Ulta Beauty Announces Second Quarter 2012 Results

Thu Sep 6, 2012 4:00pm EDT

* Reuters is not responsible for the content in this press release.

Ulta Beauty Announces Second Quarter 2012 Results

Total Sales Increased 22.1%

Comparable Store Sales Increased 9.3%

Diluted EPS Increased 42.1% to $0.54

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 28, 2012, which compares to the same periods ended July 30, 2011.

For the Second Quarter:

  • Net sales increased 22.1% to $481.7 million from $394.6 million in the second quarter of fiscal 2011;
  • Comparable store sales (sales for stores open at least 14 months) increased 9.3% compared to an increase of 11.3% in the second quarter of fiscal 2011;
  • Gross profit increased 80 basis points to 34.8% from 34.0% in the second quarter of fiscal 2011;
  • Selling, general and administrative (SG&A) expense as a percentage of net sales decreased 100 basis points compared to the second quarter of fiscal 2011;
  • Preopening expenses increased to $4.1 million, compared to $3.8 million in the second quarter of fiscal 2011. Real estate activity in the second quarter of fiscal 2012 included 22 new stores, 1 relocation and 9 remodels compared to 21 new stores and 15 remodels in the second quarter of fiscal 2011;
  • Operating income increased 44.9% to $57.5 million, or 11.9% of net sales, compared to $39.7 million, or 10.1% of net sales, in the second quarter of fiscal 2011;
  • Net income increased 46.4% to $35.0 million compared to $23.9 million in the second quarter of fiscal 2011; and
  • Income per diluted share increased 42.1% to $0.54 compared to $0.38 in the second quarter of fiscal 2011.

Chuck Rubin, President and Chief Executive Officer of Ulta stated, “We are very pleased to report excellent results for the second quarter. The team drove strong sales and profit growth by continuing to focus on the five components of our multi-year growth strategy: accelerating store growth, introducing new products, services and brands, enhancing our loyalty program, broadening our marketing reach and increasing our digital focus with Ulta.com. Second quarter highlights include strong new store productivity and solid execution of our accelerated new store program. Our rich pipeline of new products and brands continues to drive traffic and market share gains. We are pleased with our progress with the roll out of the 50 additional Lancôme boutiques we announced last quarter. We are also excited to announce the addition of Clinique boutiques in 35 additional stores in light of the success of the 13 stores currently offering Clinique. Our loyalty program reached the milestone of 10 million active customers with 50% of the stores now on the new points program. All of these strategies combined to drive gains in market share and awareness and continued to position Ulta as the beauty authority. Most importantly, our 15,000 associates are creating a fun, inviting environment to make Ulta the place where guests are increasingly choosing to shop.”

For the First Six Months:

  • Net sales increased 22.4% to $955.8 million from $780.6 million in the first six months of fiscal 2011;
  • Comparable store sales (sales for stores open at least 14 months) increased 9.7% compared to an increase of 11.2% in the first six months of fiscal 2011;
  • Gross profit increased 90 basis points to 35.4% from 34.5% in the first six months fiscal 2011;
  • SG&A expense as a percentage of net sales decreased 110 basis points compared to the first six months in fiscal 2011;
  • Pre-opening expense increased to $6.6 million compared to $5.0 million in the second quarter of fiscal 2011 due to the Company’s accelerated new store program which included 40 new stores, 2 relocation and 9 remodels in the first six months fiscal 2012 compared to 26 new stores, 1 relocations and 17 remodel stores in the first six months fiscal 2011;
  • Operating income increased 46.0% to $114.9 million, or 12.0% of net sales, compared to $78.7 million, or 10.1% of net sales, in the first six months of fiscal 2011;
  • Net income increased 48.0% to $69.9 million compared to $47.2 million in the first six months of fiscal 2011; and
  • Income per diluted share increased 45.3% to $1.09 compared to $0.75 in the first six months of fiscal 2011.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the second quarter totaled $316.7 million, compared to $258.8 million at the end of the second quarter of fiscal 2011, representing an increase of $57.9 million. The increase in inventory was primarily due to the addition of 74 net new stores opened since July 30, 2011 and the opening of the Company’s third distribution center in Chambersburg, Pennsylvania during the first quarter of fiscal 2012. Average inventory per store, including the investment in the new Chambersburg distribution center, increased 3.9% compared to the prior year, well below the 9.3% comparable store sales increase.

The Company did not utilize its credit facility during the first half of the year.

Store Expansion

During the second quarter, the Company opened 22 stores located in Boise, ID; Charleston, WV; Coeur D'Alene, ID; Council Bluffs, IA; Dubuque, IA; Fenton, MO; Florence, SC; Lake Forest, CA; Madison, MS; Monroe, LA; Northville, MI; Novi, MI; Plano, TX; Ramsey, NJ; Sand City, CA; Sanford, FL; Stillwater, OK; Stuart, FL; Temple, TX; Turlock, CA; Valencia, CA and Waldorf, MD and relocated one store in Palm Desert, CA. The Company ended the second quarter with 489 stores and square footage of 5,188,128, which represents an 18% increase in square footage compared to the second quarter of fiscal 2011.

Outlook

For the third quarter of fiscal 2012, the Company currently expects net sales in the range of $494 million to $503 million, compared to actual net sales of $413.1 million in the third quarter of fiscal 2011. This assumes comparable stores sales increase 6% to 8%, compared to a 9.6% increase last year.

Income per diluted share for the third quarter of fiscal 2012 is estimated to be in the range of $0.54 to $0.56. The range includes approximately $0.04 per diluted share of additional pre-opening expense associated with the planned 52 new stores opening in the third quarter of 2012 compared to 28 new stores in the third quarter of 2011, as well as a modest impact from the opening of the new Chambersburg distribution center and the planned expansion of prestige brand boutiques. This compares to income per diluted share for the third quarter of fiscal 2011 of $0.42.

For fiscal 2012, the Company plans to:

  • achieve comparable store sales growth of approximately 8%, approximately 300 basis points above the high end of the Company’s long-term comparable store sales growth goal of 3% to 5%;
  • deliver earnings per share in the range of $2.58 to $2.60, including the negative impact of approximately $0.07 to $0.08 of income per diluted share associated with the accelerated new store program, the opening of the new Chambersburg distribution center and the planned expansion of prestige brand boutiques;
  • incur capital expenditures of approximately $180 million in fiscal 2012, compared to $129 million in fiscal 2011. 2012 capital expenditures include approximately $10 million in incremental capital required for the expansion of prestige brand boutiques;
  • expand square footage by approximately 22% with the opening of approximately 100 new stores;
  • remodel approximately 21 locations; and
  • generate free cash flow.

Conference Call Information

A conference call to discuss second quarter results is scheduled for today, September 6, 2012, 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 13, 2012 and can be accessed by dialing (877) 870-5176 and entering conference ID number 398573.

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 July 28, 2012, the Company operates 489 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; 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)

 
 
13 Weeks Ended 13 Weeks Ended
July 28, July 30,
2012 2011
(Unaudited) (Unaudited)
Net sales $ 481,683   100.0% $ 394,567   100.0%
Cost of sales   314,058   65.2%   260,280   66.0%
Gross profit 167,625 34.8% 134,287 34.0%
 
Selling, general and administrative expense 106,040 22.0% 90,811 23.0%
Pre-opening expenses   4,126   0.9%   3,816   1.0%
Operating income 57,459 11.9% 39,660 10.1%
Interest expense   104   0.0%   147   0.0%
Income before income taxes 57,355 11.9% 39,513 10.0%
Income tax expense   22,357   4.6%   15,608   4.0%
Net income $ 34,998   7.3% $ 23,905   6.1%
 
Net income per common share:
Basic $ 0.55 $ 0.39
Diluted $ 0.54 $ 0.38
 
Weighted average common shares outstanding:
Basic 63,070 61,126
Diluted 64,293 63,241
 
 
 

Exhibit 2

 

   

Ulta Salon, Cosmetics & Fragrance, Inc.

Statements of Income

(In thousands, except per share amounts)

 
26 Weeks Ended 26 Weeks Ended
July 28, July 30,
2012 2011
(Unaudited) (Unaudited)
Net sales $ 955,781   100.0 % $ 780,573   100.0 %
Cost of sales   617,244   64.6 %   511,381   65.5 %
Gross profit 338,537 35.4 % 269,192 34.5 %
 
Selling, general and administrative expense 216,983 22.7 % 185,426 23.8 %
Pre-opening expenses   6,649   0.7 %   5,046   0.6 %
Operating income 114,905 12.0 % 78,720 10.1 %
Interest expense   125   0.0 %   320   0.0 %
Income before income taxes 114,780 12.0 % 78,400 10.0 %
Income tax expense   44,914   4.7 %   31,199   4.0 %
Net income $ 69,866   7.3 % $ 47,201   6.0 %
 
Net income per common share:
Basic $ 1.11 $ 0.78
Diluted $ 1.09 $ 0.75
 
Weighted average common shares outstanding:
Basic 62,782 60,840
Diluted 64,202 63,013
 
Dividends declared per common share $ 1.00 $
 
 
 

Exhibit 3

   

Ulta Salon, Cosmetics & Fragrance, Inc.

Condensed Balance Sheets

(In thousands)

 
July 28, January 28, July 30,
2012   2012   2011
(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 197,401 $ 253,738 $ 142,545
Receivables, net 32,279 26,153 19,939
Merchandise inventories, net 316,734 244,647 258,752
Prepaid expenses and other current assets 46,345 43,430 34,114
Prepaid income taxes 12,690
Deferred income taxes   12,257     12,264     8,922
Total current assets 617,706 580,232 464,272
 
Property and equipment, net   421,063     376,985     351,576
Total assets $ 1,038,769   $ 957,217   $ 815,848
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 88,881 $ 86,442 $ 81,380
Accrued liabilities 80,507 74,411 73,745
Accrued income taxes       4,002     483
Total current liabilities 169,388 164,855 155,608
 
Deferred rent 186,486 163,463 153,159
Deferred income taxes   43,210     44,195     29,049
Total liabilities 399,084 372,513 337,816
 
Commitments and contingencies
 
Total stockholders’ equity   639,685     584,704     478,032
Total liabilities and stockholders’ equity $ 1,038,769   $ 957,217   $ 815,848
 
 
 

Exhibit 4

 

Ulta Salon, Cosmetics & Fragrance, Inc.

Statements of Cash Flows

(In thousands)

 
26 Weeks Ended
July 28,   July 30,
2012   2011
(Unaudited)
Operating activities
Net income $ 69,866 $ 47,201
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42,614 36,400
Deferred income taxes (978 ) (977 )
Non-cash stock compensation charges 6,346 5,196
Excess tax benefits from stock-based compensation (27,788 ) (10,049 )
Loss on disposal of property and equipment 447 402
Change in operating assets and liabilities:
Receivables (6,126 ) 2,353
Merchandise inventories (72,087 ) (40,236 )
Prepaid expenses and other current assets (2,915 ) (1,324 )
Income taxes 11,096 21,216
Accounts payable 2,439 (5,713 )
Accrued liabilities (9,705 ) (12,119 )
Deferred rent   23,023       18,587  
Net cash provided by operating activities 36,232 60,937
 
Investing activities
Purchases of property and equipment   (71,338 )     (52,679 )
Net cash used in investing activities (71,338 ) (52,679 )
 
Financing activities
Dividends paid (62,482 )
Excess tax benefits from stock-based compensation 27,788 10,049
Stock options exercised 13,514 13,053
Common stock repurchased   (51 )      
Net cash (used in) provided by financing activities   (21,231 )     23,102  
 
Net (decrease) increase in cash and cash equivalents (56,337 ) 31,360
Cash and cash equivalents at beginning of period   253,738       111,185  
Cash and cash equivalents at end of period $ 197,401     $ 142,545  
 
 
 

Exhibit 5

       

2012 Store Expansion

 
Fiscal 2012  

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 449 18 0 467
2nd Quarter 467 22 0 489
 
Fiscal 2012  

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 4,747,148 202,706 0 4,949,854
2nd Quarter 4,949,854 238,274 0 5,188,128

Ulta Beauty
Company Contacts:
Gregg Bodnar, (630) 410-4633
Chief Financial Officer
or
Laurel Lefebvre, (630) 410-5230
Vice President, Investor Relations
or
ICR, Inc.
Media Contact:
Alecia Pulman, (203) 682-8224

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.