quarter with 51 stores offering Clinique
products, with further expansion planned for the rest of the year. We are
delighted to announce the addition of 25 Lancôme boutiques planned for the
fall of 2013, and expect to end the year with a significant percentage of our
stores featuring one of these iconic brand boutiques. We continue to grow our
loyalty programs and enhance our ability to communicate with our customers
with our CRM platform, and plan to convert all our loyalty program members to
one program, ULTAmate Rewards, in early 2014. Ulta.com delivered 70% sales
growth during the quarter and we are looking forward to launching our
redesigned e-commerce platform this fall. The team is executing our growth
strategies very well, and our outlook for continued market share gains is
excellent.”

Balance Sheet and Cash Flow

Merchandise inventories at the end of the first quarter totaled $442.1
million, compared to $332.1 million at the end of the first quarter of fiscal
2012, representing an increase of $110.0 million. Average inventory per store
increased 7.9% compared to prior year. The increase in total inventory was
primarily due to the 109 net new stores opened since April 28, 2012, and also
includes incremental inventory related to the recently added prestige brand
boutiques.

The Company did not utilize its credit facility during the first quarter ended
May 4, 2013.

Stock repurchase program

On March 18, 2013, the Company announced that the Board of Directors had
authorized a stock repurchase program for an aggregate amount of $150 million.
During the first quarter, the Company purchased 500,500 shares of common stock
for $37.3 million at an average price of $74.58.

Store Expansion

During the first quarter, the Company opened 28 stores located in Ann Arbor,
MI; Branson, MO; Carmel, IN; Carson City, NV; Charlotte, NC; Clifton, NJ;
Clovis, CA; Columbia, SC; Decatur, AL; East Peoria, IL; Eau Claire, WI;
Everett, WA; Gambrills, MD; Hanford, CA; Heath, OH; Holly Springs, NC;
Jacksonville, FL; Madison, WI; Nashua, NH; Richmond, TX; Salisbury, MD; Santa
Fe, NM; Sioux Falls, SD; Southern Pines, NC; Springfield, MO; Tallahassee, FL;
Williamsburg, VA and Woodbridge, VA. In addition, the Company closed two
stores. The Company ended the first quarter with 576 stores and square footage
of 6,121,399, which represents a 24% increase in square footage compared to
the first quarter of fiscal 2012.

Outlook

For the second quarter of fiscal 2013, the Company currently expects net sales
in the range of $579 million to $589 million, compared to actual net sales of
$481.7 million in the second quarter of fiscal 2012. Comparable store sales
for the second quarter of 2013 are expected to increase 4% to 6%. The Company
reported a comparable store sales increase of 9.3% in the second quarter of
2012.

Income per diluted share for the second quarter of fiscal 2013 is estimated to
be in the range of $0.64 to $0.67. This compares to income per diluted share
for the second quarter of fiscal 2012 of $0.54.

The Company is confirming its previously announced fiscal 2013 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 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 first quarter results is scheduled for today,
June 11, 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 June
25, 2013 and can be accessed by dialing (877) 870-5176 and entering conference
ID number 415409.

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 4, 2013, Ulta
operates 576 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; 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 2, 2013. 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 4,                  April 28,
                                   2013                    2012
                                   (Unaudited)             (Unaudited)
Net sales                          $ 582,712     100.0 %   $ 474,098   100.0 %
Cost of sales                        378,763     65.0  %     303,186   64.0  %
Gross profit                         203,949     35.0  %     170,912   36.0  %
                                                                        
Selling, general and                 133,048     22.8  %     110,943   23.4  %
administrative expense
Pre-opening expenses                 3,206       0.6   %     2,523     0.5   %
Operating income                     67,695      11.6  %     57,446    12.1  %
Interest (income) expense            (24     )   0.0   %     21        0.0   %
Income before income taxes           67,719      11.6  %     57,425    12.1  %
Income tax expense                   25,893      4.4   %     22,557    4.8   %
Net income                         $ 41,826      7.2   %   $ 34,868    7.4   %
                                                                        
Net income per common share:
Basic                              $ 0.66                  $ 0.56
Diluted                            $ 0.65                  $ 0.54
                                                                        
Weighted average common shares
outstanding:
Basic                                63,842                  62,496
Diluted                              64,495                  64,072
                                                                        
Dividends declared per common      $ –                     $ 1.00
share

 
Exhibit 2
 
Ulta Salon, Cosmetics & Fragrance, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
                                                                  
                                       May 4,        February 2,   April 28,
                                       2013          2013          2012
                                       (Unaudited)                 (Unaudited)
Assets
Current assets:
Cash and cash equivalents              $ 293,214     $ 320,475     $ 266,345
Receivables, net                         29,925        41,515        22,328
Merchandise inventories, net             442,085       361,125       332,065
Prepaid expenses and other current       48,106        50,452        40,102
assets
Deferred income taxes                    15,285        15,757        12,257
Total current assets                     828,615       789,324       673,097
                                                                      
Property and equipment, net              499,395       483,059       384,904
Deferred compensation plan assets        3,567         2,866         –
Total assets                           $ 1,331,577   $ 1,275,249   $ 1,058,001
                                                                      
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable                       $ 148,488     $ 118,886     $ 111,889
Accrued liabilities                      78,847        92,127        77,375
Dividends payable                        –             –             62,420
Accrued income taxes                     20,732        10,054        5,764
Total current liabilities                248,067       221,067       257,448
                                                                      
Deferred rent                            220,003       208,003       171,973
Deferred income taxes                    55,988        56,361        43,675
Other long-term liabilities              3,795         2,876         –
Total liabilities                        527,853       488,307       473,096
                                                                      
Commitments and contingencies
                                                                      
Total stockholders’ equity               803,724       786,942       584,905
Total liabilities and stockholders’    $ 1,331,577   $ 1,275,249   $ 1,058,001
equity

 
Exhibit 3
 
Ulta Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Cash Flows
(In thousands)
                                                    
                                                     13 Weeks Ended
                                                     May 4,        April 28,
                                                     2013          2012
                                                     (Unaudited)
Operating activities
Net income                                           $ 41,826      $ 34,868
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                          24,779        20,985
Deferred income taxes                                  99            (513    )
Non-cash stock compensation charges                    3,048         2,893
Excess tax benefits from stock-based compensation      (3,901  )     (16,550 )
Loss on disposal of property and equipment             1,577         255
Change in operating assets and liabilities:
Receivables                                            11,590        3,825
Merchandise inventories                                (80,960 )     (87,418 )
Prepaid expenses and other current assets              2,346         3,328
Income taxes                                           14,579        18,312
Accounts payable                                       29,602        25,447
Accrued liabilities                                    (13,968 )     (1,396  )
Deferred rent                                          12,000        8,510
Other assets and liabilities                           218           –        
Net cash provided by operating activities              42,835        12,546
                                                                      
Investing activities
Purchases of property and equipment                    (42,004 )     (24,799 )
Net cash used in investing activities                  (42,004 )     (24,799 )
                                                                      
Financing activities
Repurchase of common shares                            (37,332 )     –
Excess tax benefits from stock-based compensation      3,901         16,550
Stock options exercised                                5,411         8,310
Purchase of treasury shares                            (72     )     –        
Net cash (used in) provided by financing               (28,092 )     24,860   
activities
                                                                      
Net (decrease) increase in cash and cash               (27,261 )     12,607
equivalents
Cash and cash equivalents at beginning of period       320,475       253,738  
Cash and cash equivalents at end of period           $ 293,214     $ 266,345  

 
Exhibit 4
 
2013 Store Expansion
                                                               
               Total stores      Number of       Number of
               open              stores          stores
               at beginning of   opened during   closed         Total stores
                                 the             during the     open at
Fiscal 2013    the quarter       quarter         quarter        end of the
                                                                quarter
1^st Quarter   550               28              2              576
                                                                 
                                 Gross square
                                 feet
               Total gross       for stores      Gross square   Total gross
               square            opened          feet           square
               feet at           or expanded     for stores     feet at end of
               beginning         during          closed         the
Fiscal 2013    of the quarter    the quarter     during the     quarter
                                                 quarter
1^st Quarter   5,847,393         298,083         24,077         6,121,399
 

Contact:

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