Ulta Beauty Announces Third Quarter Fiscal 2022 Results
12/01/2022 - 04:05 PM
Net Sales of $2.3 Billion $2.0 Billion Year-Ago Quarter
Comparable Sales Increased 14.6%
Net Income of $274.6 Million $5.34 Per Diluted Share
Company Raises Outlook for Fiscal Year 2022
BOLINGBROOK, Ill. --(BUSINESS WIRE)--
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 $2.0 billion
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 $789.5 million 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 $503.4 million 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 15.5% of net sales, compared to $284.2 million 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 $215.3 million
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 $5.9 billion
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 $2.3 billion 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 $1.4 billion 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 17.1% of net sales, compared to $921.9 million 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 $696.5 million
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 $1.92 billion $198.3 million 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 $571.9 million October 29, 2022 , $1.4 billion $2.0 billion 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 $9.75 billion
$9.95 billion $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 $400 million
$300 million $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 (877) 704-4453. 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.
S tore 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%
View source version on businesswire.com : https://www.businesswire.com/news/home/20221201005756/en/
Investor Contacts:
Kiley Rawlins , CFA
krawlins@ulta.com
Media Contact:
Eileen Ziesemer
eziesemer@ulta.com
Source: Ulta Beauty, Inc.
