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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended October 28, 2023

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _____________

Commission File Number: 001-33764

ULTA BEAUTY, INC.

(Exact name of Registrant as specified in its charter)


incorporation or organization)


Identification No.)

Delaware

(State or other jurisdiction of
incorporation or organization)

38-4022268

(I.R.S. Employer
Identification No.)

1000 Remington Blvd., Suite 120

Bolingbrook, Illinois

(Address of principal executive offices)

60440

(Zip code)

Registrant’s telephone number, including area code: (630) 410-4800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ULTA

The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer      Accelerated filer      Non-accelerated filer      Smaller reporting company       Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of November 27, 2023 was 48,561,517 shares.

ULTA BEAUTY, INC.

TABLE OF CONTENTS

Part I - Financial Information

Item 1.    Financial Statements

Consolidated Balance Sheets

3

Consolidated Statements of Income

4

Consolidated Statements of Cash Flows

5

Consolidated Statements of Stockholders’ Equity

6

Notes to Consolidated Financial Statements

8

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

23

Item 4.    Controls and Procedures

24

Part II - Other Information

24

Item 1.    Legal Proceedings

24

Item 1A. Risk Factors

24

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3.    Defaults Upon Senior Securities

25

Item 4.    Mine Safety Disclosures

25

Item 5.    Other Information

25

Item 6.    Exhibits

25

SIGNATURES

27

2

Part I - Financial Information

Item 1.Financial Statements

Ulta Beauty, Inc.

Consolidated Balance Sheets

October 28,

January 28,

October 29,

(In thousands, except per share data)

    

2023

    

2023

    

2022

Assets

(Unaudited)

(Unaudited)

Current assets:

Cash and cash equivalents

$

121,811

$

737,877

$

250,628

Receivables, net

202,868

199,422

200,304

Merchandise inventories, net

2,321,306

1,603,451

2,114,669

Prepaid expenses and other current assets

117,282

130,246

137,642

Prepaid income taxes

28,773

38,308

42,572

Total current assets

2,792,040

2,709,304

2,745,815

Property and equipment, net

1,117,874

1,009,273

967,039

Operating lease assets

1,578,316

1,561,263

1,556,940

Goodwill

10,870

10,870

10,870

Other intangible assets, net

591

1,312

844

Deferred compensation plan assets

38,371

35,382

31,529

Other long-term assets

56,946

43,007

18,512

Total assets

$

5,595,008

$

5,370,411

$

5,331,549

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

597,373

$

559,527

$

647,117

Accrued liabilities

405,443

444,278

462,773

Deferred revenue

350,937

394,677

312,132

Current operating lease liabilities

287,786

283,293

275,749

Short-term debt

195,400

Total current liabilities

1,836,939

1,681,775

1,697,771

Non-current operating lease liabilities

1,616,747

1,619,883

1,621,252

Deferred income taxes

56,874

55,346

38,627

Other long-term liabilities

55,906

53,596

51,644

Total liabilities

3,566,466

3,410,600

3,409,294

Commitments and contingencies (Note 6)

Stockholders' equity:

Common stock, $0.01 par value, 400,000 shares authorized; 49,458, 51,120, and 51,785 shares issued; 48,659, 50,364, and 51,029 shares outstanding; at October 28, 2023 (unaudited), January 28, 2023, and October 29, 2022 (unaudited), respectively

495

511

517

Treasury stock-common, at cost

(82,798)

(60,470)

(60,218)

Additional paid-in capital

1,058,969

1,023,997

998,816

Retained earnings

1,051,876

995,773

983,140

Total stockholders’ equity

2,028,542

1,959,811

1,922,255

Total liabilities and stockholders’ equity

$

5,595,008

$

5,370,411

$

5,331,549

See accompanying notes to consolidated financial statements.

3

Ulta Beauty, Inc.

Consolidated Statements of Income

(Unaudited)

13 Weeks Ended

39 Weeks Ended

October 28,

October 29,

October 28,

October 29,

(In thousands, except per share data)

    

2023

2022

2023

2022

Net sales

$

2,488,933

$

2,338,793

$

7,653,005

$

6,981,807

Cost of sales

1,496,866

1,375,976

4,612,469

4,149,800

Gross profit

992,067

962,817

3,040,536

2,832,007

Selling, general and administrative expenses

661,380

597,164

1,874,201

1,632,593

Pre-opening expenses

3,460

3,797

5,396

8,422

Operating income

327,227

361,856

1,160,939

1,190,992

Interest income, net

(2,497)

(849)

(14,294)

(556)

Income before income taxes

329,724

362,705

1,175,233

1,191,548

Income tax expense

80,241

88,120

278,597

289,891

Net income

$

249,483

$

274,585

$

896,636

$

901,657

Net income per common share:

Basic

$

5.09

$

5.37

$

18.08

$

17.45

Diluted

$

5.07

$

5.34

$

17.99

$

17.35

Weighted average common shares outstanding:

Basic

49,007

51,131

49,592

51,663

Diluted

49,226

51,418

49,846

51,962

See accompanying notes to consolidated financial statements.

4

Ulta Beauty, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

39 Weeks Ended

October 28,

October 29,

(In thousands)

    

2023

    

2022

Operating activities

Net income

$

896,636

$

901,657

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

    

Depreciation and amortization

181,273

182,182

Non-cash lease expense

232,772

222,548

Deferred income taxes

1,528

(1,066)

Stock-based compensation expense

33,477

32,554

Loss on disposal of property and equipment

6,310

3,892

Change in operating assets and liabilities:

Receivables

(3,446)

33,378

Merchandise inventories

(717,855)

(615,451)

Prepaid expenses and other current assets

12,964

(26,828)

Income taxes

9,535

(49,446)

Accounts payable

41,817

94,214

Accrued liabilities

(34,955)

64,164

Deferred revenue

(43,740)

(41,447)

Operating lease liabilities

(248,469)

(246,988)

Other assets and liabilities

(9,836)

20,063

Net cash provided by operating activities

358,011

573,426

Investing activities

Capital expenditures

(311,030)

(203,961)

Other investments

(4,870)

(3,068)

Net cash used in investing activities

(315,900)

(207,029)

Financing activities

Borrowings from credit facility

195,400

Repurchase of common shares

(840,551)

(571,908)

Stock options exercised

9,302

31,319

Purchase of treasury shares

(22,328)

(6,740)

Net cash used in financing activities

(658,177)

(547,329)

Net decrease in cash and cash equivalents

(616,066)

(180,932)

Cash and cash equivalents at beginning of period

737,877

431,560

Cash and cash equivalents at end of period

$

121,811

$

250,628

Supplemental information

Income taxes paid, net of refunds

    

$

266,802

$

339,290

Non-cash capital expenditures

53,936

33,982

See accompanying notes to consolidated financial statements.

5

Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

Treasury -

Common Stock

Common Stock

Additional

Total

Issued

Treasury

Paid-In

Retained

Stockholders'

(In thousands)

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Earnings

    

Equity

Balance – January 28, 2023

51,120

$

511

(756)

$

(60,470)

$

1,023,997

$

995,773

$

1,959,811

Net income

347,051

347,051

Stock-based compensation

9,721

9,721

Stock options exercised and other awards

150

1

8,926

8,927

Purchase of treasury shares

(41)

(21,659)

(21,659)

Repurchase of common shares, including excise tax

(541)

(5)

(2,266)

(283,512)

(285,783)

Balance – April 29, 2023

50,729

$

507

(797)

$

(82,129)

$

1,040,378

$

1,059,312

$

2,018,068

Net income

300,102

300,102

Stock-based compensation

11,818

11,818

Stock options exercised and other awards

4

220

220

Purchase of treasury shares

(1)

(100)

(100)

Repurchase of common shares, including excise tax

(594)

(6)

(2,737)

(275,488)

(278,231)

Balance – July 29, 2023

50,139

$

501

(798)

$

(82,229)

$

1,049,679

$

1,083,926

$

2,051,877

Net income

249,483

249,483

Stock-based compensation

11,938

11,938

Stock options exercised and other awards

5

1

154

155

Purchase of treasury shares

(1)

(569)

(569)

Repurchase of common shares, including excise tax

(686)

(7)

(2,802)

(281,533)

(284,342)

Balance – October 28, 2023

49,458

$

495

(799)

$

(82,798)

$

1,058,969

$

1,051,876

$

2,028,542

See accompanying notes to consolidated financial statements.

6

Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

Treasury -

Common Stock

Common Stock

Additional

Total

Issued

Treasury

Paid-In

Retained

Stockholders'

(In thousands)

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Earnings

    

Equity

Balance – January 29, 2022

53,049

$

530

(738)

$

(53,478)

$

934,945

$

653,376

$

1,535,373

Net income

331,395

331,395

Stock-based compensation

10,356

10,356

Stock options exercised and other awards

73

1

6,501

6,502

Purchase of treasury shares

(14)

(5,172)

(5,172)

Repurchase of common shares

(332)

(3)

(132,831)

(132,834)

Balance – April 30, 2022

52,790

$

528

(752)

$

(58,650)

$

951,802

$

851,940

$

1,745,620

Net income

295,677

295,677

Stock-based compensation

12,519

12,519

Stock options exercised and other awards

95

1

18,018

18,019

Purchase of treasury shares

(3)

(1,153)

(1,153)

Repurchase of common shares

(798)

(8)

(301,606)

(301,614)

Balance – July 30, 2022

52,087

$

521

(755)

$

(59,803)

$

982,339

$

846,011

$

1,769,068

Net income

274,585

274,585

Stock-based compensation

9,679

9,679

Stock options exercised and other awards

38

6,798

6,798

Purchase of treasury shares

(1)

(415)

(415)

Repurchase of common shares

(340)

(4)

(137,456)

(137,460)

Balance – October 29, 2022

51,785

$

517

(756)

$

(60,218)

$

998,816

$

983,140

$

1,922,255

See accompanying notes to consolidated financial statements.

7

Ulta Beauty, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share and store count data) (Unaudited)

1.Business and basis of presentation

Ulta Beauty, Inc. was founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services. Nearly every store features a full-service salon. As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc. and its consolidated subsidiaries.

As of October 28, 2023, the Company operated 1,374 stores across 50 states, as shown in the table below.

Number of

Number of

Location

    

stores

    

Location

    

stores

Alabama

25

Montana

6

Alaska

3

Nebraska

5

Arizona

35

Nevada

16

Arkansas

11

New Hampshire

8

California

169

New Jersey

44

Colorado

27

New Mexico

7

Connecticut

19

New York

55

Delaware

4

North Carolina

44

Florida

94

North Dakota

4

Georgia

43

Ohio

46

Hawaii

4

Oklahoma

22

Idaho

9

Oregon

18

Illinois

55

Pennsylvania

45

Indiana

26

Rhode Island

4

Iowa

11

South Carolina

24

Kansas

13

South Dakota

3

Kentucky

16

Tennessee

31

Louisiana

18

Texas

129

Maine

3

Utah

15

Maryland

28

Vermont

1

Massachusetts

26

Virginia

33

Michigan

49

Washington

37

Minnesota

20

West Virginia

7

Mississippi

12

Wisconsin

21

Missouri

25

Wyoming

4

Total

1,374

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X. These financial statements were prepared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

8

The Company’s business is subject to seasonal fluctuation, with significant portions of net sales and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season. The results for the 13 and 39 weeks ended October 28, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending February 3, 2024, or for any other future interim period or for any future year.

These unaudited interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended January 28, 2023. All amounts are stated in thousands, with the exception of per share amounts and number of stores.

2.Summary of significant accounting policies

Information regarding significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Annual Report on Form 10-K for the year ended January 28, 2023. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” in the Annual Report.

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The third quarter in fiscal 2023 and 2022 ended on October 28, 2023 and October 29, 2022, respectively.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. Actual results could differ from those estimates. The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and right-of-use assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

3.Revenue

Net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue. Other revenue includes the private label and co-branded credit card programs, royalties derived from the partnership with Target Corporation, and deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

The following table sets forth the approximate percentage of net sales by primary category:

13 Weeks Ended  

39 Weeks Ended

October 28,

October 29,

October 28,

October 29,

(Percentage of net sales)

2023

2022

2023

2022

Cosmetics

42%

44%

42%

43%

Haircare products and styling tools

19%

21%

20%

21%

Skincare

19%

16%

19%

17%

Fragrance and bath

13%

12%

12%

12%

Services

4%

4%

4%

4%

Accessories and other

3%

3%

3%

3%

100%

100%

100%

100%

9

Deferred revenue

Deferred revenue primarily represents contract liabilities for the obligation to transfer additional goods or services to a guest for which the Company has received consideration, such as unredeemed Ultamate Rewards loyalty points and unredeemed Ulta Beauty gift cards. In addition, breakage on gift cards is recognized proportionately as redemption occurs.

The following table provides a summary of the changes included in deferred revenue during the 13 and 39 weeks ended October 28, 2023 and October 29, 2022:

13 Weeks Ended

39 Weeks Ended

October 28,

October 29,

October 28,

October 29,

(In thousands)

2023

2022

2023

    

2022

Beginning balance

$

346,067

$

305,913

$

388,583

$

345,206

Additions to contract liabilities (1)

107,628