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Ulta Beauty Announces Second Quarter 2013 Results

  Ulta Beauty Announces Second Quarter 2013 Results

                         Total Sales Increased 24.8%

                    Comparable Store Sales Increased 8.4%

                     Diluted EPS Increased 29.6% to $0.70

Business Wire

BOLINGBROOK, Ill. -- September 12, 2013

Ulta Beauty (NASDAQ:ULTA) today announced financial results for the thirteen
week period (“Second Quarter”) and twenty-six week period (“First Six Months”)
ended August 3, 2013, which compares to the same periods ended July 28, 2012.

“The Ulta Beauty team delivered a very strong quarter while moving our growth
strategy forward,” stated Mary Dillon, Chief Executive Officer. “Ulta Beauty
added several new brands to its stores; we further expandedthe number of
Clinique and Lancôme boutiques; we drove rapid growth in our e-commerce
business; and we achieved record membership in our loyalty program.I am
incredibly excited about the future potential of Ulta Beauty, and I look
forward to working with the team to build on the solid foundation they have
built.”

For the Second Quarter:

  *Net sales increased 24.8% to $601.0 million from $481.7 million in the
    second quarter of fiscal 2012;
  *Comparable store sales (sales for stores open at least 14 months)
    increased 8.4% compared to an increase of 9.7% in the second quarter of
    fiscal 2012, including the impact of e-commerce sales;
  *Gross profit increased 50 basis points to 35.3% from 34.8% in the second
    quarter of fiscal 2012;
  *Selling, general and administrative (SG&A) expense as a percentage of net
    sales increased 40 basis points to 22.4% compared to 22.0% in the second
    quarter of fiscal 2012;
  *Preopening expenses increased to $4.8 million, compared to $4.1 million in
    the second quarter of fiscal 2012. Real estate activity in the second
    quarter of fiscal 2013 included 33 new stores, 1 relocation and 1 remodel
    compared to 22 new stores, 1 relocation and 9 remodels in the second
    quarter of fiscal 2012;
  *Operating income increased 26.8% to $72.9 million, or 12.1% of net sales,
    compared to $57.5 million, or 11.9% of net sales, in the second quarter of
    fiscal 2012;
  *Net income increased 28.3% to $44.9 million compared to $35.0 million in
    the second quarter of fiscal 2012; and
  *Income per diluted share increased 29.6% to $0.70 compared to $0.54 in the
    second quarter of fiscal 2012.
  *The Company added 39 Clinique boutiques to end the second quarter with 90
    stores featuring Clinique, and expects to add 10 more Clinique boutiques
    during fiscal 2013. Five Lancôme boutiques were added, bringing the total
    number of stores offering Lancôme products to 85, with 20 additional
    boutiques underway.
  *The Company continued to add new products and brands, including the recent
    launches of IT Cosmetics, Jane Cosmetics, Mally Girl, and Meaningful
    Beauty.
  *The Company’s loyalty program membership grew to 12 million active
    members, an increase of 19% compared to the second quarter of fiscal 2012.
  *Ulta.com achieved sales growth of 72%, representing 130 basis points of
    the total company same store sales increase of 8.4%.

For the First Six Months:

  *Net sales increased 23.8% to $1,183.7 million from $955.8 million in the
    first six months of fiscal 2012;
  *Comparable store sales (sales for stores open at least 14 months)
    increased 7.6% compared to an increase of 10.1% in the first six months of
    fiscal 2012, including the impact of e-commerce sales;
  *Gross profit decreased 30 basis points to 35.1% from 35.4% in the first
    six months fiscal 2012;
  *SG&A expense as a percentage of net sales decreased 10 basis points to
    22.6% compared to 22.7% in the first six months in fiscal 2012;
  *Pre-opening expense increased to $8.0 million compared to $6.6 million in
    the second quarter of fiscal 2012. Real estate activity in the first six
    months of 2013 included 61 new stores, 1 relocation and 1 remodel compared
    to 40 new stores, 2 relocations and 9 remodels in the first six months
    fiscal 2012;
  *Operating income increased 22.3% to $140.6 million, or 11.9% of net sales,
    compared to $114.9 million, or 12.0% of net sales, in the first six months
    of fiscal 2012;
  *Net income increased 24.1% to $86.7 million compared to $69.9 million in
    the first six months of fiscal 2012; and
  *Income per diluted share increased 23.9% to $1.35 compared to $1.09 in the
    first six months of fiscal 2012.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the second quarter of fiscal 2013
totaled $461.2 million, compared to $316.7 million at the end of the second
quarter of fiscal 2012, representing an increase of $144.5 million. The
increase in inventory is primarily due to the addition of 120 net new stores
opened since July 28, 2012. Average inventory per store increased 16.9% for
the second quarter of fiscal 2013 compared to the second quarter of fiscal
2012. This increase is primarily due to incremental inventory related to the
recently added prestige brand boutiques, new brand additions and the expansion
of e-commerce fulfillment to the Chambersburg, PA distribution center.

Store Expansion

During the second quarter, the Company opened 33 stores located in Alameda,
CA; Benton Harbor, MI; Billings, MT; Canton, OH; Chicago, IL; Cincinnati, OH;
Clarksville, TN; Delray Beach, FL; Eastvale, CA; El Centro, CA; Foxborough,
MA; Gaylord, MI; Gilroy, CA; Grand Rapids, MI; Helena, MT; Leesburg, VA;
Martinsburg, WV; Midlothian, VA; Morehead City, NC; Newport, KY; Norcross, GA;
North Port, FL; Petaluma, CA; Philadelphia, PA; Pocatello, ID; Portland, OR;
Rock Hill, SC; Royal Oak, MI; St. Joseph, MO; State College, PA; Tracy, CA;
Vineland, NJ and Visalia, CA and relocated one store in Sacramento, CA. The
Company ended the second quarter with 609 stores and square footage of
6,476,445, which represents a 25% increase in square footage compared to the
second quarter of fiscal 2012.

Outlook

For the third quarter of fiscal 2013, the Company currently expects net sales
in the range of $613 million to $623 million, compared to actual net sales of
$505.6 million in the third quarter of fiscal 2012. Comparable store sales for
the third quarter of 2013 are expected to increase 5% to 7%. The Company
reported a comparable store sales increase of 8.4% in the third quarter of
2012.

Income per diluted share for the third quarter of fiscal 2013 is estimated to
be in the range of $0.71 to $0.74. This compares to income per diluted share
for the third quarter of fiscal 2012 of $0.59.

The Company is confirming its previously announced fiscal 2013 earnings
guidance. The Company plans to:

  *achieve comparable store sales growth of approximately 5% to 7%, 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 second quarter results is scheduled for today,
September 12, 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 September 26, 2013 and can be accessed by dialing (877)
870-5176 and entering conference ID number 420117.

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 August 3, 2013, Ulta
operates 609 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
                                   August 3,               July 28,
                                   2013                    2012
                                   (Unaudited)             (Unaudited)
Net sales                          $ 600,998    100.0 %   $ 481,683  100.0 %
Cost of sales                       388,921   64.7  %    314,058  65.2  %
Gross profit                         212,077     35.3  %     167,625   34.8  %
                                                                       
Selling, general and                 134,400     22.4  %     106,040   22.0  %
administrative expense
Pre-opening expenses                4,809     0.8   %    4,126    0.9   %
Operating income                     72,868      12.1  %     57,459    11.9  %
Interest (income) expense           (18     )  0.0   %    104      0.0   %
Income before income taxes           72,886      12.1  %     57,355    11.9  %
Income tax expense                  27,975    4.7   %    22,357   4.6   %
Net income                         $ 44,911    7.5   %   $ 34,998   7.3   %
                                                                       
Net income per common share:
Basic                              $ 0.70                  $ 0.55
Diluted                            $ 0.70                  $ 0.54
                                                                       
Weighted average common shares
outstanding:
Basic                                63,834                  63,070
Diluted                              64,331                  64,293


Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
                                                        
                                 26 Weeks Ended            26 Weeks Ended
                                 August 3,                 July 28,
                                 2013                      2012
                                 (Unaudited)               (Unaudited)
Net sales                        $ 1,183,710    100.0 %   $ 955,781  100.0 %
Cost of sales                     767,684     64.9  %    617,244  64.6  %
Gross profit                       416,026       35.1  %     338,537   35.4  %
                                                                       
Selling, general and               267,448       22.6  %     216,983   22.7  %
administrative expense
Pre-opening expenses              8,015       0.7   %    6,649    0.7   %
Operating income                   140,563       11.9  %     114,905   12.0  %
Interest (income) expense         (42       )  0.0   %    125      0.0   %
Income before income taxes         140,605       11.9  %     114,780   12.0  %
Income tax expense                53,868      4.6   %    44,914   4.7   %
Net income                       $ 86,737      7.3   %   $ 69,866   7.3   %
                                                                       
Net income per common share:
Basic                            $ 1.36                    $ 1.11
Diluted                          $ 1.35                    $ 1.09
                                                                       
Weighted average common shares
outstanding:
Basic                              63,838                    62,782
Diluted                            64,362                    64,202
                                                                       
Dividends declared per common    $ -                       $ 1.00
share


Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
                                                               
                                       August 3,     February 2,   July 28,
                                       2013         2013         2012
                                       (Unaudited)                 (Unaudited)
Assets
Current assets:
Cash and cash equivalents              $ 286,210     $ 320,475     $ 197,401
Receivables, net                         30,998        41,515        32,279
Merchandise inventories, net             461,156       361,125       316,734
Prepaid expenses and other current       51,992        50,452        46,345
assets
Prepaid income taxes                     1,111         –             12,690
Deferred income taxes                   15,320      15,757      12,257
Total current assets                     846,787       789,324       617,706
                                                                     
Property and equipment, net              541,557       483,059       421,063
Deferred compensation plan assets       3,648       2,866       –
Total assets                           $ 1,391,992  $ 1,275,249  $ 1,038,769
                                                                     
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable                       $ 130,738     $ 118,886     $ 88,881
Accrued liabilities                      102,007       92,127        80,507
Accrued income taxes                    –           10,054      –
Total current liabilities                232,745       221,067       169,388
                                                                     
Deferred rent                            239,179       208,003       186,486
Deferred income taxes                    55,492        56,361        43,210
Other long-term liabilities             4,114       2,876       –
Total liabilities                        531,530       488,307       399,084
                                                                     
Commitments and contingencies
                                                                     
Total stockholders’ equity              860,462     786,942     639,685
Total liabilities and stockholders’    $ 1,391,992  $ 1,275,249  $ 1,038,769
equity


Exhibit 4

Ulta Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Cash Flows
(In thousands)
                                                  
                                                    26 Weeks Ended
                                                    August 3,     July 28,
                                                    2013          2012
                                                    (Unaudited)
Operating activities
Net income                                          $ 86,737       $ 69,866
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                         50,747         42,614
Deferred income taxes                                 (432     )     (978    )
Non-cash stock compensation charges                   7,539          6,346
Excess tax benefits from stock-based compensation     (6,699   )     (27,788 )
Loss on disposal of property and equipment            2,030          447
Change in operating assets and liabilities:
Receivables                                           10,517         (6,126  )
Merchandise inventories                               (100,031 )     (72,087 )
Prepaid expenses and other current assets             (1,540   )     (2,915  )
Income taxes                                          (4,466   )     11,096
Accounts payable                                      11,852         2,439
Accrued liabilities                                   (3,366   )     (9,705  )
Deferred rent                                         31,176         23,023
Other assets and liabilities                         456          –       
Net cash provided by operating activities             84,520         36,232
                                                                     
Investing activities
Purchases of property and equipment                  (98,029  )    (71,338 )
Net cash used in investing activities                 (98,029  )     (71,338 )
                                                                     
Financing activities
Repurchase of common shares                           (37,337  )     –
Dividends paid                                        –              (62,482 )
Excess tax benefits from stock-based compensation     6,699          27,788
Stock options exercised                               10,007         13,514
Purchase of treasury shares                          (125     )    (51     )
Net cash used in financing activities                (20,756  )    (21,231 )
                                                                     
Net decrease in cash and cash equivalents             (34,265  )     (56,337 )
Cash and cash equivalents at beginning of period     320,475      253,738 
Cash and cash equivalents at end of period          $ 286,210     $ 197,401 


Exhibit 5

2013 Store Expansion
                                                           
               Total stores     Number of        Number of
               open             stores           stores
               at beginning     opened during    closed         Total stores
               of               the              during the     open at
Fiscal 2013   the quarter     quarter         quarter       end of the
                                                                quarter
1^st Quarter   550              28               2              576
2^nd Quarter   576              33               0              609
                                                                
                                Gross square
                                feet for
               Total gross      stores opened    Gross square   Total gross
               square           or               feet           square
               feet at          expanded         for stores     feet at end of
               beginning        during the       closed         the
Fiscal 2013   of the quarter  quarter         during the    quarter
                                                 quarter
1^st Quarter   5,847,393        298,083          24,077         6,121,399
2^nd Quarter   6,121,399        355,046          0              6,476,445
                                                                

Contact:

Ulta Beauty
Company Contacts:
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