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Ulta Beauty Announces Second Quarter 2013 Results

Ulta Beauty (NASDAQ:ULTA) today announced financial results for the thirteen week period (“Second Quarter”) and twenty-six week period (“First Six Months”) ended August 3, 2013, which compares to the same periods ended July 28, 2012.

“The Ulta Beauty team delivered a very strong quarter while moving our growth strategy forward,” stated Mary Dillon, Chief Executive Officer. “Ulta Beauty added several new brands to its stores; we further expanded the number of Clinique and Lancôme boutiques; we drove rapid growth in our e-commerce business; and we achieved record membership in our loyalty program. I am incredibly excited about the future potential of Ulta Beauty, and I look forward to working with the team to build on the solid foundation they have built.”

For the Second Quarter:

  • Net sales increased 24.8% to $601.0 million from $481.7 million in the second quarter of fiscal 2012;
  • Comparable store sales (sales for stores open at least 14 months) increased 8.4% compared to an increase of 9.7% in the second quarter of fiscal 2012, including the impact of e-commerce sales;
  • Gross profit increased 50 basis points to 35.3% from 34.8% in the second quarter of fiscal 2012;
  • Selling, general and administrative (SG&A) expense as a percentage of net sales increased 40 basis points to 22.4% compared to 22.0% in the second quarter of fiscal 2012;
  • Preopening expenses increased to $4.8 million, compared to $4.1 million in the second quarter of fiscal 2012. Real estate activity in the second quarter of fiscal 2013 included 33 new stores, 1 relocation and 1 remodel compared to 22 new stores, 1 relocation and 9 remodels in the second quarter of fiscal 2012;
  • Operating income increased 26.8% to $72.9 million, or 12.1% of net sales, compared to $57.5 million, or 11.9% of net sales, in the second quarter of fiscal 2012;
  • Net income increased 28.3% to $44.9 million compared to $35.0 million in the second quarter of fiscal 2012; and
  • Income per diluted share increased 29.6% to $0.70 compared to $0.54 in the second quarter of fiscal 2012.
  • The Company added 39 Clinique boutiques to end the second quarter with 90 stores featuring Clinique, and expects to add 10 more Clinique boutiques during fiscal 2013. Five Lancôme boutiques were added, bringing the total number of stores offering Lancôme products to 85, with 20 additional boutiques underway.
  • The Company continued to add new products and brands, including the recent launches of IT Cosmetics, Jane Cosmetics, Mally Girl, and Meaningful Beauty.
  • The Company’s loyalty program membership grew to 12 million active members, an increase of 19% compared to the second quarter of fiscal 2012.
  • Ulta.com achieved sales growth of 72%, representing 130 basis points of the total company same store sales increase of 8.4%.

For the First Six Months:

  • Net sales increased 23.8% to $1,183.7 million from $955.8 million in the first six months of fiscal 2012;
  • Comparable store sales (sales for stores open at least 14 months) increased 7.6% compared to an increase of 10.1% in the first six months of fiscal 2012, including the impact of e-commerce sales;
  • Gross profit decreased 30 basis points to 35.1% from 35.4% in the first six months fiscal 2012;
  • SG&A expense as a percentage of net sales decreased 10 basis points to 22.6% compared to 22.7% in the first six months in fiscal 2012;
  • Pre-opening expense increased to $8.0 million compared to $6.6 million in the second quarter of fiscal 2012. Real estate activity in the first six months of 2013 included 61 new stores, 1 relocation and 1 remodel compared to 40 new stores, 2 relocations and 9 remodels in the first six months fiscal 2012;
  • Operating income increased 22.3% to $140.6 million, or 11.9% of net sales, compared to $114.9 million, or 12.0% of net sales, in the first six months of fiscal 2012;
  • Net income increased 24.1% to $86.7 million compared to $69.9 million in the first six months of fiscal 2012; and
  • Income per diluted share increased 23.9% to $1.35 compared to $1.09 in the first six months of fiscal 2012.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the second quarter of fiscal 2013 totaled $461.2 million, compared to $316.7 million at the end of the second quarter of fiscal 2012, representing an increase of $144.5 million. The increase in inventory is primarily due to the addition of 120 net new stores opened since July 28, 2012. Average inventory per store increased 16.9% for the second quarter of fiscal 2013 compared to the second quarter of fiscal 2012. This increase is primarily due to incremental inventory related to the recently added prestige brand boutiques, new brand additions and the expansion of e-commerce fulfillment to the Chambersburg, PA distribution center.

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