Temporary store closures in response to
COVID-19 significantly impacted sales and earnings Proactive
actions taken to increase financial flexibility during quarter
Net Sales of $1,173.2 million compared to $1,743.0 million in
the year-ago quarter Comparable Sales decreased (35.3%)
Net Loss of ($78.5) million or ($1.39) per dilutive
share
Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial
results for the first quarter ended May 2, 2020.
“Fiscal 2020 started off well, with good growth in comparable
store sales, market share, and our Ultamate Rewards loyalty program
through mid-March. However, the rapid escalation of COVID-19
resulted in significant disruption to our operations. For much of
the first quarter, Ulta Beauty operated as a digital-only business,
and while e-commerce sales exceeded our expectations, it was not
enough to fully offset the impact of our store closings,” said Mary
Dillon, chief executive officer. “As we have navigated the
pandemic, our priority for every decision has been to protect the
well-being of our associates and guests, and I am incredibly proud
and appreciative of how quickly our teams adjusted to the dynamic
environment.”
“With safety continuing to
guide our decisions, we have begun to reopen stores, and today more
than 800 stores offer curbside pickup and more than 330 stores are
open to guests. While it is still early, we have seen
stronger-than-expected sales in reopened stores, and we’re seeing
great engagement with our salon services, where available,”
continued Dillon. “At Ulta Beauty, we have a strong, differentiated
operating model, a brand that is known and loved, and passionate
and optimistic associates, and I am confident we will emerge from
this crisis well positioned to accelerate our market share gains
and extend our competitive advantages.”
COVID-19 Response
The Company has taken decisive
actions to protect the safety of its associates and guests and to
manage its business through the fluid and challenging environment
resulting from the COVID-19 pandemic. On March 19, 2020, the
Company temporarily closed all of its stores in an effort to help
contain the spread of the virus, while continuing to support its
essential e-commerce operations. On April 19, 2020, many of the
store and salon associates were temporarily furloughed.
In addition, the Company has
taken multiple steps to reinforce the Company’s financial strength
and preserve liquidity including:
- drawing down $800.0 million under its $1.0 billion revolving
credit facility;
- suspending new hires, and deferring merit increases for all
corporate, store, and salon associates;
- reducing marketing, travel and other discretionary
expenses;
- moderating the pace of investment to support international
capabilities;
- aligning inventory receipts with current sales trends;
- prioritizing payment obligations;
- reducing planned new store openings, relocations and remodel
projects; and
- suspending its stock repurchase program.
As result of these and other
actions, the Company ended the quarter with $1.2 billion in cash,
cash equivalents, and short term investments. The Company is
confident that it currently has sufficient liquidity to fund its
operations.
On April 23, 2020, the Company
launched curbside pickup in select stores, consistent with state
and local guidelines. On May 11, 2020, the Company began to reopen
select stores. As of today, 333 stores are open to guests, and 840
stores offer curbside pickup. As the impact of COVID-19 varies by
region, the Company plans to continue to reopen stores and expand
its service offerings on a phased timeline, taking a thoughtful,
measured approach based on a variety of criteria, including state
and local guidelines.
For the First Quarter of Fiscal
2020
- Net sales decreased 32.7% to $1,173.2 million compared to
$1,743.0 million in the first quarter of fiscal 2019 due to the
impact of COVID-19.
- Comparable sales (sales for stores open at least 14 months,
including stores temporarily closed due to COVID-19, and e-commerce
sales) decreased 35.3% compared to an increase of 7.0% in the first
quarter of fiscal 2019. The 35.3% comparable sales decrease was
driven by a decline of 38.6% in transactions which was partially
offset by a 3.3% increase in average ticket.
- Gross profit decreased to $303.6 million compared to $644.8
million in the first quarter of fiscal 2019. As a percentage of net
sales, gross profit decreased to 25.9% compared to 37.0% in the
first quarter of fiscal 2019, primarily due to deleverage of fixed
store costs, pressure from channel mix shifts, and deleverage of
salon expenses due to lower sales. These pressures were partially
offset by lower promotional activity.
- Selling, general and administrative (“SG&A”) expenses
decreased to $380.9 million compared to $403.1 million in the first
quarter of fiscal 2019. Lower store expenses and lower marketing
expenses were partially offset by higher expenses related to
strategic growth investments made in fiscal 2019. As a percentage
of net sales, SG&A expenses increased to 32.5% compared to
23.1% in the first quarter of fiscal 2019, primarily due to
deleverage related to lower sales resulting from the impact of
COVID-19.
- Impairment charges of $19.5 million were driven by the
impairment of some tangible long-lived assets and operating lease
assets associated with certain retail stores.
- Pre-opening expenses increased to $4.6 million compared to $4.2
million in the first quarter of fiscal 2019. Real estate activity
in the first quarter of fiscal 2020 included 11 new stores and one
relocated store, compared to 22 new stores and one remodeled store
in the first quarter of fiscal 2019.
- Operating loss was $101.5 million, or 8.7% of net sales,
compared to operating income of $237.5 million, or 13.6% of net
sales, in the first quarter of fiscal 2019.
- Tax rate increased to 23.6% compared to 19.8% in the first
quarter of fiscal 2019. The higher effective tax rate is primarily
due to income tax accounting for share-based compensation in the
first quarter of fiscal 2019.
- Net loss was $78.5 million compared to net income of $192.2
million in the first quarter of fiscal 2019.
- Diluted loss per share was $1.39, compared to diluted earnings
per share of $3.26 in the first quarter of fiscal 2019, which
included a $0.18 benefit due to income tax accounting for
share-based compensation.
Balance Sheet
The Company ended the first quarter of fiscal 2020 with $1,153.5
million in cash, cash equivalents and short-term investments.
Merchandise inventories, net at the end of first quarter of
fiscal 2020 totaled $1,340.6 million compared to $1,250.0 million
at the end of the first quarter of fiscal 2019, representing an
increase of $90.5 million. The increase in total inventory was
driven by 68 net new stores and the impact of the temporary closing
of all Ulta Beauty stores for most of the quarter. Average
inventory per store increased 1.5% compared to the first quarter of
fiscal 2019.
During the first quarter of fiscal 2020, as a precautionary
measure during the economic uncertainty due to COVID-19 and to
enhance financial flexibility, the Company drew down $800 million
under its $1.0 billion credit facility.
Share Repurchase Program
During the first quarter fiscal 2020, the Company repurchased
326,970 shares of its common stock at a cost of $73.0 million. As
of May 2, 2020, $1.58 billion remained available under the $1.6
billion share repurchase program announced in March 2020. On April
2, 2020, the Company announced that the repurchase program has been
suspended in order to preserve financial flexibility.
Store Expansion
During the first quarter of fiscal 2020, the Company opened 11
stores located in College Point, NY; Enfield, CT; Fort Myers, FL
(2); Gillette, WY; Indio, CA; Klamath Falls, OR; Monroeville, PA;
Paramus, NJ; Portland, OR; and Roseburg, OR. The Company ended the
first quarter of fiscal 2020 with 1,264 stores and square footage
of 13,294,607, representing a 5.7% increase in square footage
compared to the first quarter of fiscal 2019. In addition, the
Company permanently closed one store.
Fiscal 2020 Outlook
Given the uncertainty related to the COVID-19 pandemic, the
Company withdrew its guidance for fiscal 2020 on March 17, 2020 and
is not providing an earnings outlook at this time. However, the
Company is providing some updated assumptions for fiscal 2020:
- Given the current environment, the Company has reduced its new
store opening and relocation plans. The Company now expects to open
between 30 and 40 new stores and execute approximately three
relocation projects. The Company will continue to evaluate these
plans based on demand and location economics, including committed
costs incurred; and
- The Company has reduced its capital expenditure plan for fiscal
2020, and currently anticipates capital expenditures will be
between $200 and $210 million.
Conference Call Information
A conference call to discuss first
quarter of fiscal 2020 results is scheduled for today, May 28,
2020, at 5:00 p.m. Eastern Time / 4:00 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 June 11, 2020 and can be accessed
by dialing (844) 512‑2921 and entering conference ID number
13702828.
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 has grown to become the top national
retailer offering the complete beauty experience.
Ulta Beauty brings possibilities to life through the power of
beauty each and every day in our stores and online with more than
25,000 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, brow, and
make-up services.
Ulta Beauty is recognized for its commitment to personalized
service, fun and inviting stores and our industry-leading Ultamate
Rewards loyalty program. Ulta Beauty operates 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:
- The uncertain negative impacts the coronavirus (COVID-19) 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;
- 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;
- the company’s ability to sustain its growth plans and
successfully implement our 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
newly opened and to be opened distribution 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 February 1, 2020, 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
May 2,
May 4,
2020
2019
(Unaudited)
(Unaudited)
Net sales
$
1,173,210
100.0%
$
1,743,029
100.0%
Cost of sales
869,605
74.1%
1,098,182
63.0%
Gross profit
303,605
25.9%
644,847
37.0%
Selling, general and administrative
expenses
380,912
32.5%
403,133
23.1%
Impairment charges
19,542
1.7%
—
0.0%
Pre-opening expenses
4,635
0.4%
4,174
0.2%
Operating income (loss)
(101,484)
(8.7%)
237,540
13.6%
Interest expense (income), net
1,272
(0.1%)
(2,046)
0.1%
Income (loss) before income taxes
(102,756)
(8.8%)
239,586
13.7%
Income tax expense (benefit)
(24,247)
(2.1%)
47,365
2.7%
Net income (loss)
$
(78,509)
(6.7%)
$
192,221
11.0%
Net income (loss) per common share:
Basic
$
(1.39)
$
3.28
Diluted
$
(1.39)
$
3.26
Weighted average common shares
outstanding:
Basic
56,419
58,631
Diluted
56,419
58,993
Exhibit 2
Ulta Beauty, Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
May 2,
February 1,
May 4,
2020
2020
2019
(Unaudited)
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
1,043,540
$
392,325
$
326,831
Short-term investments
110,000
110,000
195,000
Receivables, net
88,691
139,337
110,046
Merchandise inventories, net
1,340,566
1,293,701
1,250,037
Prepaid expenses and other current
assets
97,041
103,567
137,173
Prepaid income taxes
48,982
16,387
245
Total current assets
2,728,820
2,055,317
2,019,332
Property and equipment, net
1,148,341
1,205,524
1,205,919
Operating lease assets
1,583,490
1,537,565
1,479,132
Goodwill
10,870
10,870
10,870
Other intangible assets, net
3,159
3,391
4,085
Deferred compensation plan assets
25,388
27,849
23,910
Other long-term assets
30,483
23,356
23,105
Total assets
$
5,530,551
$
4,863,872
$
4,766,353
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
466,043
$
414,009
$
407,345
Accrued liabilities
173,310
246,088
227,156
Deferred revenue
216,330
237,535
182,993
Current operating lease liabilities
240,496
239,629
211,432
Accrued income taxes
—
—
16,679
Total current liabilities
1,096,179
1,137,261
1,045,605
Non-current operating lease
liabilities
1,748,245
1,698,718
1,654,401
Long-term debt
800,000
—
—
Deferred income taxes
95,276
89,367
90,384
Other long-term liabilities
36,892
36,432
34,395
Total liabilities
3,776,592
2,961,778
2,824,785
Commitments and contingencies
Total stockholders’ equity
1,753,959
1,902,094
1,941,568
Total liabilities and stockholders’
equity
$
5,530,551
$
4,863,872
$
4,766,353
Exhibit 3
Ulta Beauty, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
13 Weeks Ended
May 2,
May 4,
2020
2019
(Unaudited)
(Unaudited)
Operating activities
Net income (loss)
$
(78,509)
$
192,221
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
76,626
71,810
Non-cash lease expense
70,863
75,231
Impairment charges
19,542
—
Deferred income taxes
5,909
6,520
Stock-based compensation expense
6,182
6,030
Loss on disposal of property and
equipment
1,521
1,365
Change in operating assets and
liabilities:
Receivables
50,646
8,654
Merchandise inventories
(46,865)
(35,708)
Prepaid expenses and other current
assets
6,526
(24,317)
Income taxes
(32,595)
33,431
Accounts payable
46,965
3,329
Accrued liabilities
(63,927)
9,971
Deferred revenue
(21,205)
(16,061)
Operating lease liabilities
(68,976)
(67,635)
Other assets and liabilities
2,979
6,837
Net cash provided by (used in) operating
activities
(24,318)
271,678
Investing activities
Short-term investments, net
—
(195,000)
Capital expenditures
(41,474)
(71,836)
Purchases of equity investments
(5,386)
(12,736)
Net cash used in investing activities
(46,860)
(279,572)
Financing activities
Proceeds from long-term debt
800,000
—
Repurchase of common shares
(72,981)
(107,399)
Stock options exercised
250
42,056
Purchase of treasury shares
(3,002)
(9,183)
Debt issuance costs
(1,799)
—
Net cash provided by (used in) financing
activities
722,468
(74,526)
Effect of exchange rate changes on cash
and cash equivalents
(75)
—
Net increase (decrease) in cash and cash
equivalents
651,215
(82,420)
Cash and cash equivalents at beginning of
period
392,325
409,251
Cash and cash equivalents at end of
period
$
1,043,540
$
326,831
Exhibit 4
2020 Store
Expansion
Total stores open
Number of stores
Number of stores
Total stores
at beginning of the
opened during the
closed during the
open at
Fiscal 2020
quarter
quarter
quarter
end of the quarter
1st Quarter
1,254
11
1
1,264
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 2020
the quarter
quarter
during the quarter
quarter
1st Quarter
13,193,076
111,894
10,363
13,294,607
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200528005778/en/
Investor Contacts: Kiley Rawlins, CFA Vice President, Investor
Relations krawlins@ulta.com (331) 757-2206
Patrick Flaherty Senior Manager, Investor Relations
pflaherty@ulta.com (331) 253-3521
Media Contact: Eileen Ziesemer Vice President, Public Relations
eziesemer@ulta.com (708) 305-4479
Ulta Beauty (NASDAQ:ULTA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Ulta Beauty (NASDAQ:ULTA)
Historical Stock Chart
From Sep 2023 to Sep 2024