Ulta Beauty posts 'strong' Q2, shares strategic plan update


BOLINGBROOK, Ill. — Ulta Beauty reported a 22.2% boost in second-quarter new sales and drove its best comps since the secondquarter 2012 thanks in large part to successful new products and brands as well as growth in e-commerce. Meanwhile, the beauty retailer continues to forge ahead on its new strategic plan.

“We set out several months ago to refresh our strategic plan. This process was led by me and my full senior team. We formed a fact-based, guest-centric and total enterprise view of the guest experience that we want to deliver in the future, and determined what is required to do so,” Mary Dillon, who joined Ulta Beauty as CEO in July 2013, told analysts during Thursday’s conference call to discuss quarterly results.

This led the company to identify key areas of focus and investment and to create a five-year financial model, which includes same-store sales growth in the 5% to 7% range and the opening of about 100 stores per year, to support the framework.

“Supporting this vision, we articulated six strategic imperatives that we believe will drive sustainable growth for Ulta. One, acquire new guests and deepen loyalty with existing guests. Two, differentiate by delivering a distinctive and personalized guest experience across all channels. Three, offer a relevant, innovative and often exclusive products that excite our guests. Four, deliver exceptional services in three core areas: hair, skin health and brows. Five, grow stores in e-commerce to reach and serve more guests. And six, invest in infrastructure to support our guest experience and growth and capture scale efficiency.”

As it relates to e-commerce, the company expects e-commerce to grow to represent about 10% of sales. The model is expected to deliver earnings per share growth in the low 20% range over the next five years, excluding the impact of the supply chain investment.

In July, the company unveiled a revamped Web site designed to enhance the discovery and browse experience. It also added online booking capabilities for its salon appointments and started hosting live chats with vendor partners. The company also released in July its first iPad app.

“I believe our plan represents a strong set of strategic imperatives and initiatives and that our results will place Ulta in the top tier of high-performing retailers. We’ll continue to drive market share gains and deliver strong, sustainable sales and earnings growth, making our company a very attractive investment. I also know that we have the best associates in the industry who love what they do and are excited to bring more beauty into the lives of our guests,” Dillon told analysts.

Net sales for the quarter increased 22.2% to $734.2 million. Comparable store sales (sales for stores open at least 14 months and e-commerce sales) increased 9.6% compared with an increase of 8.4% in the year-ago period. The 9.6% same-store sales increase was driven by 5.8% growth in transactions and 3.8% growth in average ticket.

Net income increased 35.4% to $60.8 million compared with the year-ago period. Income per diluted share increased 34.3% to 94 cents compared with 70 cents in the second quarter of fiscal 2013.


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