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8-K - 8-K - Ulta Salon, Cosmetics & Fragrance, Inc.d446005d8k.htm

Exhibit 99.1

 

LOGO

Company Contacts:

Scott Settersten

Chief Financial Officer

(630) 410-4807

Laurel Lefebvre

Vice President, Investor Relations

(630) 410-5230

Media Contact:

ICR, Inc.

Alecia Pulman

(203) 682-8224

 

ULTA BEAUTY ANNOUNCES THIRD QUARTER 2012 RESULTS

Total Sales Increased 22.4%

Comparable Store Sales Increased 8.4%

EPS Increased 40.5% to $0.59

Full Year 2012 EPS Guidance Raised to $2.64 to $2.66

Bolingbrook, IL – November 29, 2012 – Ulta Beauty [NASDAQ:ULTA] today announced financial results for the thirteen week period (“Third Quarter”) and thirty-nine week period (“First Nine Months”) ended October 27, 2012, which compares to the same periods ended October 29, 2011.

For the Third Quarter:

 

   

Net sales increased 22.4% to $505.6 million from $413.1 million in the third quarter of fiscal 2011;

 

   

Comparable store sales (sales for stores open at least 14 months) increased 8.4% compared to an increase of 9.6% in the third quarter of fiscal 2011;

 

   

Gross profit increased 60 basis points to 36.7% from 36.1% in the third quarter of fiscal 2011;

 

   

Selling, general and administrative (SG&A) expense as a percentage of net sales decreased 120 basis points to 23.3% compared to 24.5% in the third quarter of fiscal 2011;

 

   

Preopening expenses increased to $6.3 million, compared to $4.0 million in the third quarter of fiscal 2011. Real estate activity in the third quarter included 49 new stores, one relocation and 11 remodels compared to 28 new stores and one relocation in the third quarter of fiscal 2011;


   

Operating income increased 38.6% to $61.3 million, or 12.1% of net sales, compared to $44.2 million, or 10.7% of net sales, in the third quarter of fiscal 2011;

 

   

The tax rate of 37.7% reflects $0.01 per diluted share benefit compared to the third quarter of fiscal 2011 driven primarily by stock option exercises;

 

   

Net income increased 42.5% to $38.2 million compared to $26.8 million in the third quarter of fiscal 2011; and

 

   

Income per diluted share increased 40.5% to $0.59 compared to $0.42 in the third quarter of fiscal 2011.

Chuck Rubin, President and Chief Executive Officer, stated, “Ulta drove better than expected sales growth and operating margin improvement to deliver outstanding performance in the third quarter. We gained market share across all of our major product categories through our disciplined 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 including Ulta.com. Ulta’s third quarter underscores our team’s strength in execution: we opened 49 stores, increasing Ulta’s store base by 10% during a single quarter, and we completed most of the previously announced prestige brand boutiques. We ended the quarter with Lancôme boutiques in 79 of our stores and Clinique boutiques in 42 stores. Looking ahead to next year, based on the high quality of available real estate and our team’s proven ability to execute, we expect to exceed our long-term plans for 15% to 20% annual store growth and currently plan to open approximately 125 stores in 2013, representing 22% square footage growth. We are confident that Ulta will continue to grow its position as a beauty and trend authority and drive strong sales and profit growth in the quarters and years to come.”

For the First Nine Months:

 

   

Net sales increased 22.4% to $1,461.4 million from $1,193.6 million in the first nine months of fiscal 2011;

 

   

Comparable store sales (sales for stores open at least 14 months) increased 9.3% compared to an increase of 10.7% in the first nine months of fiscal 2011;

 

   

Gross profit increased 80 basis points to 35.9% from 35.1% in the first nine months of fiscal 2011;

 

   

SG&A expense as a percentage of net sales decreased 110 basis points to 22.9% compared to 24.0% in the first nine months of fiscal 2011;

 

   

Pre-opening expense increased to $12.9 million, compared to $9.0 million in the first nine months of fiscal 2011. Real estate activity for the first nine months included 89 new stores, three relocations and 20 remodels compared to 54 new stores, two relocations and 17 remodeled stores in the first nine months of fiscal 2011;

 

   

Operating income increased 43.3% to $176.2 million, or 12.1% of net sales, compared to $122.9 million, or 10.3% of net sales, in the first nine months of fiscal 2011;

 

   

The tax rate was 38.6% compared to 39.6% for the first nine months of fiscal 2011;

 

   

Net income increased 46.0% to $108.0 million compared to $74.0 million in the first nine months of fiscal 2011; and

 

   

Income per diluted share increased 43.6% to $1.68 compared to $1.17 in the first nine months of fiscal 2011.


Balance Sheet and Cash Flow

Merchandise inventories at the end of the third quarter totaled $462.8 million, compared to $354.9 million at the end of the third quarter of fiscal 2011, representing an increase of $107.9 million. The increase in inventory was primarily due to the 95 net new stores opened since October 29, 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 increased 7.3% compared to the prior year. The increase in average inventory per store reflects the Company’s normal holiday inventory build, incremental inventory related to the recently added prestige brand boutiques, as well as strategic inventory investments in core product categories to ensure strong in-stock levels throughout the holiday season and into next year.

The Company did not utilize its credit facility during the nine month period ended October 27, 2012.

Store Expansion

During the third quarter, the Company opened 49 stores located in Arlington, TX; Bluffton, SC; Boca Raton, FL; Braintree, MA; Clearwater, FL; Columbia, SC (Cross Hill); Culver City, CA; Davie, FL; DeKalb, IL; El Cajon, CA; Florence, AL; Gainesville, FL; Garden City, NY; Grandville, MI; Hanover, PA; Houma, LA; Huntington Station, NY; Knoxville, TN; Lafayette, LA; Lee’s Summit, MO; Lincoln, NE; Little Rock, AR; Livonia, MI; Logan, UT; Long Beach, CA; McDonough, GA; Medford, OR; Milford, CT; Napa, CA; Newport Beach, CA; Odessa, TX; Pensacola, FL; Puyallup, WA; Rib Mountain, WI; Richfield, MN; Rosenburg, TX; San Diego, CA (Mission Valley); Sandusky, OH; Seal Beach, CA; Solon, OH; Spartanburg, SC; Spring, TX; Springfield, PA; Stow, OH; Traverse City, MI; Warsaw, IN; Waukesha, WI; Westminster, CO and Winchester, VA and relocated one store in D’iberville, MS. In addition, the Company closed one store. The Company ended the third quarter with 537 stores and square footage of 5,703,197, which represents a 22% increase in square footage compared to the third quarter of fiscal 2011.

Outlook

For the fourth quarter of fiscal 2012, the Company currently expects net sales in the range of $742 million to $754 million, compared to actual net sales of $582.5 million in the fourth quarter of fiscal 2011. This assumes comparable store sales increase 5% to 7%, and includes the impact of Hurricane Sandy. Comparable store sales increased 11.5% in the fourth quarter of 2011.

Income per diluted share for the fourth quarter of fiscal 2012 is estimated to be in the range of $0.96 to $0.98. This compares to income per diluted share for fourth quarter of fiscal 2011 of $0.73.

For fiscal 2012, the Company plans to:

 

   

achieve comparable store sales growth of approximately 8%, assuming the midpoint of the guidance range for the fourth quarter, 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 $2.64 to $2.66, including the negative impact of approximately $0.07 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;

 

   

expand square footage by 23% with the opening of 101 net new stores;

 

   

remodel 21 locations; and

 

   

generate free cash flow.

Conference Call Information

A conference call to discuss third quarter results is scheduled for today, November 29, 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 December 6, 2012 and can be accessed by dialing (877) 870-5176 and entering conference ID number 403787.

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 October 27, 2012, Ulta operates 537 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  
     October 27,
2012
    October 29,
2011
 
     (Unaudited)     (Unaudited)  

Net sales

   $ 505,640         100.0   $ 413,067         100.0

Cost of sales

     320,147         63.3     263,884         63.9
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     185,493         36.7     149,183         36.1

Selling, general and administrative expense

     117,934         23.3     100,997         24.5

Pre-opening expenses

     6,252         1.2     3,958         1.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     61,307         12.1     44,228         10.7

Interest expense

     39         0.0     176         0.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Income before income taxes

     61,268         12.1     44,052         10.7

Income tax expense

     23,117         4.6     17,284         4.2
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 38,151         7.5   $ 26,768         6.5
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income per common share:

          

Basic

   $ 0.60         $ 0.44      

Diluted

   $ 0.59         $ 0.42      

Weighted average common shares outstanding:

          

Basic

     63,484           61,451      

Diluted

     64,483           63,419      


Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.

Statements of Income

(In thousands, except per share amounts)

 

     39 Weeks Ended     39 Weeks Ended  
     October 27,
2012
    October 29,
2011
 
     (Unaudited)     (Unaudited)  

Net sales

   $ 1,461,421         100.0   $ 1,193,640         100.0

Cost of sales

     937,391         64.1     775,265         64.9
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     524,030         35.9     418,375         35.1

Selling, general and administrative expense

     334,917         22.9     286,423         24.0

Pre-opening expenses

     12,901         0.9     9,004         0.8
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     176,212         12.1     122,948         10.3

Interest expense

     164         0.0     496         0.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Income before income taxes

     176,048         12.0     122,452         10.3

Income tax expense

     68,031         4.7     48,483         4.1
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 108,017         7.4   $ 73,969         6.2
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income per common share:

          

Basic

   $ 1.71         $ 1.21      

Diluted

   $ 1.68         $ 1.17      

Weighted average common shares outstanding:

          

Basic

     63,016           61,044      

Diluted

     64,285           63,173      

Dividends declared per common share

   $ 1.00         $ —        


Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.

Condensed Balance Sheets

(In thousands)

 

     October 27,
2012
     January 28,
2012
     October 29,
2011
 
     (Unaudited)             (Unaudited)  

Assets

        

Current assets:

        

Cash and cash equivalents

   $ 191,724       $ 253,738       $ 130,657   

Receivables, net

     36,649         26,153         21,080   

Merchandise inventories, net

     462,833         244,647         354,891   

Prepaid expenses and other current assets

     50,197         43,430         40,223   

Prepaid income taxes

     13,417         —           505   

Deferred income taxes

     11,261         12,264         8,922   
  

 

 

    

 

 

    

 

 

 

Total current assets

     766,081         580,232         556,278   

Property and equipment, net

     467,165         376,985         373,794   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,233,246       $ 957,217       $ 930,072   
  

 

 

    

 

 

    

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Accounts payable

   $ 185,177       $ 86,442       $ 134,043   

Accrued liabilities

     90,354         74,411         81,116   

Accrued income taxes

     —           4,002         —     
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     275,531         164,855         215,159   

Deferred rent

     202,265         163,463         161,023   

Deferred income taxes

     48,450         44,195         29,458   
  

 

 

    

 

 

    

 

 

 

Total liabilities

     526,246         372,513         405,640   

Commitments and contingencies

        

Total stockholders’ equity

     707,000         584,704         524,432   
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,233,246       $ 957,217       $ 930,072   
  

 

 

    

 

 

    

 

 

 


Exhibit 4

Ulta Salon, Cosmetics & Fragrance, Inc.

Statements of Cash Flows

(In thousands)

 

     39 Weeks Ended  
     October 27,
2012
    October 29,
2011
 
     (Unaudited)  

Operating activities

    

Net income

   $ 108,017      $ 73,969   

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

    

Depreciation and amortization

     64,832        55,625   

Deferred income taxes

     5,258        (568

Non-cash stock compensation charges

     9,721        8,223   

Excess tax benefits from stock-based compensation

     (41,343     (18,127

Loss on disposal of property and equipment

     430        612   

Change in operating assets and liabilities:

    

Receivables

     (10,496     1,212   

Merchandise inventories

     (218,186     (136,375

Prepaid expenses and other current assets

     (6,767     (7,433

Income taxes

     23,924        28,306   

Accounts payable

     98,735        46,950   

Accrued liabilities

     4,531        (1,385

Deferred rent

     38,802        26,451   
  

 

 

   

 

 

 

Net cash provided by operating activities

     77,458        77,460   

Investing activities

    

Purchases of property and equipment

     (144,030     (97,695
  

 

 

   

 

 

 

Net cash used in investing activities

     (144,030     (97,695

Financing activities

    

Dividends paid

     (62,482     —     

Excess tax benefits from stock-based compensation

     41,343        18,127   

Stock options exercised

     25,776        21,580   

Common stock repurchased

     (79     —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     4,558        39,707   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (62,014     19,472   

Cash and cash equivalents at beginning of period

     253,738        111,185   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 191,724      $ 130,657   
  

 

 

   

 

 

 


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   

3rd Quarter

     489         49         1         537   

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   

3rd Quarter

     5,188,128         525,203         10,134         5,703,197