Ulta Beauty Announces Fourth Quarter 2016 Results
Total Sales Increased 24.6%
Comparable Sales Increased 16.6%
Diluted EPS Increased 32.5% to $2.24
Company Provides Outlook for Fiscal Year 2017
BOLINGBROOK, Ill.–(BUSINESS WIRE)–Ulta Beauty (NASDAQ:ULTA) today announced financial results for the
thirteen week period (“Fourth Quarter”) and fifty-two week period
(“Fiscal Year”) ended January 28, 2017, which compares to the same
periods ended January 30, 2016.
“The Ulta Beauty team delivered outstanding fourth quarter results,
capping an exceptional year of sales and earnings growth while investing
to drive market share gains and create sustainable long term shareholder
value,” said Mary Dillon, Chief Executive Officer. “We are confident in
our outlook for continued success in 2017 as we execute our strategy to
be a destination for All Things Beauty, All in One Place™. Our new brand
pipeline is very healthy and we are particularly excited to announce the
addition of the Estée Lauder Companies’ MAC brand, which will launch on
Ulta.com and begin to roll out to stores this spring.”
For the Fourth Quarter
-
Net sales increased 24.6% to $1,580.6 million from $1,268.3 million in
the fourth quarter of fiscal 2015; -
Comparable sales (sales for stores open at least 14 months and
e-commerce sales) increased 16.6% compared to an increase of 12.5% in
the fourth quarter of fiscal 2015. The 16.6% comparable sales increase
was driven by 10.9% growth in transactions and 5.7% growth in average
ticket; -
Retail comparable sales increased 12.8%, including salon comparable
sales growth of 8.8%; -
Salon sales increased 15.2% to $62.9 million from $54.6 million in the
fourth quarter of fiscal 2015; -
E-commerce sales grew 63.4% to $154.9 million from $94.8 million in
the fourth quarter of fiscal 2015, representing 380 basis points of
the total company comparable sales increase of 16.6%; -
Gross profit as a percentage of net sales decreased 10 basis points to
34.5% from 34.6% in the fourth quarter of fiscal 2015, due to planned
supply chain investments and a higher mix of e-commerce sales, partly
offset by leverage in fixed store costs. In the fourth quarter of
fiscal 2015, the company benefitted from a significant reduction in
promotional activity, contributing to gross profit improvement of 120
basis points. Promotional levels in the fourth quarter of 2016 were in
line with the prior year period; -
Selling, general and administrative (SG&A) expense as a percentage of
net sales decreased 110 basis points to 20.0%, compared to 21.1% in
the fourth quarter of fiscal 2015, due to leverage of advertising and
corporate overhead expenses attributed to higher sales volume; -
Pre-opening expenses increased to $4.4 million, compared to $1.4
million in the fourth quarter of fiscal 2015. Real estate activity in
the fourth quarter of fiscal 2016 included 25 new stores and one
remodel compared to 14 new stores and one relocation in the fourth
quarter of fiscal 2015; -
Operating income increased 32.3% to $224.2 million, or 14.2% of net
sales, compared to $169.5 million, or 13.4% of net sales, in the
fourth quarter of fiscal 2015; -
Tax rate increased to 37.5% compared to 36.5% in the fourth quarter of
fiscal 2015; -
Net income increased 30.0% to $140.2 million compared to $107.8
million in the fourth quarter of fiscal 2015; and -
Income per diluted share increased 32.5% to $2.24 compared to $1.69 in
the fourth quarter of fiscal 2015.
For the Fiscal Year 2016
-
Net sales increased 23.7% to $4,854.7 million from $3,924.1 million in
fiscal 2015; -
Comparable sales (sales for stores open at least 14 months and
e-commerce sales) increased 15.8% compared to an increase of 11.8% in
fiscal 2015. The 15.8% comparable sales increase was driven by 10.7%
growth in transactions and 5.1% growth in average ticket; -
Retail comparable sales increased 13.4%, including salon comparable
sales growth of 8.7%; -
Salon sales increased 15.2% to $241.1 million from $209.2 million in
fiscal 2015; -
E-commerce comparable sales grew 56.2% to $345.3 million from $221.1
million in fiscal 2015, representing 240 basis points of the total
company comparable sales increase of 15.8%; -
Gross profit as a percentage of net sales increased 70 basis points to
36.0% from 35.3% in fiscal 2015; -
SG&A expense as a percentage of net sales increased 10 basis points to
22.1% compared to 22.0% in fiscal 2015; -
Pre-opening expenses increased to $18.6 million, compared to $14.7
million in fiscal 2015. Real estate activity in fiscal 2016 included
104 new stores, two relocations and twelve remodels compared to 103
new stores, five relocations and four remodels in fiscal 2015; -
Operating income increased 29.3% to $654.8 million, or 13.5% of net
sales, compared to $506.3 million, or 12.9% of net sales, in fiscal
2015; - Tax rate increased to 37.5% compared to 36.9% in fiscal 2015;
-
Net income increased 28.0% to $409.8 million compared to $320.0
million in fiscal 2015; and -
Income per diluted share increased 30.9% to $6.52 compared to $4.98 in
fiscal 2015.
Balance Sheet
Merchandise inventories at the end of the fourth quarter of fiscal 2016
totaled $944.0 million, compared to $761.8 million at the end of the
fourth quarter of fiscal 2015, representing an increase of $182.2
million. Average inventory per store increased 11.2%, compared to the
fourth quarter of fiscal 2015. The increase in inventory was primarily
driven by 100 net new stores, the scaling up of the Greenwood, Indiana
and the opening of the Dallas, Texas distribution centers, investments
in inventory to ensure high in-stock levels to support sales growth, and
incremental inventory for new brands and the expansion of certain
prestige brands.
The Company ended the fourth quarter of fiscal 2016 with $415.0 million
in cash and short-term investments.
Share Repurchase Program
During fiscal 2016, including the shares repurchased under the 2016
Accelerated Share Repurchase Program and activity under the 10b5-1 plan,
the Company has repurchased 1,639,226 shares of its stock at a cost of
$344.3 million at an average price of approximately $210 per share. As
of January 28, 2017, approximately $101 million remained available under
the $425 million share repurchase program announced in March 2016.
The Company’s board of directors approved a new share repurchase
authorization of $425 million, effective March 14, 2017, which replaces
the prior authorization implemented in March 2016.
Store Expansion
During the fourth quarter, the Company opened 25 stores located in
Albany, NY; Bellingham, MA; Bellingham, WA; Chapel Hill, NC; Charlotte,
NC; Chico, CA; Cypress, TX; Dallas, TX; Dobbs Ferry, NY; Eagan, MN;
Enid, OK; Hemet, CA; Hoffman Estates, IL; Huntington Beach, CA; Johnson
City, TN; La Quinta, CA; Minot, ND; Newtown Square, PA; Parma, OH;
Phillipsburg, NJ; San Francisco, CA; San Jose, CA; Simi Valley, CA;
Taunton, MA; and Yorktown Heights, NY. The Company ended the fourth
quarter with 974 stores and square footage of 10,271,184, representing
an 11% increase in square footage compared to the fourth quarter of
fiscal 2015.
Outlook
For fiscal 2017, the Company plans to:
-
achieve comparable sales growth of approximately 8% to 10%, including
the impact of the e-commerce business; - grow e-commerce sales in the 40% range;
- open approximately 100 net new stores;
- remodel 13 locations;
-
deliver earnings per share growth in the low twenties percentage
range, including the impact of the 53rd week and the impact of
approximately $300 million in share repurchases; and -
incur capital expenditures in the $460 million range in fiscal 2017,
compared to $374 million in fiscal 2016. The planned increase in
capital expenditures includes approximately $80 million to fund
prestige brand expansions.
For the first quarter of fiscal 2017, the Company currently expects net
sales in the range of $1,244 million to $1,265 million, compared to
actual net sales of $1,073.7 million in the first quarter of fiscal
2016. Comparable sales for the first quarter of 2017, including
e-commerce sales, are expected to increase 9% to 11%. The Company
reported a comparable sales increase of 15.2% in the first quarter of
2016.
Income per diluted share for the first quarter of fiscal 2017 is
estimated to be in the range of $1.75 to $1.80. This compares to income
per diluted share for the first quarter of fiscal 2016 of $1.45.
Conference Call Information
A conference call to discuss fourth quarter results is scheduled for
today, March 9, 2017 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 March 23, 2017 and can be accessed by
dialing (844) 512-2921 and entering conference ID number 13654550.
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 approximately 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 January 28, 2017 Ulta Beauty operates 974 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 Beauty, Inc. | ||||||||||||||
Consolidated Statements of Income | ||||||||||||||
(In thousands, except per share data) | ||||||||||||||
13 Weeks Ended | 13 Weeks Ended | |||||||||||||
January 28, | January 30, | |||||||||||||
2017 | 2016 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Net sales | $ | 1,580,574 | 100.0 | % | $ | 1,268,295 | 100.0 | % | ||||||
Cost of sales | 1,035,666 | 65.5 | % | 829,259 | 65.4 | % | ||||||||
Gross profit | 544,908 | 34.5 | % | 439,036 | 34.6 | % | ||||||||
Selling, general and administrative expenses | 316,266 | 20.0 | % | 268,169 | 21.1 | % | ||||||||
Pre-opening expenses | 4,412 | 0.3 | % | 1,381 | 0.1 | % | ||||||||
Operating income | 224,230 | 14.2 | % | 169,486 | 13.4 | % | ||||||||
Interest income, net | (116 | ) | 0.0 | % | (273 | ) | 0.0 | % | ||||||
Income before income taxes | 224,346 | 14.2 | % | 169,759 | 13.4 | % | ||||||||
Income tax expense | 84,128 | 5.3 | % | 61,936 | 4.9 | % | ||||||||
Net income | $ | 140,218 | 8.9 | % | $ | 107,823 | 8.5 | % | ||||||
Net income per common share: | ||||||||||||||
Basic | $ | 2.25 | $ | 1.69 | ||||||||||
Diluted | $ | 2.24 | $ | 1.69 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 62,201 | 63,646 | ||||||||||||
Diluted | 62,544 | 63,967 |
Exhibit 2 |
||||||||||||||
Ulta Beauty, Inc. | ||||||||||||||
Consolidated Statements of Income | ||||||||||||||
(In thousands, except per share data) | ||||||||||||||
52 Weeks Ended | 52 Weeks Ended | |||||||||||||
January 28, | January 30, | |||||||||||||
2017 | 2016 | |||||||||||||
(Unaudited) | ||||||||||||||
Net sales | $ | 4,854,737 | 100.0 | % | $ | 3,924,116 | 100.0 | % | ||||||
Cost of sales | 3,107,508 | 64.0 | % | 2,539,783 | 64.7 | % | ||||||||
Gross profit | 1,747,229 | 36.0 | % | 1,384,333 | 35.3 | % | ||||||||
Selling, general and administrative expenses | 1,073,834 | 22.1 | % | 863,354 | 22.0 | % | ||||||||
Pre-opening expenses | 18,571 | 0.4 | % | 14,682 | 0.4 | % | ||||||||
Operating income | 654,824 | 13.5 | % | 506,297 | 12.9 | % | ||||||||
Interest income, net | (890 | ) | 0.0 | % | (1,143 | ) | 0.0 | % | ||||||
Income before income taxes | 655,714 | 13.5 | % | 507,440 | 12.9 | % | ||||||||
Income tax expense | 245,954 | 5.1 | % | 187,432 | 4.8 | % | ||||||||
Net income | $ | 409,760 | 8.4 | % | $ | 320,008 | 8.2 | % | ||||||
Net income per common share: | ||||||||||||||
Basic | $ | 6.55 | $ | 5.00 | ||||||||||
Diluted | $ | 6.52 | $ | 4.98 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 62,519 | 63,949 | ||||||||||||
Diluted | 62,851 | 64,275 |
Exhibit 3 |
||||||
Ulta Beauty, Inc. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(In thousands) | ||||||
January 28, | January 30, | |||||
2017 | 2016 | |||||
(Unaudited) | ||||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 385,010 | $ | 345,840 | ||
Short-term investments | 30,000 | 130,000 | ||||
Receivables, net | 88,631 | 64,992 | ||||
Merchandise inventories, net | 943,975 | 761,793 | ||||
Prepaid expenses and other current assets | 88,621 | 72,548 | ||||
Total current assets | 1,536,237 | 1,375,173 | ||||
Property and equipment, net | 1,004,358 | 847,600 | ||||
Deferred compensation plan assets | 11,283 | 8,145 | ||||
Total assets | $ | 2,551,878 | $ | 2,230,918 | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 259,518 | $ | 196,174 | ||
Accrued liabilities | 260,854 | 187,351 | ||||
Accrued income taxes | 8,971 | 12,702 | ||||
Total current liabilities | 529,343 | 396,227 | ||||
Deferred rent | 366,191 | 321,789 | ||||
Deferred income taxes | 86,498 | 59,527 | ||||
Other long-term liabilities | 19,628 | 10,489 | ||||
Total liabilities | 1,001,660 | 788,032 | ||||
Commitments and contingencies | ||||||
Total stockholders’ equity | 1,550,218 | 1,442,886 | ||||
Total liabilities and stockholders’ equity | $ | 2,551,878 | $ | 2,230,918 |
Exhibit 4 |
||||||||
Ulta Beauty, Inc. | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
52 Weeks Ended | 52 Weeks Ended | |||||||
January 28, | January 30, | |||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Operating activities | ||||||||
Net income | $ | 409,760 | $ | 320,008 | ||||
Adjustments to reconcile net income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization | 210,295 | 165,049 | ||||||
Deferred income taxes | 26,971 | 5,809 | ||||||
Non-cash stock compensation charges | 19,340 | 15,594 | ||||||
Excess tax benefits from stock-based compensation | (9,053 | ) | (9,497 | ) | ||||
Loss on disposal of property and equipment | 9,140 | 3,690 | ||||||
Change in operating assets and liabilities: | ||||||||
Receivables | (23,639 | ) | (12,552 | ) | ||||
Merchandise inventories | (182,182 | ) | (180,564 | ) | ||||
Prepaid expenses and other current assets | (16,073 | ) | (6,000 | ) | ||||
Income taxes | 5,322 | 2,795 | ||||||
Accounts payable | 63,344 | 5,396 | ||||||
Accrued liabilities | 71,057 | 37,926 | ||||||
Deferred rent | 44,402 | 27,662 | ||||||
Other assets and liabilities | 6,001 | 558 | ||||||
Net cash provided by operating activities | 634,685 | 375,874 | ||||||
Investing activities | ||||||||
Purchases of short-term investments | (90,000 | ) | (130,000 | ) | ||||
Proceeds from short-term investments | 190,000 | 150,209 | ||||||
Purchases of property and equipment | (373,747 | ) | (299,167 | ) | ||||
Net cash used in investing activities | (273,747 | ) | (278,958 | ) | ||||
Financing activities | ||||||||
Repurchase of common shares | (344,275 | ) | (167,396 | ) | ||||
Stock options exercised | 16,293 | 19,646 | ||||||
Excess tax benefits from stock-based compensation | 9,053 | 9,497 | ||||||
Purchase of treasury shares | (2,839 | ) | (1,972 | ) | ||||
Net cash used in financing activities | (321,768 | ) | (140,225 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 39,170 | (43,309 | ) | |||||
Cash and cash equivalents at beginning of period | 345,840 | 389,149 | ||||||
Cash and cash equivalents at end of period | $ | 385,010 | $ | 345,840 |
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 | ||||
3rd Quarter | 907 | 42 | 0 | 949 | ||||
4th Quarter | 949 | 25 | 0 | 974 | ||||
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 | ||||
3rd Quarter | 9,555,192 | 456,950 | 0 | 10,012,142 | ||||
4th Quarter | 10,012,142 | 259,042 | 0 | 10,271,184 | ||||
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