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| Ulta Beauty Announces Fourth Quarter Fiscal 2023 Results |
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| 4:05p ET March 14 '24 BusinessWire |
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--Comparable Sales Increased 2.5%
--Net Income of $394.4 Million or $8.08 Per Diluted Share
Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the fourteen-week period ("fourth quarter") and fifty-three-week period ("fiscal year") ended February 3, 2024, both of which contain one extra week ("53rd week") versus the comparable thirteen-week and fifty-two-week periods ended January 28, 2023.
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14 Weeks Ended 13 Weeks Ended 53 Weeks Ended 52 Weeks Ended
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February 3, January 28, February 3, January 28,
(Dollars in millions, except per share data) 2024 2024 2023 2024 2023
----------------------------------------------- -------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ----------------------------------------
Net sales $ 3,554.3 $ 3,226.8 $ 11,207.3 $ 10,208.6
Comparable sales (1) 2.5% 15.6% 5.7% 15.6%
Gross profit (as a percentage of net sales) 37.7% 37.6% 39.1% 39.6%
Selling, general and administrative expenses $ 820.4 $ 762.7 $ 2,694.6 $ 2,395.3
Operating income (as a percentage of net sales) 14.5% 13.9% 15.0% 16.1%
Diluted earnings per share $ 8.08 $ 6.68 $ 26.03 $ 24.01
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| (1) Comparable sales are based on a comparable number of weeks from the prior year.
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"We closed out a strong 2023 with better-than-expected fourth quarter financial performance. Our compelling holiday plans and thoughtfully curated assortment resonated with our guests and delivered healthy traffic, record brand awareness, and strong member growth. I am proud of how our teams drove these results while making meaningful progress on our multi-year, transformational investment agenda to enable new capabilities for future growth," said Dave Kimbell, chief executive officer. "We enter 2024 well-positioned to drive strong top and bottom-line growth, build on our foundational capabilities, and unlock further advantages of our differentiated model. While we are mindful the near-term macro environment remains dynamic, we are optimistic about the resiliency of the beauty category, energized by the growth opportunities ahead of us, and confident in our ability to deliver for our guests and our shareholders."
Kimbell continued, "International expansion represents an incremental, long-term opportunity for Ulta Beauty to extend our reach and leverage our differentiated value proposition. We have evaluated various operating models and partners, and geographies, and we are excited to announce the formation of a joint venture with Axo, a highly experienced operator of global brands, to launch and operate Ulta Beauty in Mexico in 2025."
Fourth Quarter of Fiscal 2023 Compared to Fourth Quarter of Fiscal 2022
Net sales increased 10.2% to $3.6 billion compared to $3.2 billion, primarily due to increased comparable sales, strong new store performance, strong growth in other revenue, and the benefit of an extra week of sales in fiscal 2023. Net sales in the 53rd week were approximately $181.9 million.
Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 2.5% compared to an increase of 15.6%, driven by a 4.5% increase in transactions and a 1.9% decrease in average ticket.
Gross profit increased 10.6% to $1.3 billion compared to $1.2 billion. As a percentage of net sales, gross profit increased to 37.7% compared to 37.6%, primarily due to strong growth in other revenue, lower shipping rates, and leverage of supply chain costs, largely offset by lower merchandise margin.
Selling, general and administrative (SG&A) expenses increased 7.6% to $820.4 million compared to $762.7 million. As a percentage of net sales, SG&A expenses decreased to 23.1% compared to 23.6%, primarily due to lower incentive compensation and leverage of marketing expenses and store payroll and benefits, partially offset by deleverage of corporate overhead due to strategic investments and store expenses.
Operating income increased 15.5% to $517.1 million, or 14.5% of net sales, compared to $447.6 million, or 13.9% of net sales.
Net interest income decreased to $3.3 million compared to $4.4 million due to interest paid on borrowings during the quarter.
The tax rate decreased to 24.2% compared to 24.6% primarily due to benefits from a decrease in state income taxes.
Net income increased 15.7% to $394.4 million compared to $340.8 million.
Diluted earnings per share increased 21.0% to $8.08, including $0.46 due to the extra week of sales, compared to $6.68, including a $0.02 benefit due to income tax accounting for stock-based compensation.
Full Year of Fiscal 2023 Compared to Full Year of Fiscal 2022
Net sales increased 9.8% to $11.2 billion compared to $10.2 billion, primarily due to increased comparable sales, strong new store performance, strong growth in other revenue, and the benefit of the 53rd week of sales in fiscal 2023.
Comparable sales increased 5.7% compared to an increase of 15.6%, driven by a 7.4% increase in transactions and a 1.5% decrease in average ticket.
Gross profit increased 8.3% to $4.4 billion compared to $4.0 billion. As a percentage of net sales, gross profit decreased to 39.1% compared to 39.6%, primarily due to lower merchandise margin and higher inventory shrink, partially offset by strong growth in other revenue and leverage of store fixed costs.
SG&A expenses increased 12.5% to $2.7 billion compared to $2.4 billion. As a percentage of net sales, SG&A expenses increased to 24.0% compared to 23.5%, primarily due to higher corporate overhead due to strategic investments, higher store payroll and benefits, higher marketing expenses, and higher store expenses, partially offset by lower incentive compensation.
Operating income increased 2.4% to $1.7 billion, or 15.0% of net sales, compared to $1.6 billion, or 16.1% of net sales.
Net interest income increased to $17.6 million compared to $4.9 million, due to higher average interest rates on cash balances.
The tax rate decreased to 23.9% compared to 24.4%, primarily due to a decrease in state income taxes and benefits from income tax accounting for stock-based compensation.
Net income increased 3.9% to $1.3 billion compared to $1.2 billion.
Diluted earnings per share increased 8.4% to $26.03, including a $0.14 benefit due to income tax accounting for stock-based compensation and a $0.46 benefit due to the 53rd week, compared to $24.01, including a $0.07 benefit due to income tax accounting for stock-based compensation.
Balance Sheet
Cash and cash equivalents at the end of the fourth quarter of fiscal 2023 totaled $766.6 million.
Merchandise inventories, net at the end of the fourth quarter of fiscal 2023 increased 8.6% to $1.7 billion compared to $1.6 billion at the end of the fourth quarter of fiscal 2022. The increase was primarily due to inventory to support new brand launches, 30 net new stores, increase in distribution center inventory primarily due to the opening of the new market fulfillment center in Greer, SC, and product cost increases.
As previously announced, during the third quarter of fiscal 2023, the Company borrowed $195.4 million on its revolving credit facility to support ongoing capital allocation priorities, including share repurchases and capital expenditures, and merchandise inventory growth. During the fourth quarter of fiscal 2023, the Company repaid all amounts borrowed, together with interest due. At the end of the fourth quarter of fiscal 2023, the Company had no borrowings outstanding under the revolving credit facility.
On March 13, 2024, the Company entered into an Amendment No. 3 to its Second Amended and Restated Loan Agreement, which amended and restated the existing agreement. The new loan agreement extends the maturity of the facility to March 13, 2029, provides maximum revolving loans equal to the lesser of $800 million or a percentage of eligible owned inventory, contains a $50 million sub-facility for letters of credit and allows the Company to increase the revolving facility by an additional $200 million.
Share Repurchase Program
During the fourth quarter of fiscal 2023, the Company repurchased 352,005 shares of its common stock at a cost of $159.5 million. During fiscal 2023, the Company repurchased 2.2 million shares of its common stock at a cost of $1.0 billion. As of February 3, 2024, $99.9 million remained available under the $2.0 billion share repurchase program announced in March 2022.
Since 2014, Ulta Beauty has returned $5.8 billion to shareholders through its share repurchase program, while continuing to make strategic growth investments.
On March 12, 2024, the Company's board of directors approved a new share repurchase authorization of $2.0 billion, which replaces the prior authorization implemented in March 2022. Under the new program, as under the previous program, the Company may repurchase outstanding shares of the Company's common stock from time to time through accelerated share repurchases, privately negotiated transactions, or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934. The new program has no expiration date but may be terminated by the Board at any time.
Store Update
Real estate activity in the fourth quarter of fiscal 2023 included 13 new stores located in Anaheim, CA; Brea, CA; Brenham, TX; Dartmouth, MA; Glassboro, NJ; Goldsboro, NC; Hialeah, FL; Jacksonville, FL; Land O'Lakes, FL; Missouri City, TX; Orange, CT; Orlando, FL; and Venice, FL. In addition, the Company relocated two stores, remodeled two stores, and closed two stores. During fiscal 2023, the Company opened 33 new stores, relocated seven stores, remodeled 18 stores, and closed three stores.
At the end of the fourth quarter of fiscal 2023, the Company operated 1,385 stores totaling 14.5 million square feet.
Fiscal 2024 Outlook
For fiscal 2024, the Company plans to:
| FY24 Outlook
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Net sales $11.7 billion to $11.8 billion
Comparable sales 4% to 5%
New stores, net 60-65
Remodel and relocation projects 40-45
Operating margin 14.0% to 14.3%
Diluted earnings per share $26.20 to $27.00
Share repurchases approximately $1 billion
Interest income approximately $11 million
Effective tax rate approximately 24.3%
Capital expenditures $415 million to $490 million
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Conference Call Information
A conference call to discuss fourth quarter of fiscal 2023 results is scheduled for today, March 14, 2024 at 4:30 p.m. ET / 3:30 p.m. CT. Investors and analysts who are interested in participating in the call are invited to dial (877) 704-4453. Participants may also listen to a real-time audio webcast of the conference call by visiting the Investor Relations section of the Company's website located at https://www.ulta.com/investor. A replay will be made available online approximately two hours following the live call for a period of 30 days.
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(R). Today, Ulta Beauty operates 1,385 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, elevated interest rates and recessionary concerns, as well as continuing labor cost pressures, and transportation and shipping cost pressures, 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, our ability to continue to obtain sufficient merchandise from our brand partners, and/or our ability to continue to offer permanent or temporary exclusive products of our brand partners;
our ability to effectively manage our inventory and protect against inventory shrink;
changes in the wholesale cost of our products and/or interruptions at our brand partners' or third-party vendors' operations;
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)
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14 Weeks Ended 13 Weeks Ended
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February 3, January 28,
2024 2023
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(Unaudited) (Unaudited)
Net sales $ 3,554,298 100.0% $ 3,226,773 100.0%
Cost of sales 2,213,734 62.3% 2,014,270 62.4%
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1,340,564 37.7% 1,212,503 37.6%
Gross profit
Selling, general and administrative expenses 820,360 23.1% 762,706 23.6%
Pre-opening expenses 3,114 0.1% 2,179 0.1%
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517,090 14.5% 447,618 13.9%
Operating income
Interest income, net (3,328) (0.1%) (4,378) (0.1%)
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520,418 14.6% 451,996 14.0%
Income before income taxes
Income tax expense 126,049 3.5% 111,245 3.4%
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$ 394,369 11.1% $ 340,751 10.6%
Net income
==================== ==================== ==================== ==================== ==================== ====================
Net income per common share:
$ 8.13 $ 6.73
Basic
$ 8.08 $ 6.68
Diluted
Weighted average common shares outstanding:
48,500 50,624
Basic
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Exhibit 2
Ulta Beauty, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
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53 Weeks Ended 52 Weeks Ended
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February 3, January 28,
2024 2023
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(Unaudited)
Net sales $ 11,207,303 100.0% $ 10,208,580 100.0%
Cost of sales 6,826,203 60.9% 6,164,070 60.4%
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4,381,100 39.1% 4,044,510 39.6%
Gross profit
Selling, general and administrative expenses 2,694,561 24.0% 2,395,299 23.5%
Pre-opening expenses 8,510 0.1% 10,601 0.1%
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
1,678,029 15.0% 1,638,610 16.1%
Operating income
Interest income, net (17,622) (0.2%) (4,934) (0.0%)
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1,695,651 15.1% 1,643,544 16.1%
Income before income taxes
Income tax expense 404,646 3.6% 401,136 3.9%
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$ 1,291,005 11.5% $ 1,242,408 12.2%
Net income
==================== ==================== ==================== ==================== ==================== ====================
Net income per common share:
$ 26.18 $ 24.17
Basic
$ 26.03 $ 24.01
Diluted
Weighted average common shares outstanding:
49,304 51,403
Basic
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Exhibit 3
Ulta Beauty, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
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February 3, January 28,
2024 2023
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(Unaudited)
Assets
Current assets:
$ 766,594 $ 737,877
Cash and cash equivalents
207,939 199,422
Receivables, net
1,742,136 1,603,451
Merchandise inventories, net
115,598 130,246
Prepaid expenses and other current assets
4,251 38,308
Prepaid income taxes
-------------------- -------------------- -------------------- --------------------
Total current assets 2,836,518 2,709,304
Property and equipment, net 1,182,335 1,009,273
Operating lease assets 1,574,530 1,561,263
Goodwill 10,870 10,870
Other intangible assets, net 510 1,312
Deferred compensation plan assets 43,516 35,382
Other long-term assets 58,732 43,007
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Total assets $ 5,707,011 $ 5,370,411
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Liabilities and stockholders' equity
Current liabilities:
$ 544,001 $ 559,527
Accounts payable
382,468 444,278
Accrued liabilities
436,591 394,677
Deferred revenue
283,821 283,293
Current operating lease liabilities
11,310 --
Accrued income taxes
-------------------- -------------------- -------------------- --------------------
Total current liabilities 1,658,191 1,681,775
Non-current operating lease liabilities 1,627,271 1,619,883
Deferred income taxes 85,921 55,346
Other long-term liabilities 56,300 53,596
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Total liabilities 3,427,683 3,410,600
Commitments and contingencies
Total stockholders' equity 2,279,328 1,959,811
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Exhibit 4
Ulta Beauty, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
| 53 Weeks Ended 52 Weeks Ended
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February 3, January 28,
2024 2023
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(Unaudited)
Operating activities
Net income $ 1,291,005 $ 1,242,408
Adjustments to reconcile net income to net cash provided by operating activities:
243,840 241,372
Depreciation and amortization
332,754 301,912
Non-cash lease expense
30,575 15,653
Deferred income taxes
48,246 43,044
Stock-based compensation expense
11,419 6,688
Loss on disposal of property and equipment
Change in operating assets and liabilities:
(8,517) 34,260
Receivables
(138,685) (104,233)
Merchandise inventories
14,648 (19,432)
Prepaid expenses and other current assets
45,367 (45,182)
Income taxes
(20,873) 8,309
Accounts payable
(62,238) 48,249
Accrued liabilities
41,914 41,098
Deferred revenue
(338,105) (324,500)
Operating lease liabilities
(15,084) (7,731)
Other assets and liabilities
-------------------- -------------------- -------------------- --------------------
Net cash provided by operating activities 1,476,266 1,481,915
Investing activities
Capital expenditures (435,267) (312,126)
Other investments (6,158) (2,458)
-------------------- -------------------- -------------------- --------------------
Net cash used in investing activities (441,425) (314,584)
Financing activities
Borrowings from credit facility 195,400 --
Payments on credit facility (195,400) --
Repurchase of common shares (995,738) (900,033)
Stock options exercised 12,176 46,011
Purchase of treasury shares (22,562) (6,992)
-------------------- -------------------- -------------------- --------------------
Net cash used in financing activities (1,006,124) (861,014)
Net increase in cash and cash equivalents 28,717 306,317
Cash and cash equivalents at beginning of year 737,877 431,560
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Exhibit 5
Ulta Beauty, Inc.
Store Update
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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
3rd Quarter 1,362 12 0 1,374
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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
3rd Quarter 14,272,444 133,421 0 14,405,865
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Exhibit 6
Ulta Beauty, Inc.
Sales by Category
The following tables set forth the approximate percentage of net sales by primary category:
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14 Weeks Ended 13 Weeks Ended
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February 3, January 28,
2024 2023
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Cosmetics 39% 40%
Skincare 18% 16%
Haircare products and styling tools 18% 20%
Fragrance and bath 19% 18%
Services 3% 3%
Accessories and other 3% 3%
-------------------- --------------------
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53 Weeks Ended 52 Weeks Ended
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February 3, January 28,
2024 2023
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Cosmetics 41% 42%
Skincare 19% 17%
Haircare products and styling tools 19% 21%
Fragrance and bath 15% 14%
Services 3% 3%
Accessories and other 3% 3%
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View source version on businesswire.com: https://www.businesswire.com/news/home/20240314247150/en/
SOURCE: Ulta Beauty
<img alt="" src="https://cts.businesswire.com/ct/CT?id=bwnews&sty=20240314247150r1&sid=cmtx6&distro=nx&lang=en" style="width:0;height:0" />
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Investor Contact:
Kiley Rawlins, CFA
Vice President, Investor Relations
krawlins@ulta.com
Media Contact:
Crystal Carroll
Senior Director, Public Relations
ccarroll@ulta.com
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