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Ulta Beauty Announces Second Quarter Fiscal 2023 Results :: Ulta Beauty, Inc. (ULTA)






Net Sales of $2.5 Billion Compared to $2.3 Billion in the Year-Ago Quarter

Comparable Sales Increased 8.0%

Net Income of $300.1 Million or $6.02 Per Diluted Share

Company Raises Outlook for Fiscal Year 2023

BOLINGBROOK, Ill.–(BUSINESS WIRE)–
Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the thirteen-week period (“second quarter”) and twenty-six-week period (“first six months”) ended July 29, 2023 compared to the same periods ended July 30, 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended

 

26 Weeks Ended

 

 

July 29,

 

July 30,

 

 

July 29,

 

July 30,

(Dollars in millions, except per share data)

2023

 

2022

 

 

2023

 

2022

Net sales

 

$

2,529.8

 

$

2,297.1

 

 

$

5,164.1

 

$

4,643.0

Comparable sales

 

 

8.0%

 

 

14.4%

 

 

 

8.7%

 

 

16.2%

Gross profit (as a percentage of net sales)

 

 

39.3%

 

 

40.4%

 

 

 

39.7%

 

 

40.3%

Selling, general and administrative expenses

 

$

600.7

 

$

534.5

 

 

$

1,212.8

 

$

1,035.4

Operating income (as a percentage of net sales)

 

 

15.5%

 

 

17.0%

 

 

 

16.1%

 

 

17.9%

Diluted earnings per share

 

$

6.02

 

$

5.70

 

 

$

12.90

 

$

12.00

New store openings, net

 

 

3

 

 

7

 

 

 

7

 

 

17

“The Ulta Beauty team delivered another quarter of strong performance, with sales, gross profit, and SG&A expenses all better than our internal expectations. During the quarter, we drove growth across all major categories, increased the number of loyalty members, and strengthened engagement with the Ulta Beauty brand. In addition, our teams achieved important milestones for our multi-year, transformational investment agenda designed to drive efficiencies and support our future growth,” said Dave Kimbell, chief executive officer. “The beauty category has continued to deliver healthy growth, as consumers maintain their post-pandemic routines and expand their definition of beauty. Our proven business model, diverse assortment, best-in-class loyalty program, and outstanding teams have enabled us to deliver stronger-than expected results for the first half of fiscal 2023, and I remain confident we can deliver against our updated expectations for the rest of the year.”

For the Second Quarter of Fiscal 2023

  • Net sales increased 10.1% to $2.5 billion compared to $2.3 billion in the second quarter of fiscal 2022 primarily due to increased comparable sales, strong new store performance, and growth in other revenue.

  • Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 8.0% compared to an increase of 14.4% in the second quarter of fiscal 2022, driven by a 9.0% increase in transactions and a 1.0% decrease in average ticket.

  • Gross profit increased 7.1% to $993.6 million compared to $928.2 million in the second quarter of fiscal 2022. As a percentage of net sales, gross profit decreased to 39.3% compared to 40.4% in the second quarter of fiscal 2022, primarily due to lower merchandise margin, higher inventory shrink, and higher supply chain costs, partially offset by strong growth in other revenue and leverage of store fixed costs.

  • Selling, general and administrative (SG&A) expenses increased 12.4% to $600.7 million compared to $534.5 million in the second quarter of fiscal 2022. As a percentage of net sales, SG&A expenses increased to 23.7% compared to 23.3% in the second quarter of fiscal 2022, primarily due to higher corporate overhead due to strategic investments, higher store payroll and benefits, and higher store expenses, partially offset by leverage of incentive compensation.

  • Operating income increased to $391.6 million, or 15.5% of net sales, compared to $391.4 million, or 17.0% of net sales.

  • Net interest income increased to $4.4 million compared to $0.1 million in the second quarter of fiscal 2022, due to higher average interest rates on cash balances.

  • The tax rate decreased to 24.2% compared to 24.5% in the second quarter of fiscal 2022.

  • Net income increased to $300.1 million compared to $295.7 million.

  • Diluted earnings per share increased 5.6% to $6.02 compared to $5.70, including a $0.01 benefit due to income tax accounting for stock-based compensation.

For the First Six Months of Fiscal 2023

  • Net sales increased 11.2% to $5.2 billion compared to $4.6 billion in the first six months of fiscal 2022, primarily due to increased comparable sales, strong new store performance, and growth in other revenue.

  • Comparable sales increased 8.7% compared to an increase of 16.2% in the first six months of fiscal 2022, driven by a 10.1% increase in transactions and a 1.4% decrease in average ticket.

  • Gross profit increased 9.6% to $2.0 billion compared to $1.9 billion in the first six months of fiscal 2022. As a percentage of net sales, gross profit decreased to 39.7% compared to 40.3% in the first six months of fiscal 2022, primarily due to higher inventory shrink, lower merchandise margin, and higher supply chain costs, partially offset by strong growth in other revenue and leverage of store fixed costs.

  • SG&A expenses increased 17.1% to $1.2 billion compared to $1.0 billion in the first six months of fiscal 2022. As a percentage of net sales, SG&A expenses increased to 23.5% compared to 22.3% in the first six months of fiscal 2022, primarily due to higher corporate overhead due to strategic investments, higher store payroll and benefits, and higher marketing expenses, partially offset by leverage of incentive compensation.

  • Net interest income increased to $11.8 million compared to net interest expense of $0.3 million in the first six months of fiscal 2022, due to higher average interest rates on cash balances.

  • Operating income increased to $833.7 million, or 16.1% of net sales, compared to $829.1 million, or 17.9% of net sales.

  • The tax rate decreased to 23.5% compared to 24.3%.

  • Net income increased to $647.2 million compared to $627.1 million.

  • Diluted earnings per share increased 7.5% to $12.90, including a $0.14 benefit due to income tax accounting for stock-based compensation, compared to $12.00, including a $0.03 benefit due to income tax accounting for stock-based compensation.

Balance Sheet

Cash and cash equivalents at the end of the second quarter of fiscal 2023 totaled $388.6 million.

Merchandise inventories, net at the end of the second quarter of fiscal 2023 increased 9.0% to $1.82 billion compared to $1.67 billion at the end of the second quarter of fiscal 2022. The increase was primarily due to inventory to support higher sales demand, 37 net new stores, product cost increases, and new brand launches.

Share Repurchase Program

During the second quarter of fiscal 2023, the Company repurchased 593,629 shares of its common stock at a cost of $275.5 million. During the first six months of fiscal 2023, the Company repurchased 1.1 million shares of its common stock at a cost of $559.0 million. As of July 29, 2023, $541.0 million remained available under the $2.0 billion share repurchase program announced in March 2022.

Store Update

Real estate activity in the second quarter of fiscal 2023 included three new stores located in Crestview, FL; Lebanon, TN; and Lynchburg, VA. In addition, the Company relocated two stores and remodeled three stores. During the first six months of fiscal 2023, the Company opened eight new stores, relocated three stores, remodeled five stores, and closed one store.

At the end of the second quarter of fiscal 2023, the Company operated 1,362 stores totaling 14.3 million square feet.

Fiscal 2023 Outlook

The Company has updated its outlook for fiscal 2023.

 

 

 

 

 

 

 

Prior FY23 Outlook

 

Updated FY23 Outlook

Net sales

 

 

$11.0 billion to $11.1 billion

 

$11.05 billion to $11.15 billion

Comparable sales

 

 

4% to 5%

 

4.5% to 5.5%

New stores, net

 

 

25-30

 

no change

Remodel and relocation projects

 

 

20-30

 

no change

Operating margin

 

 

14.5% to 14.8%

 

14.6% to 14.8%

Diluted earnings per share

 

 

$24.70 to $25.40

 

$25.10 to $25.60

Share repurchases

 

 

approximately $900 million

 

no change

Interest income

 

 

approximately $17 million

 

no change

Effective tax rate

 

 

approximately 23.9%

 

no change

Capital expenditures

 

 

$400 million to $475 million

 

no change

Depreciation and amortization expense

 

 

$245 million to $250 million

 

no change

Conference Call Information

A conference call to discuss second quarter of fiscal 2023 results is scheduled for today, August 24, 2023, at 4:30 p.m. ET / 3:30 p.m. CT. Investors and analysts interested in participating in the call are invited to dial (877) 704-4453. The conference call will also be webcast live at A replay of the webcast will remain available for 90 days. A replay of the conference call will be available until 11:59 p.m. ET on September 7, 2023 and can be accessed by dialing (844) 512‑2921 and entering conference ID number 13739561.

About Ulta Beauty

At Ulta Beauty (NASDAQ: ULTA), the possibilities are beautiful. Ulta Beauty is the largest specialty U.S. beauty retailer and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products and salon services. In 1990, the Company reinvented the beauty retail experience by offering a new way to shop for beauty – bringing together All Things Beauty, All in One Place®. Today, Ulta Beauty operates 1,362 retail stores across 50 states 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 the Company’s current views with respect to, among other things, future events and financial performance. These statements can be identified 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 the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company or any other person that the future plans, estimates, targets, strategies or expectations contemplated by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation:

  • macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing labor pressures, transportation and shipping cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, profitability, and cash flows (including future uncertain impacts);

  • changes in the overall level of consumer spending and volatility in the economy, including as a result of the macroeconomic conditions and geopolitical events;

  • our ability to sustain our growth plans and successfully implement our long-range strategic and financial plan;

  • the ability to execute our operational excellence priorities, including continuous improvement, Project SOAR (our replacement enterprise resource planning platform), and supply chain optimization;

  • our ability to gauge beauty trends and react to changing consumer preferences in a timely manner;

  • the possibility that we may be unable to compete effectively in our highly competitive markets;

  • the possibility of significant interruptions in the operations of our distribution centers, fast fulfillment centers, and market fulfillment centers;

  • the possibility that cybersecurity or information security breaches and other disruptions could compromise our information or result in the unauthorized disclosure of confidential information;

  • the possibility of material disruptions to our information systems, including our Ulta.com website and mobile applications;

  • the failure to maintain satisfactory compliance with applicable privacy and data protection laws and regulations;

  • changes in the good relationships we have with our brand partners and/or our ability to continue to offer permanent or temporary exclusive products of our brand partners;

  • changes in the wholesale cost of our products and/or interruptions at our brand partners’ or third-party vendors’ operations;

  • future epidemics, pandemics or natural disasters could negatively impact sales;

  • the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues;

  • our ability to attract and retain key executive personnel;

  • the impact of climate change on our business operations and/or supply chain;

  • our ability to successfully execute our common stock repurchase program or implement future common stock repurchase programs;

  • a decline in operating results may lead to asset impairment and store closure charges; and

  • other risk factors detailed in the Company’s public filings with the Securities and Exchange Commission (the SEC), including risk factors contained in its Annual Report on Form 10‑K for the fiscal year ended January 28, 2023, as such may be amended or supplemented in its subsequently filed Quarterly Reports on Form 10-Q.

The Company’s 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 Beauty, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

13 Weeks Ended

 

 

July 29,

 

July 30,

 

 

2023

 

2022

 

 

(Unaudited)

 

(Unaudited)

Net sales

 

$

2,529,809

 

 

100.0

%

 

$

2,297,113

 

 

100.0

%

Cost of sales

 

 

1,536,197

 

 

60.7

%

 

 

1,368,949

 

 

59.6

%

Gross profit

 

 

993,612

 

 

39.3

%

 

 

928,164

 

 

40.4

%

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

600,692

 

 

23.7

%

 

 

534,459

 

 

23.3

%

Pre-opening expenses

 

 

1,278

 

 

0.1

%

 

 

2,277

 

 

0.1

%

Operating income

 

 

391,642

 

 

15.5

%

 

 

391,428

 

 

17.0

%

Interest income, net

 

 

(4,449

)

 

(0.2

%)

 

 

(108

)

 

(0.0

%)

Income before income taxes

 

 

396,091

 

 

15.7

%

 

 

391,536

 

 

17.0

%

Income tax expense

 

 

95,989

 

 

3.8

%

 

 

95,859

 

 

4.2

%

Net income

 

$

300,102

 

 

11.9

%

 

$

295,677

 

 

12.9

%

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

6.05

 

 

 

 

$

5.73

 

 

 

Diluted

 

$

6.02

 

 

 

 

$

5.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,617

 

 

 

 

 

51,607

 

 

 

Diluted

 

 

49,849

 

 

 

 

 

51,900

 

 

 

Exhibit 2

Ulta Beauty, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

26 Weeks Ended

 

 

July 29,

 

July 30,

 

 

2023

 

2022

 

 

(Unaudited)

 

 (Unaudited)

Net sales

 

$

5,164,072

 

 

100.0

%

 

$

4,643,014

 

100.0

%

Cost of sales

 

 

3,115,603

 

 

60.3

%

 

 

2,773,824

 

59.7

%

Gross profit

 

 

2,048,469

 

 

39.7

%

 

 

1,869,190

 

40.3

%

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

1,212,821

 

 

23.5

%

 

 

1,035,429

 

22.3

%

Pre-opening expenses

 

 

1,936

 

 

0.0

%

 

 

4,625

 

0.1

%

Operating income

 

 

833,712

 

 

16.1

%

 

 

829,136

 

17.9

%

Interest (income) expense, net

 

 

(11,797

)

 

(0.2

%)

 

 

293

 

0.0

%

Income before income taxes

 

 

845,509

 

 

16.4

%

 

 

828,843

 

17.9

%

Income tax expense

 

 

198,356

 

 

3.8

%

 

 

201,771

 

4.3

%

Net income

 

$

647,153

 

 

12.5

%

 

$

627,072

 

13.5

%

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

12.97

 

 

 

 

$

12.08

 

 

Diluted

 

$

12.90

 

 

 

 

$

12.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,885

 

 

 

 

 

51,928

 

 

Diluted

 

 

50,157

 

 

 

 

 

52,237

 

 

Exhibit 3

Ulta Beauty, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

July 29,

 

January 28,

 

July 30,

 

 

2023

 

2023

 

2022

 

 

(Unaudited)

 

 

 

 

(Unaudited)

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

388,627

 

$

737,877

 

$

434,226

Receivables, net

 

 

174,444

 

 

199,422

 

 

180,514

Merchandise inventories, net

 

 

1,815,539

 

 

1,603,451

 

 

1,666,130

Prepaid expenses and other current assets

 

 

110,524

 

 

130,246

 

 

123,014

Prepaid income taxes

 

 

30,114

 

 

38,308

 

 

39,029

Total current assets

 

 

2,519,248

 

 

2,709,304

 

 

2,442,913

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,073,144

 

 

1,009,273

 

 

912,017

Operating lease assets

 

 

1,549,146

 

 

1,561,263

 

 

1,509,246

Goodwill

 

 

10,870

 

 

10,870

 

 

10,870

Other intangible assets, net

 

 

718

 

 

1,312

 

 

1,075

Deferred compensation plan assets

 

 

40,087

 

 

35,382

 

 

33,393

Other long-term assets

 

 

55,547

 

 

43,007

 

 

36,480

Total assets

 

$

5,248,760

 

$

5,370,411

 

$

4,945,994

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

521,315

 

$

559,527

 

$

586,851

Accrued liabilities

 

 

328,247

 

 

444,278

 

 

323,939

Deferred revenue

 

 

354,253

 

 

394,677

 

 

316,571

Current operating lease liabilities

 

 

287,359

 

 

283,293

 

 

274,693

Total current liabilities

 

 

1,491,174

 

 

1,681,775

 

 

1,502,054

 

 

 

 

 

 

 

 

 

 

Non-current operating lease liabilities

 

 

1,593,040

 

 

1,619,883

 

 

1,582,003

Deferred income taxes

 

 

56,012

 

 

55,346

 

 

40,029

Other long-term liabilities

 

 

56,657

 

 

53,596

 

 

52,840

Total liabilities

 

 

3,196,883

 

 

3,410,600

 

 

3,176,926

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

2,051,877

 

 

1,959,811

 

 

1,769,068

Total liabilities and stockholders’ equity

 

$

5,248,760

 

$

5,370,411

 

$

4,945,994

Exhibit 4

Ulta Beauty, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

26 Weeks Ended

 

 

July 29,

 

July 30,

 

 

2023

 

2022

 

 

(Unaudited)

 

(Unaudited)

Operating activities

 

 

 

 

 

 

Net income

 

$

647,153

 

 

$

627,072

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

119,862

 

 

 

123,721

 

Non-cash lease expense

 

 

152,867

 

 

 

146,251

 

Deferred income taxes

 

 

666

 

 

 

336

 

Stock-based compensation expense

 

 

21,539

 

 

 

22,875

 

Loss on disposal of property and equipment

 

 

3,878

 

 

 

2,277

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

24,978

 

 

 

53,168

 

Merchandise inventories

 

 

(212,088

)

 

 

(166,912

)

Prepaid expenses and other current assets

 

 

19,722

 

 

 

(12,200

)

Income taxes

 

 

8,194

 

 

 

(45,906

)

Accounts payable

 

 

(38,752

)

 

 

40,051

 

Accrued liabilities

 

 

(102,763

)

 

 

(49,364

)

Deferred revenue

 

 

(40,424

)

 

 

(37,008

)

Operating lease liabilities

 

 

(163,527

)

 

 

(163,302

)

Other assets and liabilities

 

 

(12,497

)

 

 

(392

)

Net cash provided by operating activities

 

 

428,808

 

 

 

540,667

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(204,748

)

 

 

(120,500

)

Other investments

 

 

(1,687

)

 

 

(1,249

)

Net cash used in investing activities

 

 

(206,435

)

 

 

(121,749

)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Repurchase of common shares

 

 

(559,011

)

 

 

(434,448

)

Stock options exercised

 

 

9,147

 

 

 

24,521

 

Purchase of treasury shares

 

 

(21,759

)

 

 

(6,325

)

Net cash used in financing activities

 

 

(571,623

)

 

 

(416,252

)

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(349,250

)

 

 

2,666

 

Cash and cash equivalents at beginning of period

 

 

737,877

 

 

 

431,560

 

Cash and cash equivalents at end of period

 

$

388,627

 

 

$

434,226

 

Exhibit 5

Ulta Beauty, Inc.

Store Update

 

 

 

Total stores open

 

Number of stores

 

Number of stores

 

Total stores

 

 

at beginning of the

 

opened during the

 

closed during the

 

open at

Fiscal 2023

 

quarter

 

quarter

 

quarter

 

end of the quarter

1st Quarter

 

1,355

 

5

 

1

 

1,359

2nd Quarter

 

1,359

 

3

 

0

 

1,362

 

 

 

 

 

 

 

 

 

 

 

 

 

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 2023

 

the quarter

 

quarter

 

during the quarter

 

quarter

1st Quarter

 

14,200,403

 

54,495

 

9,984

 

14,244,914

2nd Quarter

 

14,244,914

 

27,530

 

0

 

14,272,444

Exhibit 6

Ulta Beauty, Inc.

Sales by Category

 

The following tables set forth the approximate percentage of net sales by primary category:

 

 

13 Weeks Ended

 

 

July 29,

 

July 30,

 

2023

 

2022

Cosmetics

 

40

%

 

42

%

Haircare products and styling tools

 

21

%

 

22

%

Skincare

 

20

%

 

17

%

Fragrance and bath

 

12

%

 

12

%

Services

 

4

%

 

4

%

Accessories and other

 

3

%

 

3

%

 

 

100

%

 

100

%

 

 

 

 

 

 

 

26 Weeks Ended

 

 

July 29,

 

July 30,

 

 

2023

 

2022

Cosmetics

 

42

%

 

43

%

Haircare products and styling tools

 

19

%

 

21

%

Skincare

 

20

%

 

17

%

Fragrance and bath

 

12

%

 

12

%

Services

 

4

%

 

4

%

Accessories and other

 

3

%

 

3

%

 

 

100

%

 

100

%

 

Investor Contacts:

Kiley Rawlins, CFA

Vice President, Investor Relations

krawlins@ulta.com

Media Contact:

Crystal Carroll

Director, Public Relations

ccarroll@ulta.com

Source: Ulta Beauty, Inc.


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