Ulta Beauty Announces Second Quarter 2016 Results
Total Sales Increased 21.9%
Comparable Sales Increased 14.4%
Diluted EPS Increased 24.3% to $1.43
Company Raises Guidance for Fiscal Year 2016
BOLINGBROOK, Ill.–(BUSINESS WIRE)–Ulta Beauty (NASDAQ:ULTA) today announced financial results for the
thirteen week period (“Second Quarter”) and twenty-six week period
(“First Six Months”) ended July 30, 2016, which compares to the same
periods ended August 1, 2015.
“The Ulta Beauty team achieved another quarter of excellent top and
bottom line performance, while making significant progress on many
elements of our growth strategy,” said Mary Dillon, Chief Executive
Officer. “Our second quarter results reflect a strong pipeline of
newness and innovation in merchandising, progress in growing our brand
awareness, major milestones related to our loyalty program, continued
rapid growth in our e-commerce business, and successful execution of our
supply chain investments.”
For the Second Quarter
-
Net sales increased 21.9% to $1,069.2 million from $877.0 million in
the second quarter of fiscal 2015; -
Comparable sales (sales for stores open at least 14 months and
e-commerce sales) increased 14.4% compared to an increase of 10.1% in
the second quarter of fiscal 2015. The 14.4% comparable sales increase
was driven by 9.7% growth in transactions and 4.7% growth in average
ticket; -
Retail comparable sales increased 12.6%, including salon comparable
sales growth of 8.0%; -
Salon sales increased 14.3% to $59.0 million from $51.6 million in the
second quarter of fiscal 2015; -
E-commerce sales grew 54.9% to $55.9 million from $36.1 million in the
second quarter of fiscal 2015, representing 180 basis points of the
total company comparable sales increase of 14.4%; -
Gross profit increased 110 basis points to 36.0% from 34.9% in the
second quarter of fiscal 2015, due to improvements in merchandise
margins and leverage in fixed store costs, partly offset by planned
supply chain deleverage related to our new distribution centers; -
Selling, general and administrative (SG&A) expense as a percentage of
net sales increased 110 basis points to 22.1%, compared to 21.0% in
the second quarter of fiscal 2015, due to increased headcount to
support our growth initiatives and an impairment charge associated
with the closure of our Chicago State Street store, due to damage
resulting from construction in an adjacent building; -
Pre-opening expenses increased to $4.7 million, compared to $4.1
million in the second quarter of fiscal 2015. Real estate activity in
the second quarter of fiscal 2016 included 24 new stores, one
relocation and five remodels compared to 20 new stores, one relocation
and two remodels in the second quarter of fiscal 2015; -
Operating income increased 21.4% to $143.8 million, or 13.5% of net
sales, compared to $118.5 million, or 13.5% of net sales, in the
second quarter of fiscal 2015; -
Net income increased 21.3% to $90.0 million compared to $74.2 million
in the second quarter of fiscal 2015; and -
Income per diluted share increased 24.3% to $1.43 compared to $1.15 in
the second quarter of fiscal 2015.
For the First Six Months
-
Net sales increased 22.8% to $2,142.9 million from $1,745.1 million in
the first six months of fiscal 2015; -
Comparable sales (sales for stores open at least 14 months and
e-commerce sales) increased 14.8% compared to an increase of 10.8% in
the first six months of fiscal 2015. The 14.8% comparable sales
increase was driven by 10.4% growth in transactions and 4.4% growth in
average ticket; -
Retail comparable sales increased 13.3%, including salon comparable
sales growth of 7.9%; -
Salon sales increased 14.5% to $117.9 million from $102.9 million in
the first six months of fiscal 2015; -
E-commerce comparable sales grew 46.0% to $116.9 million from $80.1
million in the first six months of fiscal 2015, representing 150 basis
points of the total company comparable sales increase of 14.8%; -
Gross profit increased 130 basis points to 36.2% from 34.9% in the
first six months of fiscal 2015; -
SG&A expense as a percentage of net sales increased 70 basis points to
22.3% compared to 21.6% in the first six months of fiscal 2015; -
Pre-opening expenses were equal to the first six months of 2015 at
$7.2 million. Real estate activity in the first six months of 2016
included 37 new stores, one relocation and five remodels compared to
44 new stores, two relocations and two remodels in the first six
months of fiscal 2015; -
Operating income increased 28.7% to $290.9 million, or 13.6% of net
sales, compared to $226.0 million, or 13.0% of net sales, in the first
six months of fiscal 2015; -
Net income increased 29.0% to $182.0 million compared to $141.1
million in the first six months of fiscal 2015; and -
Income per diluted share increased 32.0% to $2.89 compared to $2.19 in
the first six months of fiscal 2015.
Balance Sheet
Merchandise inventories at the end of the second quarter of fiscal 2016
totaled $930.2 million, compared to $705.7 million at the end of the
second quarter of fiscal 2015, representing an increase of $224.5
million. Average inventory per store increased 18.7%, compared to the
second quarter of fiscal 2015. The increase in inventory was primarily
driven by 90 net new stores, the opening of the Company’s fourth and
fifth distribution centers in Greenwood, Indiana and Dallas, Texas,
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. Average inventory per store, excluding the investment
in the new Dallas, Texas distribution center, increased 14.5%.
The Company ended the second quarter of fiscal 2016 with $304.1 million
in cash and short-term investments.
Share Repurchase Program
During the second quarter, the Company repurchased 107,725 shares of its
stock at a cost of $25.8 million under its 10b5-1 plan and completed the
accelerated share repurchase (ASR) under an agreement entered into in
March 2016. Under the ASR agreement, the Company paid $200 million and
received initial delivery of 851,653 shares in the first quarter of
2016, which were retired and represented 80% of the total shares the
Company expected to receive based on the market price at the time of the
initial delivery. In May 2016, the ASR settled and an additional 153,418
shares were delivered to the Company and retired. The final number of
shares delivered upon settlement was determined with reference to the
average price of the Company’s common stock over the term of the
agreement.
Year to date, including the ASR and activity under our 10b5-1 plan, the
Company has repurchased 1,270,552 shares at an average price of $198.69.
As of July 30, 2016, approximately $193 million remained available under
the $425 million share repurchase program announced in March 2016.
Store Expansion
During the second quarter, the Company opened 24 stores located in
Asheboro, NC; Baytown, TX; Beavercreek, OH; Canton Township, MI;
Chambersburg, PA; Cincinnati, OH; Downey, CA; Elko, NV; Fort Collins,
CO; Glenwood Springs, CO; Joliet, IL; King of Prussia, PA; Las Vegas,
NV; Lodi, CA; Lufkin, TX; Naples, FL; Norwalk, CT; Oklahoma City, OK;
Omaha, NE; Pittsburgh, PA; Porterville, CA; Salinas, CA; Tampa, FL and
Yulee, FL. In addition, the Company closed three stores during the
quarter. The Company ended the second quarter with 907 stores and square
footage of 9,555,192, representing an 11% increase in square footage
compared to the second quarter of fiscal 2015.
Outlook
For the third quarter of fiscal 2016, the Company currently expects net
sales in the range of $1,072 million to $1,090 million, compared to
actual net sales of $910.7 million in the third quarter of fiscal 2015.
Comparable sales for the third quarter of 2016, including e-commerce
sales, are expected to increase 11% to 13%. The Company reported a
comparable sales increase of 12.8% in the third quarter of 2015.
Income per diluted share for the third 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 third quarter of fiscal 2015 of $1.11.
The Company is raising its previously announced fiscal 2016 guidance.
The Company plans to:
-
achieve comparable sales growth of approximately 11% to 13%, including
the impact of the e-commerce business, compared to previous guidance
of 10% to 12%; - increase total sales in the 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 to mid-twenties
percentage range, compared to previous guidance of low twenties
percentage range, 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.
Conference Call Information
A conference call to discuss second quarter results is scheduled for
today, August 25, 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 September 8, 2016 and can be accessed
by dialing (877) 870-5176 and entering conference ID number 13642433.
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 July 30,
2016 Ulta Beauty operates 907 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 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 | |||||||||||||
July 30, | August 1, | |||||||||||||
2016 | 2015 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Net sales | $ | 1,069,215 | 100.0 | % | $ | 876,999 | 100.0 | % | ||||||
Cost of sales | 684,377 | 64.0 | % | 570,524 | 65.1 | % | ||||||||
Gross profit | 384,838 | 36.0 | % | 306,475 | 34.9 | % | ||||||||
Selling, general and administrative expenses | 236,380 | 22.1 | % | 183,937 | 21.0 | % | ||||||||
Pre-opening expenses | 4,689 | 0.4 | % | 4,078 | 0.5 | % | ||||||||
Operating income | 143,769 | 13.5 | % | 118,460 | 13.5 | % | ||||||||
Interest income, net | (248 | ) | 0.0 | % | (276 | ) | 0.0 | % | ||||||
Income before income taxes | 144,017 | 13.5 | % | 118,736 | 13.5 | % | ||||||||
Income tax expense | 54,013 | 5.1 | % | 44,567 | 5.1 | % | ||||||||
Net income | $ | 90,004 | 8.4 | % | $ | 74,169 | 8.5 | % | ||||||
Net income per common share: | ||||||||||||||
Basic | $ | 1.44 | $ | 1.16 | ||||||||||
Diluted | $ | 1.43 | $ | 1.15 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 62,475 | 64,087 | ||||||||||||
Diluted | 62,813 | 64,410 |
Exhibit 2 |
||||||||||||||
Ulta Salon, Cosmetics & Fragrance, Inc. | ||||||||||||||
Consolidated Statements of Income | ||||||||||||||
(In thousands, except per share data) | ||||||||||||||
26 Weeks Ended | 26 Weeks Ended | |||||||||||||
July 30, | August 1, | |||||||||||||
2016 | 2015 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Net sales | $ | 2,142,931 | 100.0 | % | $ | 1,745,121 | 100.0 | % | ||||||
Cost of sales | 1,367,663 | 63.8 | % | 1,135,462 | 65.1 | % | ||||||||
Gross profit | 775,268 | 36.2 | % | 609,659 | 34.9 | % | ||||||||
Selling, general and administrative expenses | 477,104 | 22.3 | % | 376,422 | 21.6 | % | ||||||||
Pre-opening expenses | 7,231 | 0.3 | % | 7,195 | 0.4 | % | ||||||||
Operating income | 290,933 | 13.6 | % | 226,042 | 13.0 | % | ||||||||
Interest income, net | (563 | ) | 0.0 | % | (587 | ) | 0.0 | % | ||||||
Income before income taxes | 291,496 | 13.6 | % | 226,629 | 13.0 | % | ||||||||
Income tax expense | 109,516 | 5.1 | % | 85,514 | 4.9 | % | ||||||||
Net income | $ | 181,980 | 8.5 | % | $ | 141,115 | 8.1 | % | ||||||
Net income per common share: | ||||||||||||||
Basic | $ | 2.90 | $ | 2.20 | ||||||||||
Diluted | $ | 2.89 | $ | 2.19 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 62,753 | 64,134 | ||||||||||||
Diluted | 63,067 | 64,484 |
Exhibit 3 |
|||||||||
Ulta Salon, Cosmetics & Fragrance, Inc. | |||||||||
Condensed Consolidated Balance Sheets | |||||||||
(In thousands) | |||||||||
July 30, | January 30, | August 1, | |||||||
2016 | 2016 | 2015 | |||||||
(Unaudited) | (Unaudited) | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 194,084 | $ | 345,840 | $ | 325,214 | |||
Short-term investments | 110,000 | 130,000 | 150,209 | ||||||
Receivables, net | 55,998 | 64,992 | 45,277 | ||||||
Merchandise inventories, net | 930,205 | 761,793 | 705,660 | ||||||
Prepaid expenses and other current assets | 82,720 | 72,548 | 67,076 | ||||||
Prepaid income taxes | 3,075 | – | 1,883 | ||||||
Deferred income taxes | – | – | 20,766 | ||||||
Total current assets | 1,376,082 | 1,375,173 |
|
1,316,085 | |||||
Property and equipment, net | 919,597 | 847,600 | 791,904 | ||||||
Deferred compensation plan assets | 10,109 | 8,145 | 7,921 | ||||||
Total assets | $ | 2,305,788 | $ | 2,230,918 | $ | 2,115,910 | |||
Liabilities and stockholders’ equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 285,238 | $ | 196,174 | $ | 215,720 | |||
Accrued liabilities | 205,918 | 187,351 | 154,494 | ||||||
Accrued income taxes | 1,089 | 12,702 | – | ||||||
Total current liabilities | 492,245 | 396,227 | 370,214 | ||||||
Deferred rent | 345,441 | 321,789 | 315,931 | ||||||
Deferred income taxes | 58,477 | 59,527 | 75,167 | ||||||
Other long-term liabilities | 17,688 | 10,489 | 10,809 | ||||||
Total liabilities | 913,851 | 788,032 | 772,121 | ||||||
Commitments and contingencies | |||||||||
Total stockholders’ equity | 1,391,937 | 1,442,886 | 1,343,789 | ||||||
Total liabilities and stockholders’ equity | $ | 2,305,788 | $ | 2,230,918 | $ | 2,115,910 |
Exhibit 4 |
||||||||
Ulta Salon, Cosmetics & Fragrance, Inc. | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
26 Weeks Ended | ||||||||
July 30, | August 1, | |||||||
2016 | 2015 | |||||||
(Unaudited) | ||||||||
Operating activities | ||||||||
Net income | $ | 181,980 | $ | 141,115 | ||||
Adjustments to reconcile net income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization | 97,552 | 76,738 | ||||||
Deferred income taxes | (1,050 | ) | 683 | |||||
Non-cash stock compensation charges | 8,862 | 7,578 | ||||||
Excess tax benefits from stock-based compensation | (4,685 | ) | (7,257 | ) | ||||
Loss on disposal of property and equipment | 3,712 | 1,629 | ||||||
Change in operating assets and liabilities: | ||||||||
Receivables | 8,994 | 7,163 | ||||||
Merchandise inventories | (168,412 | ) | (124,431 | ) | ||||
Prepaid expenses and other current assets | (10,172 | ) | (528 | ) | ||||
Income taxes | (10,003 | ) | (14,030 | ) | ||||
Accounts payable | 89,064 | 24,942 | ||||||
Accrued liabilities | (5,099 | ) | (10,812 | ) | ||||
Deferred rent | 23,652 | 21,804 | ||||||
Other assets and liabilities | 5,235 | 1,102 | ||||||
Net cash provided by operating activities | 219,630 | 125,696 | ||||||
Investing activities | ||||||||
Purchases of short-term investments | (60,000 | ) | (50,000 | ) | ||||
Proceeds from short-term investments | 80,000 | 50,000 | ||||||
Purchases of property and equipment | (149,595 | ) | (137,218 | ) | ||||
Net cash used in investing activities | (129,595 | ) | (137,218 | ) | ||||
Financing activities | ||||||||
Repurchase of common shares | (252,450 | ) | (73,753 | ) | ||||
Stock options exercised | 8,391 | 15,561 | ||||||
Excess tax benefits from stock-based compensation | 4,685 | 7,257 | ||||||
Purchase of treasury shares | (2,417 | ) | (1,478 | ) | ||||
Net cash used in financing activities | (241,791 | ) | (52,413 | ) | ||||
Net decrease in cash and cash equivalents | (151,756 | ) | (63,935 | ) | ||||
Cash and cash equivalents at beginning of period | 345,840 | 389,149 | ||||||
Cash and cash equivalents at end of period | $ | 194,084 | $ | 325,214 |
Exhibit 5 |
||||||||
2016 Store Expansion |
||||||||
Fiscal 2016 | Total stores open at beginning of the quarter | Number of stores opened during the quarter | Number of stores closed during the quarter | Total stores open at end of the quarter | ||||
1st Quarter | 874 | 13 | 1 | 886 | ||||
2nd Quarter | 886 | 24 | 3 | 907 | ||||
Fiscal 2016 | Total gross square feet at beginning of the quarter | Gross square feet for stores opened or expanded during the quarter | Gross square feet for stores closed during the quarter | Total gross square feet at end of the quarter | ||||
1st Quarter | 9,225,957 | 132,812 | 10,192 | 9,348,577 | ||||
2nd Quarter | 9,348,577 | 253,023 | 46,408 | 9,555,192 | ||||
Contacts
Ulta Beauty
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