Ulta Beauty Inc

Previous wording

Today, we are the largest specialty beauty retailer in the United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products, and salon services. Key aspects of our business include: a differentiated assortment of approximately 25,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in more than 1,350 stores predominantly located in convenient, high-traffic locations; engaging digital experiences delivered through our website, Ulta.com, and our mobile applications; our best-in-class loyalty program that enables members to earn points for every dollar spent on products and beauty services and provides us with deep, proprietary customer insights; and our ability to cultivate human connection with warm and welcoming guest experiences across all of our channels.

Current wording

Today, we are the largest specialty beauty retailer in the United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products, and salon services. Key aspects of our business include: a differentiated assortment of approximately 25,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in more than 1,400 stores predominantly located in convenient, high-traffic locations; engaging digital experiences delivered through our website, Ulta.com, and our mobile applications; our best-in-class loyalty program that enables members to earn points for every dollar spent on products and beauty services and provides us with deep, proprietary customer insights; and our ability to cultivate human connection with warm and welcoming guest experiences across all of our channels.

Previous wording

Over the long term, our growth strategy is to increase total net sales through growing our comparable sales, expanding omnichannel capabilities, and opening new stores. Long-term operating profit is expected to increase as a result of our efforts to optimize our real estate portfolio, expand merchandise margin, and leverage our fixed store costs with comparable sales increases and operating efficiencies, partially offset by incremental investments in people, guest experiences, systems, and supply chain required to support a 1,500 to 1,700 store chain in the U.S. with successful e-commerce and competitive omnichannel capabilities.

Current wording

Over the long term, our growth strategy is to increase total net sales through growing our comparable sales, expanding omnichannel capabilities, and opening new stores. Long-term operating profit is expected to increase as a result of our efforts to optimize our real estate portfolio, expand merchandise margin, and leverage our fixed store costs with

Previous wording

Our research indicates that Ulta Beauty has captured meaningful market share across all categories over the last several years. The overall beauty market expanded in 2023 and into the first quarter of 2024, supported by healthy consumer engagement with the beauty category. We remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains over the long term.

Current wording

Our research indicates that Ulta Beauty has captured meaningful market share across all categories over the last several years. The overall beauty market expanded in 2023 and into the first 26 weeks of fiscal 2024, supported by on-going consumer engagement with the beauty category. We remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains over the long term.

Previous wording

Comparable sales reflect sales for stores beginning on the first day of the 14th month of operation. Therefore, a store is included in our comparable store base on the first day of the period after one year of operations plus the initial one-month grand opening period. Non-comparable store sales include sales from new stores that have not yet completed their 13th month of operation and stores that were closed for part or all of the period in either year. Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or prior period. Comparable sales include retail sales, salon services, and e-commerce. In fiscal years with 53 weeks, the 53rd week of comparable sales is included in the calculation. In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks. There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales.

Current wording

Comparable sales reflect sales for stores beginning on the first day of the 14 th month of operation. Therefore, a store is included in our comparable store base on the first day of the period after one year of operations plus the initial one-month grand opening period. Non-comparable store sales include sales from new stores that have not yet completed their 13 th month of operation and stores that were closed for part or all of the period in either year. Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or prior period. Comparable sales include retail sales, salon services, and e-commerce. In fiscal years with 53 weeks, the 53 rd week of comparable sales is included in the calculation. In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks. There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales.

Previous wording

Our quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s first quarter in fiscal 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. Our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance.

Current wording

Our quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s second quarter in fiscal 2024 and 2023 ended on August 3, 2024 and July 29, 2023, respectively. Our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that

Previous wording

Net sales increased $91.6 million or 3.5%, to $2.7 billion for the 13 weeks ended May 4, 2024, compared to $2.6 billion for the 13 weeks ended April 29, 2023. The net sales increase was primarily due to increased comparable sales, new store contribution, and an increase of $9.1 million in other revenue. The total comparable sales increase of 1.6% was driven by a 1.3% increase in transactions and a 0.3% increase in average ticket.

Current wording

Net sales increased $22.3 million, or 0.9%, to $2.6 billion for the 13 weeks ended August 3, 2024 compared to $2.5 billion for the 13 weeks ended July 29, 2023. The net sales increase was primarily due to new store contribution and a $5.7 million increase in other revenue. The comparable sales decrease of 1.2% for the 13 weeks ended August 3, 2024 was driven by a 1.8% decrease in transactions and a 0.6% increase in average ticket.

Previous wording

Gross profit increased $14.9 million or 1.4%, to $1.07 billion for the 13 weeks ended May 4, 2024, compared to $1.05 billion for the 13 weeks ended April 29, 2023. Gross profit as a percentage of net sales decreased to 39.2% for the 13 weeks ended May 4, 2024, compared to 40.0% for the 13 weeks ended April 29, 2023. The decrease in gross profit margin was primarily due to lower merchandise margins and higher inventory shrink, partially offset by growth in other revenue.

Current wording

Gross profit decreased $15.4 million, or 1.6%, to $978.2 million for the 13 weeks ended August 3, 2024, compared to $993.6 million for the 13 weeks ended July 29, 2023. Gross profit as a percentage of net sales decreased to 38.3% for the 13 weeks ended August 3, 2024, compared to 39.3% for the 13 weeks ended July 29, 2023. The decrease in gross profit margin was primarily due to lower merchandise margins and deleverage of store fixed costs, partially offset by growth in other revenue and lower inventory shrink.

Previous wording

Selling, general and administrative (SG&A) expenses increased $53.8 million or 8.8%, to $665.9 million for the 13 weeks ended May 4, 2024, compared to $612.1 million for the 13 weeks ended April 29, 2023. SG&A expenses as a percentage of net sales increased to 24.4% for the 13 weeks ended May 4, 2024, compared to 23.2% for the 13 weeks ended April 29, 2023, primarily due to higher corporate overhead for strategic investments, higher store payroll and benefits, and higher store expenses.

Current wording

Selling, general and administrative (SG&A) expenses increased $44.1 million or 7.3%, to $644.8 million for the 13 weeks ended August 3, 2024, compared to $600.7 million for the 13 weeks ended July 29, 2023. SG&A expenses as a percentage of net sales increased to 25.3% for the 13 weeks ended August 3, 2024, compared to 23.7% for the 13 weeks ended July 29, 2023, primarily due to deleverage of store payroll and benefits, corporate overhead primarily due to strategic investments, store expenses, and marketing expenses, partially offset by lower incentive compensation.

Previous wording

Interest income, net was $6.9 million for the 13 weeks ended May 4, 2024 compared to $7.3 million for the 13 weeks ended April 29, 2023. We did not have any outstanding borrowings on the credit facility as of May 4, 2024, February 3, 2024, and April 29, 2023.

Current wording

Interest income, net was $4.5 million for the 13 weeks ended August 3, 2024 compared to $4.4 million for the 13 weeks ended July 29, 2023. We did not have any outstanding borrowings on the credit facility as of August 3, 2024, February 3, 2024, and July 29, 2023.

Previous wording

Income tax expense of $94.7 million for the 13 weeks ended May 4, 2024 represents an effective tax rate of 23.2%, compared to $102.4 million of income tax expense representing an effective tax rate of 22.8% for the 13 weeks ended April 29, 2023. The higher income tax rate is primarily due to a reduced benefit from income tax accounting for stock-based compensation.

Current wording

Income tax expense of $81.2 million for the 13 weeks ended August 3, 2024 represents an effective tax rate of 24.3%, compared to $96.0 million of income tax expense representing an effective tax rate of 24.2% for the 13 weeks ended July 29, 2023.

Previous wording

Net income was $313.1 million for the 13 weeks ended May 4, 2024, compared to $347.1 million for the 13 weeks ended April 29, 2023. The decrease in net income is primarily related to the $53.8 million increase in SG&A expenses and the $0.4 million decrease in interest income, net, partially offset by the $14.9 million increase in gross profit and the $7.6 million decrease in income tax expense.

Current wording

Net income was $252.6 million for the 13 weeks ended August 3, 2024, compared to $300.1 million for the 13 weeks ended July 29, 2023. The decrease in net income is primarily due to the $44.1 million increase in SG&A expenses, the $15.4 million decrease in gross profit, and the $2.9 million increase in pre-opening expenses, partially offset by the $14.8 million decrease in income taxes.

Previous wording

Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowings under our credit facility. The most significant components of our working capital are merchandise inventories, cash and cash equivalents, and receivables, reduced by accounts payable, deferred revenue, and accrued liabilities. As of May 4, 2024, February 3, 2024, and April 29, 2023, we had cash and cash equivalents of $524.6 million, $766.6 million, and $636.4 million, respectively.

Current wording

Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowings under our credit facility. The most significant components of our working capital are merchandise inventories, cash and cash equivalents, and receivables, reduced by accounts payable, deferred revenue, and accrued liabilities. As of August 3, 2024, February 3, 2024, and July 29, 2023, we had cash and cash equivalents of $414.0 million, $766.6 million, and $388.6 million, respectively.

Previous wording

The decrease in net cash provided by operating activities in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was mainly due to the timing of accounts payable, accrued liabilities, accrued income taxes, and prepaid expenses and other current assets, the decrease in net income, and a larger increase in merchandise inventories in the first quarter of fiscal 2024, partially offset by the net decrease in other assets and liabilities.

Current wording

The decrease in net cash provided by operating activities in the first 26 weeks of fiscal 2024 compared to the first 26 weeks of fiscal 2023 was mainly due to the timing of accounts payable, accrued liabilities, accrued income taxes, and prepaid expenses and other current assets, the decrease in net income, and a larger increase in merchandise inventories in the first 26 weeks of fiscal 2024, partially offset by a decrease in net other assets and liabilities.

Previous wording

Merchandise inventories, net were $1.9 billion at May 4, 2024, compared to $1.8 billion at April 29, 2023, representing an increase of $154.8 million or 8.8%. The increase in total inventory is primarily due to the following:

Current wording

Merchandise inventories, net were $2.0 billion at August 3, 2024 compared to $1.8 billion at July 29, 2023, representing an increase of $182.7 million or 10.1%. The increase in total inventory is primarily due to the following:

Previous wording

We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems. Investing activities for capital expenditures were $91.0 million during the 13 weeks ended May 4, 2024 compared to $109.8 million during the 13 weeks ended April 29, 2023.

Current wording

We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems. Investing activities for capital expenditures were $186.3 million during the 26 weeks ended August 3, 2024, compared to $204.7 million during the 26 weeks ended July 29, 2023.

Previous wording

During the 13 weeks ended May 4, 2024, we opened 12 new stores, closed two stores, and relocated one store, compared to the 13 weeks ended April 29, 2023, when we opened five new stores, closed one store, remodeled two stores, and relocated one store.

Current wording

During the 26 weeks ended August 3, 2024, we opened 29 new stores, closed three stores, relocated two stores, and remodeled nine stores, compared to the 26 weeks ended July 29, 2023, when we opened eight new stores, closed one store, relocated three stores, and remodeled five stores.

Previous wording

The decrease in net cash used in investing activities in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to lower capital expenditures for information technology systems and supply chain investments, partially offset by higher capital expenditures for merchandising fixtures, compared to the first quarter of fiscal 2023.

Current wording

The decrease in net cash used in investing activities in the first 26 weeks of fiscal 2024 compared to the first 26 weeks of fiscal 2023 was primarily due to lower capital expenditures for information technology systems and supply chain investments, partially offset by higher capital expenditures for new, remodeled, and relocated stores and merchandising fixtures, compared to the first 26 weeks of fiscal 2023.

Previous wording

Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems investments, and supply chain investments that we undertake and the timing of these expenditures.

Current wording

Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems, and supply chain investments we undertake and the timing of these expenditures. Based on past performance and current expectations, we believe our sources of liquidity will be sufficient to fund future capital expenditures.

Previous wording

The increase in net cash used in financing activities in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to an increase in share repurchases.

Current wording

The decrease in net cash used in financing activities in the first 26 weeks of fiscal 2024 compared to the first 26 weeks of fiscal 2023 was primarily due to a decrease in the dollar amount of share repurchases.

Previous wording

On March 13, 2024, we entered into Amendment No. 3 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender; PNC Bank, National Association, as Documentation Agent and a Lender; and the other lenders party thereto. The Loan Agreement matures on March 13, 2029, provides maximum revolving loans equal to the lesser of $800.0 million or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $200.0 million, subject to the consent by each lender and other conditions. The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan

Current wording

On March 13, 2024, we entered into Amendment No. 3 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender; PNC Bank, National Association, as Documentation Agent and a Lender; and the other lenders party thereto. The Loan Agreement matures on March 13, 2029, provides maximum revolving loans equal to the lesser of $800.0 million or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $200.0 million, subject to the consent by each lender and other conditions. The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not

Previous wording

Agreement. Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0.5% to 1.0% or the Term Secured Overnight Financing Rate plus a margin of 1.5% to 2.0%, and a credit spread adjustment of 0.10%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.25% to 0.375% per annum.

Current wording

less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement. Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0.5% to 1.0% or the Term Secured Overnight Financing Rate plus a margin of 1.5% to 2.0%, and a credit spread adjustment of 0.10%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.25% to 0.375% per annum.