Ulta Beauty Announces Third Quarter Fiscal 2022 Results

Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the thirteen-week period (“third quarter”) and thirty-nine-week period (“first nine months”) ended October 29, 2022 compared to the same periods ended October 30, 2021.

 

 

13 Weeks Ended

 

 

 

39 Weeks Ended

(Dollars in millions, except per share data)

 

October 29,

 

October 30,

 

October 31,

 

 

October 29,

 

October 30,

 

October 31,

2022

 

2021

 

2020

 

 

2022

 

2021

 

2020

Net sales

 

$

2,338.8

 

$

1,995.8

 

$

1,552.0

 

 

$

6,981.8

 

$

5,901.5

 

$

3,953.3

Comparable sales

 

 

14.6%

 

 

25.8%

 

 

(8.9)%

 

 

 

15.6%

 

 

47.1%

 

 

(23.8)%

Gross profit (as a percentage of net sales)

 

 

41.2%

 

 

39.6%

 

 

35.1%

 

 

 

40.6%

 

 

39.7%

 

 

29.8%

Selling, general and administrative expenses

 

$

597.2

 

$

503.4

 

$

416.4

 

 

$

1,632.6

 

$

1,411.6

 

$

1,068.9

Operating income (as a percentage of net sales)

 

 

15.5%

 

 

14.2%

 

 

6.5%

 

 

 

17.1%

 

 

15.6%

 

 

0.3%

Diluted earnings per share

 

$

5.34

 

$

3.94

 

$

1.32

 

 

$

17.35

 

$

12.60

 

$

0.08

New store openings, net

 

 

18

 

 

6

 

 

(2)

 

 

 

35

 

 

38

 

 

8

“Amidst a challenging macro environment, the Ulta Beauty team delivered yet another outstanding quarter, with strong top and bottom-line results and growth across all major categories and channels,” said Dave Kimbell, chief executive officer. “Our third quarter results reflect the sustained resilience of the beauty category and the strong emotional connection and loyalty we have cultivated with our guests. I am confident our business model, which offers unmatched breadth, value, and convenience, is even more relevant today and unlocks opportunities to further delight guests as we continue to lead the beauty category.”

For the Third Quarter of Fiscal 2022

• Net sales increased 17.2% to $2.3 billion compared to $2.0 billion in the third quarter of fiscal 2021 primarily due to the favorable impact from the continued resilience of the beauty category, retail price increases, and the impact of new brands and product innovation compared to the third quarter of fiscal 2021.
• Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 14.6% compared to an increase of 25.8% in the third quarter of fiscal 2021, driven by a 10.7% increase in transactions and a 3.5% increase in average ticket.
• Gross profit increased 22.0% to $962.8 million compared to $789.5 million in the third quarter of fiscal 2021. As a percentage of net sales, gross profit increased to 41.2% compared to 39.6% in the third quarter of fiscal 2021, primarily due to leverage in fixed costs, strong growth in other revenue, and higher merchandise margin, partially offset by higher inventory shrink.
• Selling, general and administrative (SG&A) expenses increased 18.6% to $597.2 million compared to $503.4 million in the third quarter of fiscal 2021. As a percentage of net sales, SG&A expenses increased to 25.5% compared to 25.2% in the third quarter of fiscal 2021, primarily due to deleverage in store payroll and benefits and corporate overhead due to strategic investments, partially offset by lower marketing expenses.
• Operating income increased 27.3% to $361.9 million, or 15.5% of net sales, compared to $284.2 million, or 14.2% of net sales, in the third quarter of fiscal 2021.
• The tax rate increased to 24.3% compared to 24.1% in the third quarter of fiscal 2021.
• Net income increased 27.5% to $274.6 million compared to $215.3 million in the third quarter of fiscal 2021.
• Diluted earnings per share increased 35.5% to $5.34, including a $0.02 benefit due to income tax accounting for stock-based compensation, compared to $3.94, including a $0.01 benefit due to income tax accounting for stock-based compensation, in the third quarter of fiscal 2021.

For the First Nine Months of Fiscal 2022

• Net sales increased 18.3% to $7.0 billion compared to $5.9 billion in the first nine months of fiscal 2021, primarily due to the favorable impact from the continued resilience of the beauty category, retail price increases, the impact of new brands and product innovation, and the easing of COVID-19 restrictions compared to the first nine months of fiscal 2021.
• Comparable sales increased 15.6% compared to an increase of 47.1% in the first nine months of fiscal 2021, driven by a 9.7% increase in transactions and a 5.4% increase in average ticket.
• Gross profit increased 21.0% to $2.8 billion compared to $2.3 billion in the first nine months of fiscal 2021. As a percentage of net sales, gross profit increased to 40.6% compared to 39.7% in the first nine months of fiscal 2021, primarily due to leverage of fixed costs, strong growth in other revenue, and favorable channel mix shifts, partially offset by lower merchandise margin and higher inventory shrink.
• SG&A expenses increased 15.7% to $1.6 billion compared to $1.4 billion in the first nine months of fiscal 2021. As a percentage of net sales, SG&A expenses decreased to 23.4% compared to 23.9% in the first nine months of fiscal 2021, due to lower marketing expenses, partially offset by deleverage in corporate overhead primarily due to strategic investments.
• Operating income increased 29.2% to $1.2 billion, or 17.1% of net sales, compared to $921.9 million, or 15.6% of net sales, in the first nine months of fiscal 2021.
• The tax rate decreased to 24.3% compared to 24.4% in the first nine months of fiscal 2021.
• Net income increased 29.5% to $901.7 million compared to $696.5 million in the first nine months of fiscal 2021.
• Diluted earnings per share increased 37.7% to $17.35, including a $0.05 benefit due to income tax accounting for stock-based compensation, compared to $12.60 including a $0.08 benefit due to income tax accounting for stock-based compensation, in the first nine months of fiscal 2021.

Balance Sheet

Cash and cash equivalents at the end of the third quarter of fiscal 2022 were $250.6 million.

Merchandise inventories, net at the end of the third quarter of fiscal 2022 totaled $2.11 billion compared to $1.92 billion at the end of the third quarter of fiscal 2021. The $198.3 million increase was primarily due to inventory to support new brand launches, the addition of 41 net new stores opened since October 30, 2021, inventory cost increases, and inventory receipts to maintain strong in-stocks of key items to support expected demand.

Share Repurchase Program

During the third quarter of fiscal 2022, the Company repurchased 340,271 shares of its common stock at a cost of $137.5 million. During the first nine months of fiscal 2022, the Company repurchased 1.5 million shares of its common stock at a cost of $571.9 million. As of October 29, 2022, $1.4 billion remained available under the $2.0 billion share repurchase program announced in March 2022.

Store Update

Real estate activity in the third quarter of fiscal 2022 included 18 new stores located in Boone, NC; Bullhead City, AZ; Campbell, CA; Clemmons, NC; Dallas, TX; Del Rio, TX; Huntsville, TX; Jasper, IN; McMinnville, OR; Paris, TX; Redmond, OR; Rehoboth Beach, DE; Selma, TX; Sequim, WA; St. Petersburg, FL; Starkville, MS; Stoughton, MA and Wilson, NC. In addition, the Company relocated one store and remodeled eight stores. During the first nine months of fiscal 2022, the Company opened 35 new stores, relocated 11 stores, and remodeled eight stores.

At the end of the third quarter of fiscal 2022, the Company operated 1,343 stores totaling 14.1 million square feet.

Fiscal 2022 Outlook

Based on third quarter results and updated expectations for the fourth quarter, the Company has increased its outlook for fiscal 2022.

The Company’s updated outlook for fiscal 2022 is as follows:

			Prior FY22 Outlook		Updated FY22 Outlook
Net sales			$9.65 billion to $9.75 billion		$9.95 billion to $10.00 billion
Comparable sales			9.5% to 10.5%		12.6% to 13.2%
New stores, net			50		47
Remodel and relocation projects			35		33
Operating margin			14.6% to 14.8%		15.5% to 15.6%
Diluted earnings per share			$20.70 to $21.20		$22.60 to $22.90
Share repurchases			approximately $900 million		no change
Effective tax rate			approximately 24.5%		no change
Capital expenditures			$350 million to $400 million		$300 million to $350 million
Depreciation and amortization expense			approximately $250 million		no change

The Company’s outlook for fiscal 2022 assumes a consistent federal tax rate.

Conference Call Information

A conference call to discuss third quarter of fiscal 2022 results is scheduled for today, December 1, 2022, at 4:30 p.m. ET / 3:30 p.m. CT. Investors and analysts interested in participating in the call are invited to dial [phone]. The conference call will also be webcast live at https://ulta.com/investor. 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 December 15, 2022 and can be accessed by dialing (844) 512‑2921 and entering conference ID number 13733783.

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 1,343 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:

• changes in the overall level of consumer spending and volatility in the economy, including as a result of the COVID-19 pandemic and geo-political events;
• the impact of current inflationary cost pressures on payroll, benefits, supply chain, and other operating costs;
• our ability to sustain our growth plans and successfully implement our long-range strategic and financial plan;
• the ability to execute our operational excellence priorities, including continuous improvement, Project SOAR (our replacement enterprise resource planning platform), and supply chain optimization;
• epidemics, pandemics or natural disasters that have and could continue to negatively impact sales;
• our ability to gauge beauty trends and react to changing consumer preferences in a timely manner;
• the possibility that we may be unable to compete effectively in our highly competitive markets;
• the possibility that cybersecurity or information security breaches and other disruptions could compromise our information or result in the unauthorized disclosure of confidential information;
• the possibility of material disruptions to our information systems;
• the failure to maintain satisfactory compliance with applicable privacy and data protection laws and regulations;
• the possibility that the capacity of our distribution and order fulfillment infrastructure and the performance of our distribution centers and fast fulfillment centers may not be adequate to support our expected future growth plans;
• changes in the wholesale cost of our products;
• a decline in operating results that has and may continue to lead to asset impairment and store closure charges;
• the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues;
• our ability to attract and retain key executive personnel;
• the impact of climate change on our business operations and/or supply chain;
• our ability to successfully execute our 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 29, 2022, 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 Income (In thousands, except per share data)
		13 Weeks Ended
		October 29,							October 30,
		2022							2021
		(Unaudited)							(Unaudited)
Net sales		$	2,338,793			100.0	%		$	1,995,775		100.0	%
Cost of sales			1,375,976			58.8	%			1,206,301		60.4	%
Gross profit			962,817			41.2	%			789,474		39.6	%
Selling, general and administrative expenses			597,164			25.5	%			503,403		25.2	%
Pre-opening expenses			3,797			0.2	%			1,832		0.1	%
Operating income			361,856			15.5	%			284,239		14.2	%
Interest expense (income), net			(849	)		(0.0	%)			413		0.0	%
Income before income taxes			362,705			15.5	%			283,826		14.2	%
Income tax expense			88,120			3.8	%			68,537		3.4	%
Net income		$	274,585			11.7	%		$	215,289		10.8	%
Net income per common share:
Basic		$	5.37						$	3.97
Diluted		$	5.34						$	3.94
Weighted average common shares outstanding:
Basic			51,131							54,291
Diluted			51,418							54,660

Exhibit 2
Ulta Beauty, Inc. Consolidated Statements of Income (In thousands, except per share data)
		39 Weeks Ended
		October 29,							October 30,
		2022							2021
		(Unaudited)							(Unaudited)
Net sales		$	6,981,807			100.0	%		$	5,901,501		100.0	%
Cost of sales			4,149,800			59.4	%			3,560,276		60.3	%
Gross profit			2,832,007			40.6	%			2,341,225		39.7	%
Selling, general and administrative expenses			1,632,593			23.4	%			1,411,577		23.9	%
Pre-opening expenses			8,422			0.1	%			7,778		0.1	%
Operating income			1,190,992			17.1	%			921,870		15.6	%
Interest expense (income), net			(556	)		(0.0	%)			1,196		0.0	%
Income before income taxes			1,191,548			17.1	%			920,674		15.6	%
Income tax expense			289,891			4.2	%			224,203		3.8	%
Net income		$	901,657			12.9	%		$	696,471		11.8	%
Net income per common share:
Basic		$	17.45						$	12.68
Diluted		$	17.35						$	12.60
Weighted average common shares outstanding:
Basic			51,663							54,921
Diluted			51,962							55,280

Exhibit 3
Ulta Beauty, Inc. Condensed Consolidated Balance Sheets (In thousands)
		October 29,			January 29,			October 30,
		2022			2022			2021
		(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	250,628		$	431,560		$	605,053
Receivables, net			200,304			233,682			169,212
Merchandise inventories, net			2,114,669			1,499,218			1,916,343
Prepaid expenses and other current assets			137,642			110,814			105,584
Prepaid income taxes			42,572			5,909			37,501
Total current assets			2,745,815			2,281,183			2,833,693
Property and equipment, net			967,039			914,476			908,665
Operating lease assets			1,556,940			1,482,256			1,464,533
Goodwill			10,870			10,870			10,870
Other intangible assets, net			844			1,538			1,770
Deferred compensation plan assets			31,529			38,409			36,403
Other long-term assets			18,512			35,647			31,833
Total assets		$	5,331,549		$	4,764,379		$	5,287,767
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	647,117		$	552,730		$	747,451
Accrued liabilities			462,773			364,797			329,672
Deferred revenue			312,132			353,579			272,628
Current operating lease liabilities			275,749			274,118			274,365
Accrued income taxes			—			12,786			—
Total current liabilities			1,697,771			1,558,010			1,624,116
Non-current operating lease liabilities			1,621,252			1,572,638			1,565,921
Deferred income taxes			38,627			39,693			67,267
Other long-term liabilities			51,644			58,665			43,663
Total liabilities			3,409,294			3,229,006			3,300,967
Commitments and contingencies
Total stockholders’ equity			1,922,255			1,535,373			1,986,800
Total liabilities and stockholders’ equity		$	5,331,549		$	4,764,379		$	5,287,767

Exhibit 4
Ulta Beauty, Inc. Condensed Consolidated Statements of Cash Flows (In thousands)
		39 Weeks Ended
		October 29,				October 30,
		2022				2021
		(Unaudited)				(Unaudited)
Operating activities
Net income		$	901,657			$	696,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			182,182				204,734
Non-cash lease expense			222,548				206,017
Deferred income taxes			(1,066	)			1,908
Stock-based compensation expense			32,554				38,217
Loss on disposal of property and equipment			3,892				3,357
Change in operating assets and liabilities:
Receivables			33,378				23,897
Merchandise inventories			(615,451	)			(748,128	)
Prepaid expenses and other current assets			(26,828	)			1,818
Income taxes			(49,446	)			(80,027	)
Accounts payable			94,214				266,104
Accrued liabilities			64,164				24,482
Deferred revenue			(41,447	)			(1,755	)
Operating lease liabilities			(246,988	)			(222,451	)
Other assets and liabilities			20,063				213
Net cash provided by operating activities			573,426				414,857
Investing activities
Capital expenditures			(203,961	)			(108,418	)
Other investments			(3,068	)			—
Net cash used in investing activities			(207,029	)			(108,418	)
Financing activities
Repurchase of common shares			(571,908	)			(762,167	)
Stock options exercised			31,319				30,297
Purchase of treasury shares			(6,740	)			(15,511	)
Net cash used in financing activities			(547,329	)			(747,381	)
Effect of exchange rate changes on cash and cash equivalents			—				(56	)
Net decrease in cash and cash equivalents			(180,932	)			(440,998	)
Cash and cash equivalents at beginning of period			431,560				1,046,051
Cash and cash equivalents at end of period		$	250,628			$	605,053

								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 2022		quarter		quarter		quarter		end of the quarter
1st Quarter		1,308		10		0		1,318
2nd Quarter		1,318		7		0		1,325
3rd Quarter		1,325		18		0		1,343
				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 2022		the quarter		quarter		during the quarter		quarter
1st Quarter		13,770,438		90,905		0		13,861,343
2nd Quarter		13,861,343		61,257		0		13,922,600
3rd Quarter		13,922,600		151,730		0		14,074,330

				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
		October 29,		October 30,
		2022		2021
Cosmetics		44%		45%
Haircare products and styling tools		21%		21%
Skincare		16%		16%
Fragrance and bath		12%		12%
Services		4%		3%
Accessories and other		3%		3%
		100%		100%
		39 Weeks Ended
		October 29,		October 30,
		2022		2021
Cosmetics		43%		44%
Haircare products and styling tools		21%		20%
Skincare		17%		17%
Fragrance and bath		12%		12%
Services		4%		4%
Accessories and other		3%		3%
		100%		100%

 

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The Ulta Beauty Stock at the time of publication of the news with a raise of +1,78 % to 473,1USD on Nasdaq stock exchange (01. Dezember 2022, 21:55 Uhr).