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Form 8-K Ulta Salon, Cosmetics & For: Mar 12

March 12, 2015 4:17 PM EDT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 12, 2015

 

 

ULTA SALON, COSMETICS & FRAGRANCE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   001-33764   36-3685240

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

1000 Remington Blvd., Suite 120

Bolingbrook, Illinois 60440

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (630) 410-4800

Not Applicable

(Former Name or Former Address, if Changed Since Last Report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On March 12, 2015, Ulta Salon, Cosmetics & Fragrance, Inc. (the “Company”) issued a press release regarding its consolidated financial results for the fourth quarter and fiscal year ended January 31, 2015. A copy of the press release is furnished as Exhibit 99.1 to this report.

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) On March 9, 2015, Janet Taake informed Ulta Salon, Cosmetics & Fragrance, Inc. (the “Company”) that she will retire from her position as Chief Merchandising Officer of the Company effective May 1, 2015.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
No.

  

Description

99.1    Press release issued by Ulta Salon, Cosmetics & Fragrance, Inc. on March 12, 2015 announcing consolidated financial results for the fourth quarter and fiscal year ended January 31, 2015 furnished herewith


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

ULTA SALON, COSMETICS & FRAGRANCE, INC.
Date: March 12, 2015 By:

/s/ Robert S. Guttman

Robert S. Guttman

Senior Vice President, General Counsel

and Secretary


EXHIBIT INDEX

 

Exhibit
No.

  

Description

99.1    Press release issued by Ulta Salon, Cosmetics & Fragrance, Inc. on March 12, 2015 announcing consolidated financial results for the fourth quarter and fiscal year ended January 31, 2015 furnished herewith

Exhibit 99.1

 

LOGO

 

Company Contacts:

Scott Settersten

Chief Financial Officer

(630) 410-4807

Laurel Lefebvre

Vice President, Investor Relations

(630) 410-5230

Karen May

Director, Public Relations

(630) 410-5457

ULTA BEAUTY ANNOUNCES FOURTH QUARTER 2014 RESULTS

Total Sales Increased 20.7%

Comparable Sales Increased 11.1%

Diluted EPS Increased 23.9% to $1.35

Bolingbrook, IL – March 12, 2015 – ULTA Beauty [NASDAQ:ULTA] today announced financial results for the thirteen week period (“Fourth Quarter”) and fifty-two week period (“Fiscal Year”) ended January 31, 2015, which compares to the same periods ended February 1, 2014.

“ULTA Beauty wrapped up a very strong year of sales and profit growth with an excellent fourth quarter, which we are proud to celebrate as our first billion dollar sales quarter,” said Mary Dillon, Chief Executive Officer. “Our best comparable sales increase of the year was driven by accelerating traffic growth, continued strength in prestige and mass color cosmetics, a successful holiday selling season, execution of more effective marketing and CRM strategies, a double-digit comp in our salon business, and a 55% comparable sales increase in our e-commerce business.”

For the Fourth Quarter

 

    Net sales increased 20.7% to $1,047.6 million from $868.1 million in the fourth quarter of fiscal 2013;

 

    Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 11.1% compared to an increase of 9.2% in the fourth quarter of fiscal 2013. The 11.1% same store sales increase was driven by 7.7% growth in transactions and 3.4% growth in average ticket;

 

    E-commerce sales grew 55.2%, representing 230 basis points of the total company same store sales increase of 11.1%;


    Salon sales increased 20.9%, and comparable salon sales grew 11.0%, contributing 10 basis points to the retail comparable sales increase of 8.8%;

 

    Gross profit decreased 40 basis points to 33.4% from 33.8% in the fourth quarter of fiscal 2013, driven by increased costs associated with the ULTAmate Rewards loyalty program and the impact of a higher mix of e-commerce sales;

 

    Selling, general and administrative (SG&A) expense as a percentage of net sales decreased 40 basis points to 20.1% compared to 20.5% in the fourth quarter of 2013;

 

    Pre-opening expenses decreased to $1.6 million, compared to $1.8 million in the fourth quarter of fiscal 2013. Real estate activity in the fourth quarter of fiscal 2014 included 10 new stores compared to 11 new stores in the fourth quarter of fiscal 2013;

 

    Operating income increased 20.4% to $137.5 million, or 13.1% of net sales, compared to $114.1 million, or 13.1% of net sales, in the fourth quarter of fiscal 2013;

 

    Tax rate of 36.6% reflects a $0.02 per diluted share benefit related to a non-recurring tax adjustment;

 

    Net income increased 23.5% to $87.3 million compared to $70.7 million in the fourth quarter of fiscal 2013. Net income increased 21.6% to $86.0 million excluding the impact of a non-recurring tax adjustment; and

 

    Income per diluted share increased 23.9% to $1.35 compared to $1.09 in the fourth quarter of fiscal 2013. Income per diluted share includes a non-recurring tax adjustment of approximately $0.02 resulting in a lower effective tax rate compared to the fourth quarter of fiscal 2013. Excluding this tax benefit, income per diluted share increased 22.0% to $1.33.

For the Fiscal Year 2014

 

    Net sales increased 21.4% to $3,241.4 million from $2,670.6 million in fiscal 2013;

 

    Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 9.9% compared to an increase of 7.9% in fiscal 2013. The 9.9% same store sales increase was driven by 5.6% growth in transactions and 4.3% growth in average ticket;

 

    E-commerce sales grew 56.4%, representing 180 basis points of the total company same store sales increase of 9.9%;

 

    Salon sales increased 20.4%, and comparable salon sales grew 9.5%, contributing 10 basis points to the retail comparable sales increase of 8.1%;

 

    Gross profit decreased 10 basis points to 35.1% compared to 35.2% in fiscal 2013;

 

    SG&A expense as a percentage of net sales decreased 30 basis points to 22.0% compared to 22.3% in fiscal 2013;

 

    Pre-opening expense decreased to $14.4 million compared to $17.3 million in fiscal 2013. Real estate activity for fiscal 2014 included 100 new stores, 2 relocations and 9 remodels compared to 127 new stores, 4 relocations and 7 remodels in fiscal 2013;

 

    Operating income increased 25.3% to $410.4 million, or 12.7% of net sales, compared to $327.6 million, or 12.3% of net sales, in fiscal 2013;

 

    Tax rate of 37.5% reflects a $0.02 per diluted share benefit related to a non-recurring deferred tax adjustment;

 

    Net income increased 26.8% to $257.1 million compared to $202.8 million in fiscal 2013. Net income increased 26.1% to $255.8 million excluding the impact of a non-recurring tax adjustment; and

 

    Income per diluted share increased 26.3% to $3.98 compared to $3.15 in fiscal 2013. Income per diluted share includes a non-recurring tax adjustment of approximately $0.02 resulting in a lower effective tax rate compared to fiscal 2013. Excluding this tax benefit, income per diluted share increased 25.7% to $3.96.


Balance Sheet and Cash Flow

Merchandise inventories at the end of the fourth quarter of fiscal 2014 totaled $581.2 million, compared to $457.9 million at the end of the fourth quarter of fiscal 2013, representing an increase of $123.3 million. This increase was driven by 99 net new stores as well as new brand additions. Average inventory per store increased 10.7% for the fourth quarter of fiscal 2014 compared to the fourth quarter of fiscal 2013. This increase was primarily driven by investments in inventory to ensure high in-stock levels to support strong sales growth, as well as inventory for new brands.

The Company generated $148 million of free cash flow in fiscal 2014, compared to $102 million in fiscal 2013 and ended the fiscal year 2014 with $539 million in cash and short-term investments. Free cash flow is defined as net cash provided by operating activities less purchases of property and equipment.

Share Repurchase Program

During the fourth quarter, the Company repurchased 235,223 shares of its stock at a cost of approximately $30 million under its 10b5-1 plan. As of January 31, 2015, $260.1 million remained available under the $300 million share repurchase program.

Effective March 17, 2015, the Company’s board of directors authorized an increase of $100 million to the existing share repurchase program implemented in September of 2014.

Store Expansion

During the fourth quarter, the Company opened 10 stores located in Anaheim, CA; Bellevue, WA; Howell, NJ; Las Cruces, NM; Ontario, OH; Palm Coast, FL; Pflugerville, TX; Rocklin, CA; San Antonio, TX and Saratoga Springs, NY. In addition, the Company closed one store. The Company ended the fourth quarter with 774 stores and square footage of 8,182,404 which represents a 14% increase in square footage compared to the fourth quarter of fiscal 2013.

Outlook

For fiscal 2015, the Company plans to:

 

    achieve comparable sales growth of approximately 6% to 8%, including the impact of the e-commerce business;

 

    increase total sales in the mid-teens percentage range;

 

    grow e-commerce sales in the 40% range;

 

    expand square footage by approximately 13% with the opening of 100 net new stores;

 

    remodel four locations;

 

    deliver earnings per share growth in the range of 15% to 17%, including planned supply chain and system investments, excluding the $0.02 non-recurring tax benefit in Q4 of 2014, and assuming continued share repurchases to offset dilution; and


    incur capital expenditures in the $300 million range in fiscal 2015, compared to $249 million in fiscal 2014.

For the first quarter of fiscal 2015, the Company currently expects net sales in the range of $833 million to $847 million, compared to actual net sales of $713.8 million in the first quarter of fiscal 2014. Comparable sales for the first quarter of 2015, including e-commerce sales, are expected to increase 7% to 9%. The Company reported a comparable sales increase of 8.7% in the first quarter of 2014.

Income per diluted share for the first quarter of fiscal 2015 is estimated to be in the range of $0.88 to $0.93. This compares to income per diluted share for the first quarter of fiscal 2014 of $0.77.

Conference Call Information

A conference call to discuss fourth quarter results is scheduled for today, March 12, 2015, at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 705-6003. The conference call will also be web-cast live at http://ir.ulta.com and remain available for 90 days. A replay of this call will be available until 11:59 p.m. (ET) on March 26, 2015 and can be accessed by dialing (877) 870-5176 and entering conference ID number 13602225.

About ULTA Beauty

ULTA Beauty (NASDAQ: ULTA) is the largest beauty retailer in the United States and the premier 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 January 31, 2015 ULTA Beauty operates 774 retail stores across 47 states and also distributes its products through its website, which includes a collection of tips, tutorials and social content. For more information, visit www.ulta.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” “targets,” “strategies” or other comparable words. Any forward-looking statements contained in this press release are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates, targets, strategies or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the


economy; changes in the overall level of consumer spending; customer acceptance of our rewards programs and technological and marketing initiatives; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales; our ability to attract and retain key executive personnel; our ability to successfully execute our common stock repurchase program or implement future common stock repurchase programs; our ability to sustain our growth plans and successfully implement our long-range financial and strategic plan; and other risk factors detailed in our public filings with the Securities and Exchange Commission (SEC), including risk factors contained in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014. Our filings with the SEC are available at www.sec.gov. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.


Exhibit 1

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

 

     13 Weeks Ended     13 Weeks Ended  
     January 31,
2015
    February 1,
2014
 
     (Unaudited)     (Unaudited)  

Net sales

   $ 1,047,641        100.0   $ 868,082        100.0

Cost of sales

     697,904        66.6     574,521        66.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  349,737      33.4   293,561      33.8

Selling, general and administrative expenses

  210,702      20.1   177,636      20.5

Pre-opening expenses

  1,568      0.1   1,787      0.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  137,467      13.1   114,138      13.1

Interest income, net

  (231   0.0   (69   0.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

  137,698      13.1   114,207      13.2

Income tax expense

  50,434      4.8   43,525      5.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 87,264      8.3 $ 70,682      8.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

Basic

$ 1.36    $ 1.10   

Diluted

$ 1.35    $ 1.09   

Weighted average common shares outstanding:

Basic

  64,300      64,232   

Diluted

  64,657      64,607   


Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

 

     52 Weeks Ended     52 Weeks Ended  
     January 31,
2015
    February 1,
2014
 
     (Unaudited)        

Net sales

   $ 3,241,369        100.0   $ 2,670,573        100.0

Cost of sales

     2,104,582        64.9     1,729,325        64.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  1,136,787      35.1   941,248      35.2

Selling, general and administrative expenses

  712,006      22.0   596,390      22.3

Pre-opening expenses

  14,366      0.4   17,270      0.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  410,415      12.7   327,588      12.3

Interest income, net

  (894   0.0   (118   0.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

  411,309      12.7   327,706      12.3

Income tax expense

  154,174      4.8   124,857      4.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 257,135      7.9 $ 202,849      7.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

Basic

$ 4.00    $ 3.17   

Diluted

$ 3.98    $ 3.15   

Weighted average common shares outstanding:

Basic

  64,335      63,992   

Diluted

  64,651      64,461   


Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

     January 31,      February 1,  
     2015      2014  
     (Unaudited)         

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 389,149       $ 419,476   

Short-term investments

     150,209         —     

Receivables, net

     52,440         47,049   

Merchandise inventories, net

     581,229         457,933   

Prepaid expenses and other current assets

     66,548         55,993   

Deferred income taxes

     20,780         22,246   
  

 

 

    

 

 

 

Total current assets

  1,260,355      1,002,697   

Property and equipment, net

  717,159      595,736   

Deferred compensation plan assets

  5,656      4,294   
  

 

 

    

 

 

 

Total assets

$ 1,983,170    $ 1,602,727   
  

 

 

    

 

 

 

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$ 190,778    $ 148,282   

Accrued liabilities

  149,412      103,180   

Accrued income taxes

  19,404      15,349   
  

 

 

    

 

 

 

Total current liabilities

  359,594      266,811   

Deferred rent

  294,127      261,630   

Deferred income taxes

  74,498      66,718   

Other long-term liabilities

  7,442      4,474   
  

 

 

    

 

 

 

Total liabilities

  735,661      599,633   

Commitments and contingencies

Total stockholders’ equity

  1,247,509      1,003,094   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

$ 1,983,170    $ 1,602,727   
  

 

 

    

 

 

 


Exhibit 4

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

     52 Weeks Ended     52 Weeks Ended  
     January 31,     February 1,  
     2015     2014  
     (Unaudited)        

Operating activities

    

Net income

   $ 257,135      $ 202,849   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     131,764        106,283   

Deferred income taxes

     9,246        3,868   

Non-cash stock compensation charges

     14,923        16,003   

Excess tax benefits from stock-based compensation

     (3,229     (13,378

Loss on disposal of property and equipment

     4,468        3,902   

Change in operating assets and liabilities:

    

Receivables

     (5,391     (5,534

Merchandise inventories

     (123,296     (96,808

Prepaid expenses and other current assets

     (10,555     (5,541

Income taxes

     7,284        18,673   

Accounts payable

     42,496        29,396   

Accrued liabilities

     37,644        14,215   

Deferred rent

     32,497        53,627   

Other assets and liabilities

     1,606        170   
  

 

 

   

 

 

 

Net cash provided by operating activities

  396,592      327,725   

Investing activities

Purchases of short-term investments

  (200,209   —     

Proceeds from short-term investments

  50,000      —     

Purchases of property and equipment

  (249,067   (226,024
  

 

 

   

 

 

 

Net cash used in investing activities

  (399,276   (226,024

Financing activities

Repurchase of common shares

  (39,923   (37,337

Stock options exercised

  10,639      21,890   

Excess tax benefits from stock-based compensation

  3,229      13,378   

Purchase of treasury shares

  (1,588   (631
  

 

 

   

 

 

 

Net cash used in financing activities

  (27,643   (2,700
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

  (30,327   99,001   

Cash and cash equivalents at beginning of period

  419,476      320,475   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 389,149    $ 419,476   
  

 

 

   

 

 

 


Exhibit 5

2014 Store Expansion

 

Fiscal 2014

   Total stores open
at beginning of the
quarter
     Number of stores
opened during the
quarter
     Number of stores
closed during the
quarter
     Total stores open
at end of the quarter
 

1st Quarter

     675         21         0         696   

2nd Quarter

     696         19         0         715   

3rd Quarter

     715         50         0         765   

4th Quarter

     765         10         1         774   

Fiscal 2014

   Total gross square
feet at beginning of
the quarter
     Gross square feet for
stores opened or
expanded during the
quarter
     Gross square feet for
stores closed
during the quarter
     Total gross square
feet at end of the
quarter
 

1st Quarter

     7,158,286         216,984         0         7,375,270   

2nd Quarter

     7,375,270         199,966         0         7,575,236   

3rd Quarter

     7,575,236         514,380         0         8,089,616   

4th Quarter

     8,089,616         102,806         10,018         8,182,404   


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