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

BOLINGBROOK, Ill.--(BUSINESS WIRE)-- Ulta Beauty (NAS: 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 atwww.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 administrative expense

133,048

22.8

%

110,943

23.4

%

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 share

$

-

$

1.00

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 assets

48,106

50,452

40,102

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' equity

$

1,331,577

$

1,275,249

$

1,058,001

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 activities

(28,092

)

24,860

Net (decrease) increase in cash and cash equivalents

(27,261

)

12,607

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 open

Number of stores

Number of stores

at beginning of

opened during the

closed during the

Total stores open at

Fiscal 2013

the quarter

quarter

quarter