Ulta Beauty Announces Second Quarter Fiscal 2022 Results

BOLINGBROOK, Ill.--(BUSINESS WIRE)--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 30, 2022 compared to the same periods ended July 31, 2021.

		13 Weeks Ended										26 Weeks Ended
		July 30,			July 31,			August 1,				July 30,			July 31,			August 1,
(Dollars in millions)		2022			2021			2020				2022			2021			2020
Net sales		$	2,297.1		$	1,967.2		$	1,228.0			$	4,643.0		$	3,905.7		$	2,401.2
Comparable sales			14.4%			56.3%			(26.7)%				16.2%			60.9%			(31.1)%
Gross profit (as a percentage of net sales)			40.4%			40.6%			26.8%				40.3%			39.7%			26.3%
Selling, general and administrative expenses		$	534.5		$	464.3		$	271.6			$	1,035.4		$	908.2		$	652.5
Operating income (loss) (as a percentage of net sales)			17.0%			16.9%			1.1%				17.9%			16.3%			(3.7)%
Diluted earnings (loss) per share		$	5.70		$	4.56		$	0.14			$	12.00		$	8.66		$	(1.25)
New store openings, net			7			6			—				17			32			10

"Strong consumer demand and broad-based momentum across our business continued as our teams executed our plans with excellence," said Dave Kimbell, chief executive officer. "For the quarter, we delivered double-digit comparable sales growth across all major categories and increased profitability, demonstrating the strength of our model and the commitment of our teams."

Kimbell continued, "As we look to the second half of the year, we continue to operate in a dynamic environment, but I am confident that our unique model and one-of-a-kind assortment, paired with the strong emotional connection guests have to Beauty, position us well to continue to deliver profitable growth."

For the Second Quarter of Fiscal 2022

• Net sales increased 16.8% to $2.3 billion compared to $2.0 billion in the second quarter of fiscal 2021 due to the favorable impact from the continued resilience of the beauty category, the impact of new brands and product innovation, and the easing of COVID-19 restrictions compared to the second quarter of fiscal 2021.
• Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 14.4% compared to an increase of 56.3% in the second quarter of fiscal 2021, driven by an 8.3% increase in transactions and a 5.6% increase in average ticket.
• Gross profit increased 16.3% to $928.2 million compared to $798.0 million in the second quarter of fiscal 2021. As a percentage of net sales, gross profit decreased to 40.4% compared to 40.6% in the second quarter of fiscal 2021, primarily due to lower merchandise margin and higher inventory shrink, partially offset by leverage of fixed costs and strong growth in other revenue.
• Selling, general and administrative (SG&A) expenses increased 15.1% to $534.5 million compared to $464.3 million in the second quarter of fiscal 2021. As a percentage of net sales, SG&A expenses decreased to 23.3% compared to 23.6% in the second quarter of fiscal 2021, primarily due to lower marketing expenses and leverage of store payroll and benefits and store expenses due to higher sales, partially offset by deleverage in corporate overhead primarily due to strategic investments and higher incentive compensation.
• Pre-opening expenses increased to $2.3 million compared to $1.4 million in the second quarter of fiscal 2021.
• Operating income increased 17.8% to $391.4 million, or 17.0% of net sales, compared to $332.3 million, or 16.9% of net sales, in the second quarter of fiscal 2021.
• The company's tax rate increased to 24.5% compared to 24.4% in the second quarter of fiscal 2021.
• Net income increased 17.8% to $295.7 million compared to $250.9 million in the second quarter of fiscal 2021.
• Diluted earnings per share increased 25.0% to $5.70, including a $0.01 benefit due to income tax accounting for stock-based compensation, compared to $4.56, including a $0.04 benefit due to income tax accounting for stock-based compensation, in the second quarter of fiscal 2021.

For the First Six Months of Fiscal 2022

• Net sales increased 18.9% to $4.6 billion compared to $3.9 billion in the first six months of fiscal 2021, primarily due to the favorable impact from the continued resilience of the beauty category, the impact of new brands and product innovation, and the easing of COVID-19 restrictions compared to the first six months of fiscal 2021.
• Comparable sales increased 16.2% compared to an increase of 60.9% in the first six months of fiscal 2021, driven by a 9.2% increase in transactions and a 6.4% increase in average ticket.
• Gross profit increased 20.5% to $1.9 billion compared to $1.6 billion in the first six months of fiscal 2021. As a percentage of net sales, gross profit increased to 40.3% compared to 39.7% in the first six 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 14.0% to $1.0 billion compared to $0.9 billion in the first six months of fiscal 2021. As a percentage of net sales, SG&A expenses decreased to 22.3% compared to 23.3% in the first six months of fiscal 2021, due to lower marketing expenses and leverage of store payroll and benefits due to higher sales, partially offset by deleverage in corporate overhead primarily due to strategic investments.
• Pre-opening expenses decreased to $4.6 million compared to $5.9 million in the first six months of fiscal 2021.
• Operating income increased 30.0% to $829.1 million, or 17.9% of net sales, compared to $637.6 million, or 16.3% of net sales, in the first six months of fiscal 2021.
• The company's tax rate was 24.3% compared to 24.4% in the first six months of fiscal 2021.
• Net income increased 30.3% to $627.1 million compared to $481.2 million in the first six months of fiscal 2021.
• Diluted earnings per share increased 38.6% to $12.00, including a $0.03 benefit due to income tax accounting for stock-based compensation, compared to $8.66, including a $0.07 benefit due to income tax accounting for stock-based compensation, in the first six months of fiscal 2021.

Balance Sheet

Cash and cash equivalents at the end of the second quarter of fiscal 2022 were $434.2 million.

Merchandise inventories, net at the end of the second quarter of fiscal 2022 totaled $1.67 billion compared to $1.44 billion at the end of the second quarter of fiscal 2021. The $222.4 million increase in inventory was primarily due to the addition of 29 net new stores opened since July 31, 2021, inventory to support new brand launches, inventory cost increases, and inventory receipts to maintain strong in-stocks of key items to support expected demand.

Share Repurchase Program

During the second quarter of fiscal 2022, the Company repurchased 797,994 shares of its common stock at a cost of $301.6 million. During the first six months of fiscal 2022, the Company repurchased 1.1 million shares of its common stock at a cost of $434.4 million. As of July 30, 2022, $1.6 billion remained available under the $2.0 billion share repurchase program announced in March 2022.

Store Update

Real estate activity in the second quarter of fiscal 2022 included seven new stores located in Apopka, FL; Grand Fords, ND; Greenville, SC; Monroe, GA; North Charleston, SC; Saratoga Springs, UT; and Tucson, AZ. In addition, the Company relocated four stores. During the first six months of fiscal 2022, the Company opened 17 new stores and relocated 10 stores.

At the end of the second quarter of fiscal 2022, the Company operated 1,325 stores totaling 13.9 million square feet.

Fiscal 2022 Outlook

Based on the results for the first six months of fiscal 2022 and sales trends experience to date in August, 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			$9.35 billion to $9.55 billion		$9.65 billion to $9.75 billion
Comparable sales			6% to 8%		9.5% to 10.5%
New stores, net			50		no change
Remodel and relocation projects			35		no change
Operating margin			14.1% to 14.4%		14.6% to 14.8%
Diluted earnings per share			$19.20 to $20.10		$20.70 to $21.20
Share repurchases			approximately $900 million		no change
Effective tax rate			approximately 24.5%		no change
Capital expenditures			$375 million to $425 million		$350 million to $400 million
Depreciation and amortization expense			$250 million to $255 million		approximately $250 million

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

Conference Call Information

A conference call to discuss second quarter of fiscal 2022 results is scheduled for today, August 25, 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 September 8, 2022 and can be accessed by dialing [phone] and entering conference ID number 13731271.

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 1,325 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
		July 30,							July 31,
		2022							2021
		(Unaudited)							(Unaudited)
Net sales		$	2,297,113			100.0	%		$	1,967,207		100.0	%
Cost of sales			1,368,949			59.6	%			1,169,244		59.4	%
Gross profit			928,164			40.4	%			797,963		40.6	%
Selling, general and administrative expenses			534,459			23.3	%			464,299		23.6	%
Pre-opening expenses			2,277			0.1	%			1,357		0.1	%
Operating income			391,428			17.0	%			332,307		16.9	%
Interest expense (income), net			(108	)		(0.0	%)			425		0.0	%
Income before income taxes			391,536			17.0	%			331,882		16.9	%
Income tax expense			95,859			4.2	%			80,989		4.1	%
Net income		$	295,677			12.9	%		$	250,893		12.8	%
Net income per common share:
Basic		$	5.73						$	4.59
Diluted		$	5.70						$	4.56
Weighted average common shares outstanding:
Basic			51,607							54,675
Diluted			51,900							55,014

Exhibit 2
Ulta Beauty, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
		26 Weeks Ended
		July 30,					July 31,
		2022					2021
		(Unaudited)					(Unaudited)
Net sales		$	4,643,014		100.0%		$	3,905,726		100.0%
Cost of sales			2,773,824		59.7%			2,353,975		60.3%
Gross profit			1,869,190		40.3%			1,551,751		39.7%
Selling, general and administrative expenses			1,035,429		22.3%			908,174		23.3%
Pre-opening expenses			4,625		0.1%			5,946		0.1%
Operating income			829,136		17.9%			637,631		16.3%
Interest expense, net			293		0.0%			783		0.0%
Income before income taxes			828,843		17.9%			636,848		16.3%
Income tax expense			201,771		4.3%			155,666		4.0%
Net income		$	627,072		13.5%		$	481,182		12.3%
Net income per common share:
Basic		$	12.08				$	8.71
Diluted		$	12.00				$	8.66
Weighted average common shares outstanding:
Basic			51,928					55,235
Diluted			52,237					55,592

Exhibit 3
Ulta Beauty, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
		July 30,			January 29,			July 31,
		2022			2022			2021
		(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	434,226		$	431,560		$	770,144
Receivables, net			180,514			233,682			154,416
Merchandise inventories, net			1,666,130			1,499,218			1,443,685
Prepaid expenses and other current assets			123,014			110,814			108,145
Prepaid income taxes			39,029			5,909			18,544
Total current assets			2,442,913			2,281,183			2,494,934
Property and equipment, net			912,017			914,476			909,507
Operating lease assets			1,509,246			1,482,256			1,470,166
Goodwill			10,870			10,870			10,870
Other intangible assets, net			1,075			1,538			2,001
Deferred compensation plan assets			33,393			38,409			36,396
Other long-term assets			36,480			35,647			30,711
Total assets		$	4,945,994		$	4,764,379		$	4,954,585
Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$	586,851		$	552,730		$	535,257
Accrued liabilities			323,939			364,797			313,372
Deferred revenue			316,571			353,579			265,462
Current operating lease liabilities			274,693			274,118			267,442
Accrued income taxes			—			12,786			—
Total current liabilities			1,502,054			1,558,010			1,381,533
Non-current operating lease liabilities			1,582,003			1,572,638			1,585,539
Deferred income taxes			40,029			39,693			64,535
Other long-term liabilities			52,840			58,665			43,165
Total liabilities			3,176,926			3,229,006			3,074,772
Commitments and contingencies
Total stockholders' equity			1,769,068			1,535,373			1,879,813
Total liabilities and stockholders' equity		$	4,945,994		$	4,764,379		$	4,954,585

Exhibit 4
Ulta Beauty, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
		26 Weeks Ended
		July 30,				July 31,
		2022				2021
		(Unaudited)				(Unaudited)
Operating activities
Net income		$	627,072			$	481,182
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			123,721				139,577
Non-cash lease expense			146,251				137,521
Deferred income taxes			336				(824	)
Stock-based compensation expense			22,875				19,097
Loss on disposal of property and equipment			2,277				1,703
Change in operating assets and liabilities:
Receivables			53,168				38,693
Merchandise inventories			(166,912	)			(275,470	)
Prepaid expenses and other current assets			(12,200	)			(741	)
Income taxes			(45,906	)			(61,074	)
Accounts payable			40,051				59,360
Accrued liabilities			(49,364	)			17,858
Deferred revenue			(37,008	)			(8,921	)
Operating lease liabilities			(163,302	)			(146,892	)
Other assets and liabilities			(392	)			344
Net cash provided by operating activities			540,667				401,413
Investing activities
Capital expenditures			(120,500	)			(57,305	)
Other investments			(1,249	)			—
Net cash used in investing activities			(121,749	)			(57,305	)
Financing activities
Repurchase of common shares			(434,448	)			(635,793	)
Stock options exercised			24,521				22,808
Purchase of treasury shares			(6,325	)			(6,974	)
Net cash used in financing activities			(416,252	)			(619,959	)
Effect of exchange rate changes on cash and cash equivalents			—				(56	)
Net increase (decrease) in cash and cash equivalents			2,666				(275,907	)
Cash and cash equivalents at beginning of period			431,560				1,046,051
Cash and cash equivalents at end of period		$	434,226			$	770,144

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
				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

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 30,		July 31,
		2022		2021
Cosmetics		42%		43%
Haircare products and styling tools		22%		21%
Skincare		17%		17%
Fragrance and bath		12%		12%
Services		4%		4%
Accessories and other		3%		3%
		100%		100%
		26 Weeks Ended
		July 30,		July 31,
		2022		2021
Cosmetics		43%		44%
Haircare products and styling tools		21%		20%
Skincare		17%		18%
Fragrance and bath		12%		11%
Services		4%		4%
Accessories and other		3%		3%
		100%		100%

 

Contacts

Investor Contact:
Kiley Rawlins, CFA
Vice President, Investor Relations
[e-mail]

Media Contact:
Eileen Ziesemer
Vice President, Public Relations
[e-mail]
[phone]