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Ulta Beauty Announces Third Quarter 2013 Results

Ulta Beauty (NASDAQ:ULTA) today announced financial results for the thirteen week period (“Third Quarter”) and thirty-nine week period (“First Nine Months”) ended November 2, 2013, which compares to the same periods ended October 27, 2012.

“The Ulta Beauty team delivered solid top line growth, with particular strength in our on-line sales, despite a challenging environment,” said Mary Dillon, Chief Executive Officer. “We also made significant progress on our growth strategies, including opening a record number of new stores, seamlessly rolling out a new e-commerce site while maintaining strong top-line momentum, completing this year’s roll-out of Clinique and Lancôme boutiques, and continuing to launch new and exclusive products and brands.”

For the Third Quarter:

  • Net sales increased 22.4% to $618.8 million from $505.6 million in the third quarter of fiscal 2012;
  • Comparable store sales (sales for stores open at least 14 months) increased 6.8% compared to an increase of 8.9% in the third quarter of fiscal 2012, including the impact of e-commerce sales;
  • Gross profit increased 70 basis points to 37.4% from 36.7% in the third quarter of fiscal 2012;
  • Selling, general and administrative (SG&A) expense as a percentage of net sales increased 120 basis points to 24.5%, including the impact of a severance charge related to management changes to strengthen the Supply Chain and Human Resources functions. SG&A expense as a percentage of net sales increased 90 basis points to 24.2%, excluding the impact of the severance charge. This compares to 23.3% in the third quarter of fiscal 2012.
  • Preopening expenses increased to $7.5 million, compared to $6.3 million in the third quarter of fiscal 2012. Real estate activity in the third quarter of fiscal 2013 included 55 new stores, 3 relocations and 6 remodels compared to 49 new stores, one relocation and 11 remodels in the third quarter of fiscal 2012;
  • Operating income increased 18.9% to $72.9 million, or 11.8% of net sales, compared to $61.3 million, or 12.1% of net sales, in the third quarter of fiscal 2012;
  • Net income increased 19.1% to $45.4 million compared to $38.2 million in the third quarter of fiscal 2012; excluding the severance charge, net income increased 22.1%;
  • Income per diluted share increased 18.6% to $0.70, including $0.02 per diluted share related to the severance charge. Income per diluted share was $0.72, excluding the severance charge. This compares to $0.59 in the third quarter of fiscal 2012;
  • The Company added 55 new stores, the most stores opened in a single quarter in the Company’s history;
  • The Company added 10 Clinique boutiques to end the third quarter with 100 stores offering Clinique products, and added 20 Lancôme boutiques to end the third quarter with 105 stores offering Lancôme products;
  • The Company’s loyalty program membership grew 18% year over year to reach 12.5 million active members; and
  • Ulta.com successfully launched a completely redesigned website, featuring innovative Responsive Web Design technology, and expanded e-commerce fulfillment capabilities to a second distribution center, in Chambersburg, PA. E-commerce sales grew 74.4%, representing 170 basis points of the total company same store sales increase of 6.8%.

For the First Nine Months:

  • Net sales increased 23.3% to $1,802.5 million from $1,461.4 million in the first nine months of fiscal 2012;
  • Comparable store sales (sales for stores open at least 14 months) increased 7.3% compared to an increase of 9.7% in the first nine months of fiscal 2012, including the impact of e-commerce sales;
  • Gross profit increased to $647.7 million compared to $524.0 million in the first nine months of fiscal 2012;
  • SG&A expense as a percentage of net sales increased 30 basis points to 23.2% including the impact of the severance charge. SG&A expense increased 20 basis points to 23.1%, excluding the impact of the severance charge. This compares to 22.9% in the first nine months in fiscal 2012.
  • Pre-opening expense increased to $15.5 million compared to $12.9 million in the first nine months of fiscal 2012. Real estate activity in the first nine months of 2013 included 116 new stores, 4 relocations and 7 remodels compared to 89 new stores, 3 relocations and 20 remodels in the first nine months fiscal 2012;
  • Operating income increased 21.1% to $213.5 million, or 11.8% of net sales, compared to $176.2 million, or 12.1% of net sales, in the first nine months of fiscal 2012;
  • Net income increased 22.4% to $132.2 million compared to $108.0 million in the first nine months of fiscal 2012; excluding the severance charge, net income increased 23.4%; and
  • Income per diluted share increased 22.0% to $2.05, which includes $0.02 per share of severance charge. Income per diluted share was $2.07, excluding the severance charge. This compares to $1.68 in the first nine months of fiscal 2012.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the third quarter of fiscal 2013 totaled $582.3 million, compared to $462.8 million at the end of the third quarter of fiscal 2012, representing an increase of $119.5 million. Average inventory per store increased 1.7% for the third quarter of fiscal 2013 compared to the third quarter of fiscal 2012.

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