Ulta Beauty Announces First Quarter 2016 Results

Total Sales Increased 23.7%

Comparable Sales Increased 15.2%

Diluted EPS Increased 39.4% to $1.45

Company Raises Outlook for Fiscal Year 2016

BOLINGBROOK, Ill.–(BUSINESS WIRE)–Ulta Beauty (NASDAQ:ULTA) today announced financial results for the
thirteen week period ended April 30, 2016 (“First Quarter”), which
compares to the same period ended May 2, 2015.

“We are off to a phenomenal start to the year, delivering excellent top
and bottom line growth in the first quarter,” said Mary Dillon, Chief
Executive Officer. “Several positive factors are coming together to
drive the momentum in our business, exemplified by the best comparable
sales growth in our history as a public company. These include healthy
consumer demand in the beauty category, our unique format and offering
which are supporting sustained share gains, and effective collaboration
across the enterprise to ensure strong execution of our growth

For the First Quarter

  • Net sales increased 23.7% to $1,073.7 million from $868.1 million in
    the first quarter of fiscal 2015;
  • Comparable sales (sales for stores open at least 14 months and
    e-commerce sales) increased 15.2% compared to an increase of 11.4% in
    the first quarter of fiscal 2015. The 15.2% same store sales increase
    was driven by 11.0% growth in traffic and 4.2% growth in average
  • Retail comparable sales increased 13.9%, including salon comparable
    sales growth of 7.7%;
  • Salon sales increased 14.7% to $58.9 million from $51.3 million in the
    first quarter of fiscal 2015;
  • E-commerce sales grew 38.8% to $61.0 million from $44.0 million in the
    first quarter of fiscal 2015, representing 130 basis points of the
    total company comparable sales increase of 15.2%;
  • Gross profit increased 150 basis points to 36.4% from 34.9% in the
    first quarter of fiscal 2015, due to leverage in fixed store costs and
    increased merchandise margins;
  • Selling, general and administrative expense as a percentage of net
    sales increased 20 basis points to 22.4% compared to 22.2% in the
    first quarter of 2015;
  • Pre-opening expenses were $2.5 million, compared to $3.1 million in
    the first quarter of fiscal 2015. Real estate activity in the first
    quarter of fiscal 2016 included 13 new stores compared to 24 new
    stores and one relocation in the first quarter of fiscal 2015;
  • Operating income increased 36.8% to $147.2 million, or 13.7% of net
    sales, compared to $107.6 million, or 12.4% of net sales, in the first
    quarter of fiscal 2015;
  • Tax rate decreased to 37.6% compared to 38.0% in the first quarter of
    fiscal 2015;
  • Net income increased 37.4% to $92.0 million compared to $66.9 million
    in the first quarter of fiscal 2015; and
  • Income per diluted share increased 39.4% to $1.45 compared to $1.04 in
    the first quarter of fiscal 2015.

Balance Sheet

Merchandise inventories at the end of the first quarter of fiscal 2016
totaled $843.5 million, compared to $662.9 million at the end of the
first quarter of fiscal 2015, representing an increase of $180.6
million. Average inventory per store increased 14.5%, compared to the
first quarter of fiscal 2015. The increase in inventory was driven by 89
net new stores, the opening of the Company’s fourth distribution center
in Greenwood, Indiana, 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.

The Company ended the first quarter of fiscal 2016 with $369.3 million
in cash and short-term investments.

Share Repurchase Program

During the first quarter, the Company repurchased 157,765 shares of its
stock at a cost of $26.7 million under its 10b5-1 plan and in March
2016, the Company entered into an accelerated share repurchase agreement
with Goldman, Sachs & Co. to repurchase $200.0 million of its common
stock. Under the agreement, the Company paid $200.0 million and received
initial delivery of 851,653 shares in the first quarter of 2016, which
represents 80% of the total shares the Company expects to receive based
on the market price at the time of the initial delivery. The final
number of shares delivered upon settlement of the agreement will be
determined with reference to the average price of the Company’s common
stock over the term of the agreement. As of April 30, 2016,
approximately $219 million remained available under the $425 million
share repurchase program announced in March 2016.

Store Expansion

During the first quarter, the Company opened 13 stores located in Dover,
DE; Eldersburg, MD; Morgantown, WV; Muskogee, OK; Orlando, FL; San
Clemente, CA; Sarasota, FL; Suffolk, VA; Tucson, AZ; Warren, MI;
Washington, D.C.; Waxahachie, TX and Wooster, OH. In addition, the
Company closed one store. The Company ended the first quarter with 886
stores and square footage of 9,348,577 which represents an 11% increase
in square footage compared to the first quarter of fiscal 2015.


For the second quarter of fiscal 2016, the Company currently expects net
sales in the range of $1,041 million to $1,058 million, compared to
actual net sales of $877.0 million in the second quarter of fiscal 2015.
Comparable sales for the second quarter of 2016, including e-commerce
sales, are expected to increase 11% to 13%. The Company reported a
comparable sales increase of 10.1% in the second quarter of 2015.

Income per diluted share for the second quarter of fiscal 2016 is
estimated to be in the range of $1.32 to $1.37. This compares to income
per diluted share for the second quarter of fiscal 2015 of $1.15.

The Company is raising its previously announced fiscal 2016 sales and
earnings per share guidance. The Company plans to:

  • achieve comparable sales growth of approximately 10% to 12%, including
    the impact of the e-commerce business, compared to previous guidance
    of 8% to 10%;
  • increase total sales in the high teens percentage range, compared to
    previous guidance of 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 low twenties percentage
    range, compared to previous guidance 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

Conference Call Information

A conference call to discuss first quarter results is scheduled for
today, May 26, 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 June 9, 2016 and can be accessed by
dialing (877) 870-5176 and entering conference ID number 13637509.

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 in 1990, 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 April 30,
2016, Ulta Beauty operates 886 retail stores across 48 states and the
District of Columbia 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; the possibility that we may be
unable to compete effectively in our highly competitive markets; the
possibility that cybersecurity breaches and other disruptions could
compromise our information or result in the unauthorized disclosure of
confidential information; the possibility that the capacity of our
distribution and order fulfillment infrastructure and the performance of
our newly opened and to be opened distribution centers may not be
adequate to support our recent growth and expected future growth plans;
our ability to gauge beauty trends and react to changing consumer
preferences in a timely manner; our ability to attract and retain key
executive personnel; customer acceptance of our rewards program and
technological and marketing initiatives; our ability to sustain our
growth plans and successfully implement our long-range strategic and
financial plan; 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 of material
disruptions to our information systems; changes in the wholesale cost of
our products; the possibility that new store openings and existing
locations may be impacted by developer or co-tenant issues; weather
conditions that could negatively impact sales; our ability to
successfully execute our common stock repurchase program or implement
future common stock repurchase programs; 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 30, 2016, as such may be amended
or supplemented in our subsequently filed Quarterly Reports on Form 10-Q.

Our 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 Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
  13 Weeks Ended   13 Weeks Ended
April 30, May 2,
2016 2015
(Unaudited) (Unaudited)
Net sales $ 1,073,716   100.0 % $ 868,122   100.0 %
Cost of sales   683,286     63.6 %   564,938     65.1 %
Gross profit 390,430 36.4 % 303,184 34.9 %
Selling, general and administrative expenses 240,724 22.4 % 192,485 22.2 %
Pre-opening expenses   2,542     0.2 %   3,117     0.4 %
Operating income 147,164 13.7 % 107,582 12.4 %
Interest income, net   (315 )   0.0 %   (311 )   0.0 %
Income before income taxes 147,479 13.7 % 107,893 12.4 %
Income tax expense   55,503     5.2 %   40,947     4.7 %
Net income $ 91,976     8.6 % $ 66,946     7.7 %
Net income per common share:
Basic $ 1.46 $ 1.04
Diluted $ 1.45 $ 1.04
Weighted average common shares outstanding:
Basic 63,031 64,180
Diluted 63,335 64,555

Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
  April 30,   January 30,   May 2,
2016   2016   2015
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 239,254 $ 345,840 $ 386,007
Short-term investments 130,000 130,000 150,209
Receivables, net 54,112 64,992 43,558
Merchandise inventories, net 843,490 761,793 662,936
Prepaid expenses and other current assets 71,561 72,548 61,725
Deferred income taxes           20,766
Total current assets 1,338,417 1,375,173


Property and equipment, net 870,835 847,600 744,665
Deferred compensation plan assets   9,698     8,145     8,085
Total assets $ 2,218,950   $ 2,230,918   $ 2,077,951
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 266,278 $ 196,174 $ 209,509
Accrued liabilities 179,300 187,351 139,284
Accrued income taxes   50,156     12,702     34,871
Total current liabilities 495,734 396,227 383,664
Deferred rent 330,121 321,789 305,355
Deferred income taxes 59,977 59,527 75,135
Other long-term liabilities   13,430     10,489     10,812
Total liabilities 899,262 788,032 774,966
Commitments and contingencies
Total stockholders’ equity   1,319,688     1,442,886     1,302,985
Total liabilities and stockholders’ equity $ 2,218,950   $ 2,230,918   $ 2,077,951

Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.
Consolidated Statements of Cash Flows
(In thousands)
  13 Weeks Ended
April 30,   May 2,
2016   2015
Operating activities
Net income $ 91,976 $ 66,946
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 47,887 37,967
Deferred income taxes 450 651
Non-cash stock compensation charges 4,022 3,342
Excess tax benefits from stock-based compensation (3,203 ) (4,003 )
Loss on disposal of property and equipment 812 1,121
Change in operating assets and liabilities:
Receivables 10,880 8,882
Merchandise inventories (81,697 ) (81,707 )
Prepaid expenses and other current assets 987 4,823
Income taxes 40,657 19,470
Accounts payable 70,104 18,731
Accrued liabilities (25,664 ) (20,100 )
Deferred rent 8,332 11,228
Other assets and liabilities   1,388     941  
Net cash provided by operating activities 166,931 68,292
Investing activities
Purchases of property and equipment   (54,321 )   (56,622 )
Net cash used in investing activities (54,321 ) (56,622 )
Financing activities
Repurchase of common shares (226,666 ) (27,956 )
Stock options exercised 6,209 10,154
Excess tax benefits from stock-based compensation 3,203 4,003
Purchase of treasury shares   (1,942 )   (1,013 )
Net cash used in financing activities   (219,196 )   (14,812 )
Net decrease in cash and cash equivalents (106,586 ) (3,142 )
Cash and cash equivalents at beginning of period   345,840     389,149  
Cash and cash equivalents at end of period $ 239,254   $ 386,007  



Exhibit 4


2016 Store Expansion

    Total stores open   Number of stores   Number of stores  
at beginning of the opened during the closed during the Total stores open
Fiscal 2016     quarter   quarter   quarter   at end of the quarter
1st Quarter 874 13 1 886
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 2016     the quarter   quarter   during the quarter   quarter
1st Quarter 9,225,957 132,812 10,192 9,348,577


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