Net Sales of $2.0 Billion Compared to $1.2
Billion in the Year-Ago Quarter
Comparable Sales Increased 56.3%
Net Income of $250.9 Million or $4.56 Per
Diluted Share
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 31, 2021
compared to the same periods ended August 1, 2020.
13 Weeks Ended
July 31,
August 1,
August 3,
(Dollars in
millions)
2021
2020
2019
Net sales
$
1,967.2
$
1,228.0
$
1,666.6
Comparable sales
56.3%
(26.7)%
6.2%
Gross profit (as a percentage of net
sales)
40.6%
26.8%
36.4%
Selling, general and administrative
expenses
$
464.3
$
271.6
$
392.8
Operating income (as a percentage of net
sales)
16.9%
1.1%
12.5%
Diluted earnings per share
$
4.56
$
0.14
$
2.76
New store openings, net
6
—
17
“The Ulta Beauty team delivered strong results for the second
quarter. This performance reflects the recovery of the beauty
category, investments and choices we’ve made over the last year to
adapt to the market disruption and strengthen our leadership
position, and the ongoing efforts of our associates to deliver
great experiences for our guests,” said Dave Kimbell, chief
executive officer. “Our value proposition is strong, and we are
evolving and innovating to lead in the new beauty landscape,
capture additional market share, and drive profitable growth.”
For the Second Quarter of Fiscal
2021
- Net sales increased 60.2% to $2.0 billion compared to $1.2
billion in the second quarter of fiscal 2020 due to the favorable
impact from stronger consumer confidence and fewer COVID-19
restrictions, compared to the second quarter of fiscal 2020.
- Comparable sales (sales for stores open at least 14 months,
including stores temporarily closed due to COVID-19, and e-commerce
sales) increased 56.3% compared to a decrease of 26.7% in the
second quarter of fiscal 2020, driven by a 52.5% increase in
transactions and a 2.5% increase in average ticket. Compared to the
second quarter of fiscal 2019, comparable sales increased
13.1%.
- Gross profit increased to $798.0 million compared to $329.0
million in the second quarter of fiscal 2020. As a percentage of
net sales, gross profit increased to 40.6% compared to 26.8% in the
second quarter of fiscal 2020, primarily due to leverage of fixed
costs, improvement in merchandise margins, favorable channel mix
shifts, and leverage of salon expenses.
- Selling, general and administrative (SG&A) expenses
increased to $464.3 million compared to $271.6 million in the
second quarter of fiscal 2020. As a percentage of net sales,
SG&A expenses increased to 23.6% compared to 22.1% in the
second quarter of fiscal 2020, due to deleverage related to higher
store payroll and benefits primarily due to less employee retention
credits received under the CARES Act, and higher marketing expense,
partially offset by leverage of corporate overhead and store
expenses due to higher sales.
- There were no impairment, restructuring and other costs in the
second quarter of 2021 compared to $40.8 million in the second
quarter of 2020.
- Pre-opening expenses decreased to $1.4 million compared to $3.9
million in the second quarter of fiscal 2020.
- Operating income increased to $332.3 million, or 16.9% of net
sales, compared to $12.8 million, or 1.1% of net sales, in the
second quarter of fiscal 2020. Adjusted operating income for the
second quarter of fiscal 2020 was $54.9 million, or 4.5% of net
sales.
- Tax rate increased to 24.4% compared to 20.6% in the second
quarter of fiscal 2020. The higher effective tax rate is primarily
due to a decrease in the benefit of state tax credits as a result
of an increase in pretax income.
- Net income was $250.9 million compared to $8.1 million in the
second quarter of fiscal 2020. Adjusted net income for the second
quarter of fiscal 2020 was $41.5 million.
- Diluted earnings per share was $4.56, including a $0.04 benefit
due to income tax accounting for share-based compensation, compared
to $0.14 in the second quarter of fiscal 2020. Adjusted diluted
earnings per share for the second quarter of fiscal 2020 was
$0.73.
For the First Six Months of Fiscal 2021
- Net sales increased 62.7% to $3.9 billion compared to $2.4
billion in the first six months of fiscal 2020, primarily due to
the favorable impact from improving consumer confidence, government
stimulus payments, and the easing of COVID-19 restrictions, as
compared to the first six months of fiscal 2020.
- Comparable sales increased 60.9% compared to a decrease of
31.1% in the first six months of fiscal 2020, driven by a 52.5%
increase in transactions and a 5.5% increase in average ticket.
Compared to the first six months of fiscal 2019, comparable sales
increased 10.0%.
- Gross profit increased to $1.6 billion compared to $632.6
million in the first six months of fiscal 2020. As a percentage of
net sales, gross profit increased to 39.7% compared to 26.3% in the
first six months of fiscal 2020, primarily due to leverage of fixed
costs, improvement in merchandise margins, leverage of salon
expenses, and favorable channel mix shifts.
- SG&A expenses increased to $908.2 million compared to
$652.5 million in the first six months of fiscal 2020. As a
percentage of net sales, SG&A expenses decreased to 23.3%
compared to 27.2% in the first six months of fiscal 2020, due to
leverage of corporate overhead and store expenses due to higher
sales, partially offset by deleverage related to higher store
payroll and benefits primarily due to less employee retention
credits received under the CARES Act, and higher marketing
expense.
- There were no impairment, restructuring and other costs
recognized in the first six months of fiscal 2021, compared to
$60.3 million in the first six months of fiscal 2020.
- Pre-opening expenses decreased to $5.9 million compared to $8.5
million in the first six months of fiscal 2020.
- Operating income increased to $637.6 million, or 16.3% of net
sales, compared to an operating loss of $88.7 million, or (3.7)% of
net sales, in the first six months of fiscal 2020. Adjusted
operating loss for the first six months of fiscal 2020 was $27.0
million, or (1.1)% of net sales.
- Tax rate increased to 24.4% compared to 23.9% in the first six
months of fiscal 2020. The higher effective tax rate is primarily
due to a decrease in the benefit of state tax credits as a result
of an increase in pretax income.
- Net income was $481.2 million compared to a net loss of $70.5
million in the first six months of fiscal 2020. Adjusted net loss
for the first six months of fiscal 2020 was $23.5 million.
- Diluted earnings per share was $8.66, including a $0.07 benefit
due to income tax accounting for share-based compensation, compared
to a diluted loss per share of $1.25 in the first six months of
fiscal 2020. Adjusted diluted loss per share for the first six
months of fiscal 2020 was $0.42.
Balance Sheet
Cash and cash equivalents at the end of the second quarter of
fiscal 2021 were $770.1 million.
Merchandise inventories, net at the end of the second quarter of
fiscal 2021 totaled $1.44 billion compared to $1.37 billion at the
end of the second quarter of fiscal 2020. The $75.14 million
increase in inventory was primarily due to the addition of 32 net
new stores opened since August 1, 2020, the opening of the
Jacksonville, FL fast fulfillment center, and increased purchases
to support strong demand.
Share Repurchase Program
During the second quarter of fiscal 2021, the Company
repurchased 746,367 shares of its common stock at a cost of $243.5
million. During the first six months of fiscal 2021, the Company
repurchased 1,989,576 shares of its common stock at a cost of
$635.8 million. As of July 31, 2021, $886.2 million remained
available under the $1.6 billion share repurchase program announced
in March 2020.
Store Update
Real estate activity in the second quarter of fiscal 2021
included 7 new stores located in Dyersburg, TN; Gig Harbor, WA;
Little Rock, AR; Richmond, TX; Staten Island, NY; Sunnyvale, CA;
and Troy, AL. In addition, the Company relocated one store,
remodeled five stores, and closed one store. In the first six
months of fiscal 2021, the Company opened 35 new stores, relocated
two stores, remodeled five stores, and closed three stores.
The second quarter of fiscal 2021 ended with 1,296 stores and
square footage of 13.6 million, representing a 2.7% increase in
square footage compared to the second quarter of fiscal 2020.
Fiscal 2021 Outlook
Based on the results for the first six months of fiscal 2021 and
revised expectations for consumer demand, the Company has increased
its outlook for fiscal 2021.
The Company’s updated outlook for fiscal 2021 is as follows:
Prior FY21 Outlook
Updated FY21 Outlook
Net sales
$7.7 billion to $7.8 billion
$8.1 billion to $8.3 billion
Comparable sales
23% to 25%
30% to 32%
New stores, net
40
44
Remodel and relocation projects
19
18
Operating margin
approximately 11%
approximately 13%
Diluted earnings per share
$11.50 to $11.95
$14.50 to $14.70
Share repurchases
approximately $850 million
no change
Effective tax rate
24.8%
no change
Capital expenditures
$225 million to $250 million
no change
Depreciation and amortization expense
$270 million to $280 million
no change
The Company’s outlook for fiscal 2021 assumes no material
increases in the federal minimum wage and does not include
assumptions for any impact related to a resurgence of COVID-19.
Non-GAAP Financial
Information
In this press release, the Company
provides information regarding adjusted operating income (loss),
adjusted net income (loss), and adjusted diluted earnings (loss)
per share, which are not recognized terms under U.S. generally
accepted accounting principles (GAAP) and do not purport to be
alternatives to operating income (loss), net income (loss), and
diluted earnings (loss) per share as measures of operating
performance. A reconciliation of adjusted operating income (loss),
adjusted net income (loss), and adjusted diluted earnings (loss)
per share is provided in this release. The Company believes the
presentation of these non-GAAP financial measures provides
additional information on comparisons between periods by excluding
certain items that affect overall comparability and provides
investors with enhanced visibility into its results with respect to
the impact of certain costs. Non-GAAP financial measures should be
considered in addition to, and not as an alternative for, the
Company’s reported results prepared in accordance with GAAP.
Conference Call
Information
A conference call to discuss second
quarter of fiscal 2021 results is scheduled for today, August 25,
2021, at 4:30 p.m. Eastern Time / 3:30 p.m. Central Time. Investors
and analysts interested in participating in the call are invited to
dial (877) 705‑6003. The conference call will also be webcast live
at http://ir.ultabeauty.com. 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 8, 2021 and can be
accessed by dialing (844) 512‑2921 and entering conference ID
number 13721889.
About Ulta Beauty
At Ulta Beauty (NASDAQ: ULTA), the possibilities are beautiful.
Ulta Beauty is the largest 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 1,296 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.
Ulta Beauty was recently added to the Bloomberg Gender Equality
Index, which tracks the financial performance of public companies
committed to supporting gender equality through policy development,
representation and transparency. More information about Ulta
Beauty’s corporate responsibility efforts can be found at
www.ulta.com/investor/ESG.
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:
- The negative impacts the COVID-19 pandemic has had, and will
continue to have, on the company’s business, financial condition,
profitability, cash flows and supply chain, as well as consumer
spending (including future uncertain impacts);
- epidemics, pandemics like COVID-19 or natural disasters that
have and could continue to negatively impact the company’s
sales;
- changes in the overall level of consumer spending and
volatility in the economy, including as a result of the COVID-19
pandemic and/or government aid programs;
- a decline in operating results that has and may continue to
lead to asset impairment and store closures charges;
- the company’s ability to sustain its growth plans and
successfully implement its long-range strategic and financial
plan;
- the company’s ability to gauge beauty trends and react to
changing consumer preferences in a timely manner;
- the possibility that the company may be unable to compete
effectively in its highly competitive markets;
- the company’s ability to execute its Efficiencies for Growth
cost optimization program;
- the possibility that cybersecurity breaches and other
disruptions could compromise the company’s information or result in
the unauthorized disclosure of confidential information;
- the possibility of material disruptions to the company’s
information systems;
- the possibility that the capacity of the company’s distribution
and order fulfillment infrastructure and the performance of its
distribution centers and fast fulfillment centers may not be
adequate to support its recent growth and expected future growth
plans;
- changes in the wholesale cost of the company’s products;
- the possibility that new store openings and existing locations
may be impacted by developer or co-tenant issues;
- the company’s ability to attract and retain key executive
personnel;
- the company’s ability to successfully execute its common stock
repurchase program or implement future common stock repurchase
programs; 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 30, 2021, 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
Operations
(In thousands, except per
share data)
13 Weeks Ended
July 31,
August 1,
2021
2020
(Unaudited)
(Unaudited)
Net sales
$
1,967,207
100.0%
$
1,228,009
100.0%
Cost of sales
1,169,244
59.4%
899,002
73.2%
Gross profit
797,963
40.6%
329,007
26.8%
Selling, general and administrative
expenses
464,299
23.6%
271,587
22.1%
Impairment, restructuring and other
costs
—
0.0%
40,758
3.3%
Pre-opening expenses
1,357
0.1%
3,907
0.3%
Operating income
332,307
16.9%
12,755
1.1%
Interest expense, net
425
0.0%
2,617
0.2%
Income before income taxes
331,882
16.9%
10,138
0.9%
Income tax expense
80,989
4.1%
2,086
0.2%
Net income
$
250,893
12.8%
$
8,052
0.7%
Net income per common share:
Basic
$
4.59
$
0.14
Diluted
$
4.56
$
0.14
Weighted average common shares
outstanding:
Basic
54,675
56,318
Diluted
55,014
56,497
Exhibit 2
Ulta Beauty, Inc.
Consolidated Statements of
Operations
(In thousands, except per
share data)
26 Weeks Ended
July 31,
August 1,
2021
2020
(Unaudited)
(Unaudited)
Net sales
$
3,905,726
100.0%
$
2,401,219
100.0%
Cost of sales
2,353,975
60.3%
1,768,607
73.7%
Gross profit
1,551,751
39.7%
632,612
26.3%
Selling, general and administrative
expenses
908,174
23.3%
652,499
27.2%
Impairment, restructuring and other
costs
—
0.0%
60,300
2.5%
Pre-opening expenses
5,946
0.1%
8,542
0.3%
Operating income (loss)
637,631
16.3%
(88,729)
(3.7)%
Interest expense, net
783
0.0%
3,889
0.1%
Income (loss) before income taxes
636,848
16.3%
(92,618)
(3.8)%
Income tax expense (benefit)
155,666
4.0%
(22,161)
(0.9)%
Net income (loss)
$
481,182
12.3%
$
(70,457)
(2.9)%
Net income (loss) per common share:
Basic
$
8.71
$
(1.25)
Diluted
$
8.66
$
(1.25)
Weighted average common shares
outstanding:
Basic
55,235
56,369
Diluted
55,592
56,369
Exhibit 3
Ulta Beauty, Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
July 31,
January 30,
August 1,
2021
2021
2020
(Unaudited)
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
770,144
$
1,046,051
$
1,157,318
Receivables, net
154,416
193,109
127,992
Merchandise inventories, net
1,443,685
1,168,215
1,368,543
Prepaid expenses and other current
assets
108,145
107,402
102,713
Prepaid income taxes
18,544
—
42,622
Total current assets
2,494,934
2,514,777
2,799,188
Property and equipment, net
909,507
995,795
1,077,825
Operating lease assets
1,470,166
1,504,614
1,548,239
Goodwill
10,870
10,870
10,870
Other intangible assets, net
2,001
2,465
2,927
Deferred compensation plan assets
36,396
33,223
28,789
Other long-term assets
30,711
28,225
29,283
Total assets
$
4,954,585
$
5,089,969
$
5,497,121
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
535,257
$
477,052
$
398,011
Accrued liabilities
313,372
296,334
201,754
Deferred revenue
265,462
274,383
216,545
Current operating lease liabilities
267,442
253,415
245,019
Accrued income taxes
—
42,529
—
Total current liabilities
1,381,533
1,343,713
1,061,329
Non-current operating lease
liabilities
1,585,539
1,643,386
1,718,549
Long-term debt
—
—
800,000
Deferred income taxes
64,535
65,359
94,272
Other long-term liabilities
43,165
37,962
52,178
Total liabilities
3,074,772
3,090,420
3,726,328
Commitments and contingencies
Total stockholders’ equity
1,879,813
1,999,549
1,770,793
Total liabilities and stockholders’
equity
$
4,954,585
$
5,089,969
$
5,497,121
Exhibit 4
Ulta Beauty, Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
26 Weeks Ended
July 31,
August 1,
2021
2020
(Unaudited)
(Unaudited)
Operating activities
Net income (loss)
$
481,182
$
(70,457)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
139,577
154,029
Non-cash lease expense
137,521
132,808
Long-lived asset impairment charge
—
59,997
Deferred income taxes
(824)
4,905
Stock-based compensation expense
19,097
14,595
Loss on disposal of property and
equipment
1,703
2,273
Change in operating assets and
liabilities:
Receivables
38,693
11,345
Merchandise inventories
(275,470)
(74,842)
Prepaid expenses and other current
assets
(741)
854
Income taxes
(61,074)
(26,235)
Accounts payable
59,360
(18,486)
Accrued liabilities
17,858
(32,901)
Deferred revenue
(8,921)
(20,990)
Operating lease liabilities
(146,892)
(137,383)
Other assets and liabilities
344
16,477
Net cash provided by operating
activities
401,413
15,989
Investing activities
Short-term investments, net
—
110,000
Capital expenditures
(57,305)
(77,090)
Acquisitions, net of cash acquired
—
(1,220)
Purchases of equity investments
—
(5,386)
Net cash provided by (used in) investing
activities
(57,305)
26,304
Financing activities
Proceeds from long-term debt
—
800,000
Repurchase of common shares
(635,793)
(72,981)
Stock options exercised
22,808
577
Purchase of treasury shares
(6,974)
(3,065)
Debt issuance costs
—
(1,861)
Net cash provided by (used in) financing
activities
(619,959)
722,670
Effect of exchange rate changes on cash
and cash equivalents
(56)
30
Net increase (decrease) in cash and cash
equivalents
(275,907)
764,993
Cash and cash equivalents at beginning of
period
1,046,051
392,325
Cash and cash equivalents at end of
period
$
770,144
$
1,157,318
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 2021
quarter
quarter
quarter
end of the quarter
1st Quarter
1,264
28
2
1,290
2nd Quarter
1,290
7
1
1,296
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 2021
the quarter
quarter
during the quarter
quarter
1st Quarter
13,291,838
327,476
22,906
13,596,408
2nd Quarter
13,596,408
62,511
10,760
13,648,159
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 31,
August 1,
2021
2020
Cosmetics (1)
43%
45%
Skincare (1)
17%
18%
Haircare products and styling tools
(1)
21%
21%
Fragrance and bath
12%
9%
Services
4%
3%
Accessories and other (1)
3%
4%
100%
100%
26 weeks ended
July 31,
August 1,
2021
2020
Cosmetics (1)
44%
47%
Skincare (1)
18%
18%
Haircare products and styling tools
(1)
20%
19%
Fragrance and bath
11%
8%
Services
4%
4%
Accessories and other (1)
3%
4%
100%
100%
(1) Certain sales departments were reclassified between
categories in the prior year to conform to current year
presentation.
Exhibit 7
Ulta Beauty, Inc.
Reconciliation of GAAP basis
to Adjusted operating income (loss), Adjusted net income
(loss)
and Adjusted diluted earnings
(loss) per share
(In thousands, except per
share data)
(Unaudited)
13 weeks ended
26 weeks ended
August 1,
August 1,
2020
2020
Operating income (loss)
$
12,755
$
(88,729)
Add: Store asset impairment
20,886
40,428
Add: Store closures
19,872
19,872
Add: Store closures - inventory
write-off
1,400
1,400
Adjusted operating income (loss)
$
54,913
$
(27,029)
Net income (loss)
$
8,052
$
(70,457)
Add: Store asset impairment
20,886
40,428
Less: Income tax benefit of store asset
impairment1
(4,303)
(9,662)
Add: Store closures
19,872
19,872
Less: Income tax benefit of store
closures1
(4,094)
(4,749)
Add: Store closures - inventory
write-off
1,400
1,400
Less: Income tax benefit of store closures
- inventory write-off1
(288)
(335)
Adjusted net income (loss)
$
41,525
$
(23,503)
Diluted earnings (loss) per share
$
0.14
$
(1.25)
Add: Store asset impairment
0.37
0.72
Less: Income tax benefit of store asset
impairment1
(0.08)
(0.17)
Add: Store closures
0.35
0.35
Less: Income tax benefit of store
closures1
(0.07)
(0.09)
Add: Store closures - inventory
write-off
0.03
0.03
Less: Income tax benefit of store closures
- inventory write-off1
(0.01)
(0.01)
Adjusted diluted earnings (loss) per
share
$
0.73
$
(0.42)
1 The income tax benefit for non-GAAP
adjustments was calculated using the Company's blended tax rate
before discrete items.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210825005731/en/
Investor Contacts: Kiley Rawlins, CFA Vice President, Investor
Relations krawlins@ulta.com (331) 757-2206
Media Contact: Eileen Ziesemer Vice President, Public Relations
eziesemer@ulta.com (708) 305-4479
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