ULTA Beauty (ULTA, Financial) is the largest beauty retailer in the U.S. and the premiere beauty destination for cosmetics, fragrance, skin, hair care products and salon services. Since opening its first store 25 years ago, ULTA Beauty has grown to become the top national retailer providing all things beauty, all in one place.
The company offers more than 20,000 products from over 500 well-established and emerging beauty brands across all categories and price points, including ULTA Beauty’s own private label. ULTA Beauty also offers a full-service salon in every store featuring hair, skin and brow services. ULTA Beauty is recognized for its commitment to personalized service, fun and inviting stores and its industry-leading ULTAmate Rewards loyalty program. As of Jan. 30, ULTA Beauty operates 874 retail stores across 48 states and also distributes its products through its website, which includes a collection of tips, tutorials and social content.
It recently announced fourth-quarter results. 2015 was an exceptional year for this company as it achieved its targets. It witnessed outstanding sales and earnings growth.
Strong fourth quarter
Net sales increased by 21.1% and were $1.26 billion ($1.05 billion in the prior-year quarter).
Comparable sales (sales for stores open at least 14 months and ecommerce sales) increased by 12.5% (11.1% during the prior-year quarter). The 12.5% same-store sales increase was driven by 8.6% growth in transactions and 3.9% growth in average ticket.
Retail comparable sales increased by 10.4%.
Salon sales increased by 6.7% and were $54.6 million ($46.8 million during the prior-year quarter).
Ecommerce sales grew by 44.2% and were $94.8 million ($65.7 million during the prior-year quarter).
Gross profit increased by 120 basis points and was 34.6% (33.4% during the prior-year quarter).
Selling, general and administrative (SG&A) expense as a percentage of net sales increased 100 basis points to 21.1% (20.1% during the prior-year quarter).
Pre-opening expenses were $1.4 million ($1.6 million during the prior-year quarter).
Real estate activity in the fourth quarter of fiscal 2015 included 14 new stores and one relocation (10 new stores in the prior-year period).
Operating income increased by 23.3% and was $169.5 million, or 13.4% of net sales ($137.5 million, or 13.1% of net sales in the prior-year quarter).
Tax rate decreased to 36.5% (36.6% in the prior-year quarter).
Net income increased by 23.6% and was $107.8 million ($87.3 million in the prior-year quarter).
Income per diluted share increased by 25.2% and was $1.69 ($1.35 in the prior-year quarter).
Merchandise inventories at the end of the fourth quarter of fiscal 2015 totaled $761.8 million, (which was $581.2 million during the prior-year quarter).
During the fourth quarter, the company opened 14 stores.
Share repurchases
During the fourth quarter, the company repurchased 262,342 shares of its stock at a cost of approximately $46 million under its 10b5-1 plan. For fiscal 2015, the company repurchased 1,034,418 shares of its stock at a cost of approximately $167 million. As of Jan. 30, $192.7 million remained available under the $400 million share repurchase program.
(Source: Company’s website)
Expectations for 2016
| Â | Range |
| Comparable sales growth | Approximately 8% to 10%. |
| Grow ecommerce sales | In the 40% range. |
| EPS | To be in the range of 18% to 20%. |
| Capex | Ranging in the $390 million range. |
Expectations for first quarter
| Â | Range |
| Net Sales | To range between $1.02 billion to $1.03 billion. |
| Comparable sales | To increase between 9% to 11%. |
| Income per diluted share | To be in the range of $1.25 to $1.30. |
Positive attributes of the company
- Highly differentiated offering.
- Committed to returning value to shareholders.
- Vast array of products.
- Store expansion.
Strategic imperatives
- Acquire new guests and deepen loyalty with existing guests.
- Differentiate by delivering a distinctive and personalized guest experience across all channels.
- Offer relevant, innovative and often exclusive products.
- Invest in infrastructure.
- Capture scale efficiencies.
On a concluding note
The company employs a multifaceted marketing strategy to increase brand awareness, drive traffic to the stores and website, acquire new customers, improve customer retention and increase frequency of shopping.
This market represents approximately $121 billion in retail sales, according to Euromonitor International and IBIS World Inc. The approximately $71 billion beauty products industry includes color cosmetics, hair care, fragrance, bath and body, skin care, salon styling tools and other toiletries. ULTA has loads of opportunities in this industry. ULTA Beauty’s financial position is strong. The company is doing well now, and I would recommend it as a buy.
Disclosure: I do not hold any position in the company.
