Ulta Beauty Announces Third Quarter Fiscal 2023 Results

Rhea-AI Summary

Ulta Beauty, Inc. (NASDAQ: ULTA) reported net sales of $2.5 billion, a 6.4% increase from the year-ago quarter, with a net income of $249.5 million. The company's comparable sales increased by 4.5% and the diluted earnings per share were $5.07.

Positive

• Net sales increased by 6.4% compared to the year-ago quarter
• Comparable sales increased by 4.5%
• Net income of $249.5 million
• Diluted earnings per share of $5.07

Negative

• Gross profit decreased to 39.9% from 41.2%
• Selling, general and administrative expenses increased to 26.6% from 25.5%
• Operating income decreased to 13.1% from 15.5%
• Net income decreased to $249.5 million from $274.6 million
• Diluted earnings per share decreased to $5.07 from $5.34

Net Sales of $2.5 Billion Compared to $2.3 Billion in the Year-Ago Quarter

Comparable Sales Increased 4.5%

Net Income of $249.5 Million or $5.07 Per Diluted Share

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 28, 2023 compared to the same periods ended October 29, 2022.

		13 Weeks Ended						39 Weeks Ended
		October 28,			October 29,				October 28,			October 29,
(Dollars in millions, except per share data)		2023			2022				2023			2022
Net sales		$	2,488.9		$	2,338.8			$	7,653.0		$	6,981.8
Comparable sales			4.5%			14.6%				7.3%			15.6%
Gross profit (as a percentage of net sales)			39.9%			41.2%				39.7%			40.6%
Selling, general and administrative expenses		$	661.4		$	597.2			$	1,874.2		$	1,632.6
Operating income (as a percentage of net sales)			13.1%			15.5%				15.2%			17.1%
Diluted earnings per share		$	5.07		$	5.34			$	17.99		$	17.35
New store openings, net			12			18				19			35

“The third quarter represented another strong performance by the Ulta Beauty team, as sales, gross profit, and diluted EPS all exceeded our internal expectations. Our traffic trends remained healthy, our brand awareness increased, and we expanded our loyalty program to a record 42.2 million members,” said Dave Kimbell, chief executive officer. “As we look to the future, the outlook for the Beauty category is bright, and I am confident Ulta Beauty has the right plans in place to delight our guests this holiday season, expand our leadership position in specialty beauty retail, and deliver long-term shareholder growth.”

Third Quarter of Fiscal 2023 Compared to Third Quarter of Fiscal 2022

• Net sales increased 6.4% to $2.5 billion compared to $2.3 billion, primarily due to increased comparable sales, strong new store performance, and strong growth in other revenue.
• Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 4.5% compared to an increase of 14.6%, driven by a 5.9% increase in transactions and a 1.4% decrease in average ticket.
• Gross profit increased 3.0% to $992.1 million compared to $962.8 million. As a percentage of net sales, gross profit decreased to 39.9% compared to 41.2%, primarily due to lower merchandise margin, higher inventory shrink, and higher supply chain costs, partially offset by strong growth in other revenue.
• Selling, general and administrative (SG&A) expenses increased 10.8% to $661.4 million compared to $597.2 million. As a percentage of net sales, SG&A expenses increased to 26.6% compared to 25.5%, primarily due to higher corporate overhead due to strategic investments, higher store expenses, higher store payroll and benefits, and higher marketing expenses, partially offset by lower incentive compensation.
• Operating income was $327.2 million, or 13.1% of net sales, compared to $361.9 million, or 15.5% of net sales.
• Net interest income increased to $2.5 million compared to $0.8 million, due to higher average interest rates on cash balances.
• The tax rate remained flat at 24.3%.
• Net income was $249.5 million compared to $274.6 million.
• Diluted earnings per share was $5.07 compared to $5.34 (which included a $0.02 benefit due to income tax accounting for stock-based compensation).

First Nine Months of Fiscal 2023 Compared to First Nine Months of Fiscal 2022

• Net sales increased 9.6% to $7.7 billion compared to $7.0 billion, primarily due to increased comparable sales, strong new store performance, and strong growth in other revenue.
• Comparable sales increased 7.3% compared to an increase of 15.6%, driven by an 8.7% increase in transactions and a 1.4% decrease in average ticket.
• Gross profit increased 7.4% to $3.0 billion compared to $2.8 billion. As a percentage of net sales, gross profit decreased to 39.7% compared to 40.6%, primarily due to lower merchandise margin, higher inventory shrink, higher supply chain costs, and deleverage of salon expenses, partially offset by strong growth in other revenue and leverage of store fixed costs.
• SG&A expenses increased 14.8% to $1.9 billion compared to $1.6 billion. As a percentage of net sales, SG&A expenses increased to 24.5% compared to 23.4%, primarily due to higher corporate overhead due to strategic investments, higher store payroll and benefits, higher marketing expenses, and higher store expenses, partially offset by lower incentive compensation.
• Operating income was $1.16 billion, or 15.2% of net sales, compared to $1.19 billion, or 17.1% of net sales.
• Net interest income increased to $14.3 million compared to $0.6 million, due to higher average interest rates on cash balances.
• The tax rate decreased to 23.7% compared to 24.3%, primarily due to benefits from income tax accounting for stock-based compensation.
• Net income was $896.6 million compared to $901.7 million.
• Diluted earnings per share was $17.99, including a $0.14 benefit due to income tax accounting for stock-based compensation, compared to $17.35, including a $0.05 benefit due to income tax accounting for stock-based compensation.

Balance Sheet

Cash and cash equivalents at the end of the third quarter of fiscal 2023 totaled $121.8 million.

Merchandise inventories, net at the end of the third quarter of fiscal 2023 increased 9.8% to $2.3 billion compared to $2.1 billion at the end of the third quarter of fiscal 2022. The increase was primarily due to inventory to support expected demand, 31 net new stores, the new market fulfillment center in Greer, SC, new brand launches, and product cost increases.

Short-term debt at the end of the third quarter of fiscal 2023 was $195.4 million, as the Company drew on its revolving credit facility to support ongoing capital allocation priorities, including share repurchases and capital expenditures, and merchandise inventory growth.

Share Repurchase Program

During the third quarter of fiscal 2023, the Company repurchased 686,689 shares of its common stock at a cost of $281.5 million. During the first nine months of fiscal 2023, the Company repurchased 1.8 million shares of its common stock at a cost of $840.5 million. As of October 28, 2023, $259.4 million 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 2023 included 12 new stores located in Antioch, TN; Baraboo, WI; Cornelius, NC; Cottage Grove, MN; El Paso, TX (2); Elizabethtown, KY; Leominster, MA; Mesa, AZ; Parrish, FL; Pell City, AL; and Rialto, CA. In addition, the Company relocated two stores and remodeled 11 stores. During the first nine months of fiscal 2023, the Company opened 20 new stores, relocated five stores, remodeled 16 stores, and closed one store.

At the end of the third quarter of fiscal 2023, the Company operated 1,374 stores totaling 14.4 million square feet.

Fiscal 2023 Outlook

The Company has updated its outlook for fiscal 2023.

			Prior FY23 Outlook		Updated FY23 Outlook
Net sales			$11.05 billion to $11.15 billion		$11.10 billion to $11.15 billion
Comparable sales			4.5% to 5.5%		5.0% to 5.5%
New stores, net			25-30		no change
Remodel and relocation projects			20-30		no change
Operating margin			14.6% to 14.8%		no change
Diluted earnings per share			$25.10 to $25.60		$25.20 to $25.60
Share repurchases			approximately $900 million		approximately $950 million
Interest income			approximately $17 million		no change
Effective tax rate			approximately 23.9%		no change
Capital expenditures			$400 million to $475 million		$400 million to $425 million
Depreciation and amortization expense			$245 million to $250 million		$240 million to $245 million

Conference Call Information

A conference call to discuss third quarter of fiscal 2023 results is scheduled for today, November 30, 2023, 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 14, 2023 and can be accessed by dialing (844) 512-2921 and entering conference ID number 13741934.

About Ulta Beauty

At Ulta Beauty (NASDAQ: ULTA), the possibilities are beautiful. Ulta Beauty is the largest specialty 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 1,374 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:

• macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing labor pressures, transportation and shipping cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, profitability, and cash flows (including future uncertain impacts);
• changes in the overall level of consumer spending and volatility in the economy, including as a result of the macroeconomic conditions and geopolitical events;
• 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;
• 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 of significant interruptions in the operations of our distribution centers, fast fulfillment centers, and market fulfillment centers;
• 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, including our Ulta.com website and mobile applications;
• the failure to maintain satisfactory compliance with applicable privacy and data protection laws and regulations;
• changes in the good relationships we have with our brand partners and/or our ability to continue to offer permanent or temporary exclusive products of our brand partners;
• changes in the wholesale cost of our products and/or interruptions at our brand partners’ or third-party vendors’ operations;
• future epidemics, pandemics or natural disasters could negatively impact sales;
• 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;
• a decline in operating results may lead to asset impairment and store closure charges; 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 28, 2023, 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 28,							October 29,
		2023							2022
		(Unaudited)							(Unaudited)
Net sales		$	2,488,933			100.0	%		$	2,338,793			100.0	%
Cost of sales			1,496,866			60.1	%			1,375,976			58.8	%
Gross profit			992,067			39.9	%			962,817			41.2	%
Selling, general and administrative expenses			661,380			26.6	%			597,164			25.5	%
Pre-opening expenses			3,460			0.1	%			3,797			0.2	%
Operating income			327,227			13.1	%			361,856			15.5	%
Interest income, net			(2,497	)		(0.1	%)			(849	)		(0.0	%)
Income before income taxes			329,724			13.2	%			362,705			15.5	%
Income tax expense			80,241			3.2	%			88,120			3.8	%
Net income		$	249,483			10.0	%		$	274,585			11.7	%
Net income per common share:
Basic		$	5.09						$	5.37
Diluted		$	5.07						$	5.34
Weighted average common shares outstanding:
Basic			49,007							51,131
Diluted			49,226							51,418

Exhibit 2
Ulta Beauty, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
		39 Weeks Ended
		October 28,							October 29,
		2023							2022
		(Unaudited)							(Unaudited)
Net sales		$	7,653,005			100.0	%		$	6,981,807			100.0	%
Cost of sales			4,612,469			60.3	%			4,149,800			59.4	%
Gross profit			3,040,536			39.7	%			2,832,007			40.6	%
Selling, general and administrative expenses			1,874,201			24.5	%			1,632,593			23.4	%
Pre-opening expenses			5,396			0.1	%			8,422			0.1	%
Operating income			1,160,939			15.2	%			1,190,992			17.1	%
Interest income, net			(14,294	)		(0.2	%)			(556	)		(0.0	%)
Income before income taxes			1,175,233			15.4	%			1,191,548			17.1	%
Income tax expense			278,597			3.6	%			289,891			4.2	%
Net income		$	896,636			11.7	%		$	901,657			12.9	%
Net income per common share:
Basic		$	18.08						$	17.45
Diluted		$	17.99						$	17.35
Weighted average common shares outstanding:
Basic			49,592							51,663
Diluted			49,846							51,962

Exhibit 3
Ulta Beauty, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
		October 28,			January 28,			October 29,
		2023			2023			2022
		(Unaudited)						(Unaudited)
Assets
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
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

Exhibit 4
Ulta Beauty, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
		39 Weeks Ended
		October 28,				October 29,
		2023				2022
		(Unaudited)				(Unaudited)
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

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 2023		quarter		quarter		quarter		end of the quarter
1st Quarter		1,355		5		1		1,359
2nd Quarter		1,359		3		0		1,362
3rd Quarter		1,362		12		0		1,374

				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 2023		the quarter		quarter		during the quarter		quarter
1st Quarter		14,200,403		54,495		9,984		14,244,914
2nd Quarter		14,244,914		27,530		0		14,272,444
3rd Quarter		14,272,444		133,421		0		14,405,865

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 28,			October 29,
		2023			2022
Cosmetics		42	%		44	%
Haircare products and styling tools		19	%		21	%
Skincare		19	%		16	%
Fragrance and bath		13	%		12	%
Services		4	%		4	%
Accessories and other		3	%		3	%
		100	%		100	%

		39 Weeks Ended
		October 28,			October 29,
		2023			2022
Cosmetics		42	%		43	%
Haircare products and styling tools		20	%		21	%
Skincare		19	%		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/20231130337622/en/

Investor Contacts:

Kiley Rawlins, CFA

Vice President, Investor Relations

krawlins@ulta.com

Media Contact:

Crystal Carroll

Senior Director, Public Relations

ccarroll@ulta.com

Source: Ulta Beauty, Inc.

FAQ

What are Ulta Beauty, Inc.'s (NASDAQ: ULTA) net sales for the third quarter of fiscal 2023?

Ulta Beauty, Inc. reported net sales of $2.5 billion for the third quarter of fiscal 2023, a 6.4% increase from the year-ago quarter.

How much did Ulta Beauty, Inc. (NASDAQ: ULTA) report as net income for the third quarter of fiscal 2023?

Ulta Beauty, Inc. reported a net income of $249.5 million for the third quarter of fiscal 2023.

What was the diluted earnings per share for Ulta Beauty, Inc. (NASDAQ: ULTA) in the third quarter of fiscal 2023?

The diluted earnings per share for Ulta Beauty, Inc. in the third quarter of fiscal 2023 were $5.07.

What are the positive aspects of Ulta Beauty, Inc.'s (NASDAQ: ULTA) financial results for the third quarter of fiscal 2023?

The positive aspects of Ulta Beauty, Inc.'s financial results for the third quarter of fiscal 2023 include a 6.4% increase in net sales, a 4.5% increase in comparable sales, and a net income of $249.5 million.

What are the negative aspects of Ulta Beauty, Inc.'s (NASDAQ: ULTA) financial results for the third quarter of fiscal 2023?

The negative aspects of Ulta Beauty, Inc.'s financial results for the third quarter of fiscal 2023 include a decrease in gross profit to 39.9% from 41.2%, an increase in selling, general and administrative expenses to 26.6% from 25.5%, a decrease in operating income to 13.1% from 15.5%, a decrease in net income to $249.5 million from $274.6 million, and a decrease in diluted earnings per share to $5.07 from $5.34.