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Form 8-K Ulta Salon, Cosmetics & For: Aug 27

August 27, 2015 4:19 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): August 27, 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 August 27, 2015, Ulta Salon, Cosmetics & Fragrance, Inc. (the “Company”) issued a press release regarding its consolidated financial results for the second quarter ended August 1, 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 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

  

Description

99.1    Press release issued by Ulta Salon, Cosmetics & Fragrance, Inc. on August 27, 2015 announcing consolidated financial results for the second quarter ended August 1, 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: August 27, 2015             By:  

    /s/ Jodi Caro

     

    Jodi Caro

    Senior Vice President, General Counsel and

    Corporate Secretary


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1    Press release issued by Ulta Salon, Cosmetics & Fragrance, Inc. on August 27, 2015 announcing consolidated financial results for the second quarter ended August 1, 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 SECOND QUARTER 2015 RESULTS

Total Sales Increased 19.4%

Comparable Sales Increased 10.1%

Diluted EPS Increased 22.3% to $1.15

Company Raises Guidance for Fiscal Year 2015

Bolingbrook, IL – August 27, 2015 – 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 1, 2015, which compares to the same periods ended August 2, 2014.

“The Ulta Beauty team achieved outstanding results in the second quarter, with top line momentum delivering better than expected earnings growth,” said Mary Dillon, Chief Executive Officer. “Strong traffic growth drove healthy comparable sales increases across stores, salon and e-commerce, while average ticket growth also contributed. An exciting pipeline of new products, combined with increasing effectiveness of our marketing strategies, drove market share gains across all categories. In light of the excellent performance of the business in the first half of the year, we are raising our outlook for the full year and now expect to achieve earnings per share growth in the high teens.”

For the Second Quarter

 

    Net sales increased 19.4% to $877.0 million from $734.2 million in the second quarter of fiscal 2014;

 

    Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 10.1% compared to an increase of 9.6% in the second quarter of fiscal 2014. The 10.1% comparable sales increase was driven by 7.0% growth in transactions and 3.1% growth in average ticket;


    Retail comparable sales increased 8.9%, including salon comparable sales growth of 10.1%;

 

    Salon sales increased 19.7% to $51.6 million from $43.1 million in the second quarter of fiscal 2014;

 

    E-commerce sales grew 43.4% to $36.1 million from $25.2 million in the second quarter of fiscal 2014, representing 120 basis points of the total company comparable sales increase of 10.1%;

 

    Gross profit decreased 40 basis points to 34.9% from 35.3% in the second quarter of fiscal 2014 primarily due to supply chain initiatives including the new Greenwood, Indiana distribution center;

 

    Selling, general and administrative (SG&A) expense as a percentage of net sales decreased 50 basis points to 21.0% compared to 21.5% in the second quarter of fiscal 2014 primarily due to marketing efficiencies;

 

    Pre-opening expenses increased to $4.1 million, compared to $3.6 million in the second quarter of fiscal 2014. Real estate activity in the second quarter of fiscal 2015 included 20 new stores, one relocation and two remodels compared to 19 new stores and four remodels in the second quarter of fiscal 2014;

 

    Operating income increased 20.9% to $118.5 million, or 13.5% of net sales, compared to $98.0 million, or 13.3% of net sales, in the second quarter of fiscal 2014;

 

    Net income increased 22.0% to $74.2 million compared to $60.8 million in the second quarter of fiscal 2014; and

 

    Income per diluted share increased 22.3% to $1.15 compared to $0.94 in the second quarter of fiscal 2014.

For the First Six Months

 

    Net sales increased 20.5% to $1,745.1 million from $1,448.0 million in the first six months of fiscal 2014;

 

    Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 10.8% compared to an increase of 9.2% in the first six months of fiscal 2014. The 10.8% comparable sales increase was driven by 7.2% growth in transactions and 3.6% growth in average ticket;

 

    Retail comparable sales increased 9.3%, including salon comparable sales growth of 10.2%;

 

    Salon sales increased 20.1% to $102.9 million from $85.7 million in the first six months of fiscal 2014;

 

    E-commerce comparable sales grew 46.8% to $80.1 million from $54.5 million in the first six months of fiscal 2014, representing 150 basis points of the total company comparable sales increase of 10.8%;

 

    Gross profit as a percentage of net sales was equal to the first six months of fiscal 2014 at 34.9%;

 

    SG&A expense as a percentage of net sales decreased 50 basis points to 21.6% compared to 22.1% in the first six months in fiscal 2014;

 

    Pre-opening expense increased to $7.2 million compared to $6.2 million in the first six months of fiscal 2014. Real estate activity in the first six months of 2015 included 44 new stores, two relocations and two remodels compared to 40 new stores and four remodels in the first six months of fiscal 2014;


    Operating income increased 26.4% to $226.0 million, or 13.0% of net sales, compared to $178.9 million, or 12.4% of net sales, in the first six months of fiscal 2014;

 

    Net income increased 27.4% to $141.1 million compared to $110.7 million in the first six months of fiscal 2014; and

 

    Income per diluted share increased 28.1% to $2.19 compared to $1.71 in the first six months of fiscal 2014.

Balance Sheet

Merchandise inventories at the end of the second quarter of fiscal 2015 totaled $705.7 million, compared to $541.5 million at the end of the second quarter of fiscal 2014, representing an increase of $164.2 million. This increase was driven by 102 net new stores, the opening of the Company’s fourth distribution center in Greenwood, Indiana, as well as new brand additions. Average inventory per store increased 14%, compared to the second quarter of fiscal 2014. This increase was primarily driven by the new Greenwood, Indiana distribution center, investments in inventory to ensure high in-stock levels to support strong sales growth and incremental inventory for new brands and in-store prestige brand boutiques. Average inventory per store, excluding the investment in the new Greenwood, Indiana distribution center, increased 10.9%.

The Company ended the second quarter of fiscal 2015 with $475.4 million in cash and short-term investments.

Share Repurchase Program

During the second quarter, the Company repurchased 291,227 shares of its stock at a cost of approximately $46 million under its 10b5-1 plan. As of August 1, 2015, $286.3 million remained available under the $400 million share repurchase program.

Store Expansion

During the second quarter, the Company opened 20 stores located in Albuquerque, NM; Ammon, ID; Bristol, TN; Chattanooga, TN; Clark, NJ; Federal Way, WA; Jacksonville Beach, FL; Laurel, MD; Miami, FL; Myrtle Beach, SC; Rancho Cordova, CA; Redlands, CA; Reno, NV; Roseville, MI; San Francisco, CA; San Luis Obispo, CA; Shawnee, OK; Sioux City, IA; Twin Falls, ID and Waterford, CT. The Company ended the second quarter with 817 stores and square footage of 8,628,213, representing a 14% increase in square footage compared to the second quarter of fiscal 2014.

Outlook

For the third quarter of fiscal 2015, the Company currently expects net sales in the range of $869 million to $883 million, compared to actual net sales of $745.7 million in the third quarter of fiscal 2014. Comparable sales for the third quarter of 2015, including e-commerce sales, are expected to increase 8% to 10%. The Company reported a comparable sales increase of 9.5% in the third quarter of 2014.

Income per diluted share for the third quarter of fiscal 2015 is estimated to be in the range of $1.00 to $1.05. This compares to income per diluted share for the third quarter of fiscal 2014 of $0.91. As previously communicated, earnings growth in the second half of 2015 is expected to moderate compared to the first half of the year, reflecting the timing of marketing expenses and supply chain investments including a new distribution center in Greenwood, Indiana which opened on August 3, 2015.


The Company is raising its previously announced fiscal 2015 guidance. The Company plans to:

 

    achieve comparable sales growth of approximately 8% to 10%, including the impact of the e-commerce business, compared to previous guidance of 7% to 9%;

 

    increase total sales in the mid to high 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 high teens, compared to previous guidance of the high end of the range of 15% to 17%. This includes planned supply chain and system investments, excluding the $0.02 non-recurring tax benefit in the fourth quarter 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.

Conference Call Information

A conference call to discuss second quarter results is scheduled for today, August 27, 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 September 10, 2015 and can be accessed by dialing (877) 870-5176 and entering conference ID number 13617296.

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 August 1, 2015 ULTA Beauty operates 817 retail stores across 48 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 program 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 and the performance of our newly opened distribution center 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 strategic and financial plan; and other risk factors detailed in our public filings with the Securities and Exchange Commission (the “SEC”), including risk factors contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015. 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  
     August 1, 2015     August 2, 2014  
     (Unaudited)     (Unaudited)  

Net sales

   $ 876,999        100.0   $ 734,236        100.0

Cost of sales

     570,524        65.1     474,894        64.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     306,475        34.9     259,342        35.3

Selling, general and administrative expenses

     183,937        21.0     157,768        21.5

Pre-opening expenses

     4,078        0.5     3,595        0.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     118,460        13.5     97,979        13.3

Interest income, net

     (276     0.0     (209     0.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     118,736        13.5     98,188        13.4

Income tax expense

     44,567        5.1     37,394        5.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 74,169        8.5   $ 60,794        8.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

        

Basic

   $ 1.16        $ 0.94     

Diluted

   $ 1.15        $ 0.94     

Weighted average common shares outstanding:

        

Basic

     64,087          64,349     

Diluted

     64,410          64,636     


Exhibit 2

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

 

     26 Weeks Ended     26 Weeks Ended  
     August 1, 2015     August 2, 2014  
     (Unaudited)     (Unaudited)  

Net sales

   $ 1,745,121        100.0   $ 1,448,006        100.0

Cost of sales

     1,135,462        65.1     942,711        65.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     609,659        34.9     505,295        34.9

Selling, general and administrative expenses

     376,422        21.6     320,211        22.1

Pre-opening expenses

     7,195        0.4     6,224        0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     226,042        13.0     178,860        12.4

Interest income, net

     (587     0.0     (409     0.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     226,629        13.0     179,269        12.4

Income tax expense

     85,514        4.9     68,522        4.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 141,115        8.1   $ 110,747        7.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

        

Basic

   $ 2.20        $ 1.72     

Diluted

   $ 2.19        $ 1.71     

Weighted average common shares outstanding:

        

Basic

     64,134          64,311     

Diluted

     64,484          64,618     


Exhibit 3

Ulta Salon, Cosmetics & Fragrance, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

     August 1,
2015
     January 31,
2015
     August 2,
2014
 
     (Unaudited)             (Unaudited)  

Assets

        

Current assets:

        

Cash and cash equivalents

   $ 325,214       $ 389,149       $ 363,058   

Short-term investments

     150,209         150,209         100,146   

Receivables, net

     45,277         52,440         42,110   

Merchandise inventories, net

     705,660         581,229         541,508   

Prepaid expenses and other current assets

     67,076         66,548         58,859   

Prepaid income taxes

     1,883         —           —     

Deferred income taxes

     20,766         20,780         22,012   
  

 

 

    

 

 

    

 

 

 

Total current assets

     1,316,085         1,260,355         1,127,693   

Property and equipment, net

     791,904         717,159         646,890   

Deferred compensation plan assets

     7,921         5,656         5,229   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 2,115,910       $ 1,983,170       $ 1,779,812   
  

 

 

    

 

 

    

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Accounts payable

   $ 215,720       $ 190,778       $ 163,459   

Accrued liabilities

     154,494         149,412         126,792   

Accrued income taxes

     —           19,404         9,890   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     370,214         359,594         300,141   

Deferred rent

     315,931         294,127         281,348   

Deferred income taxes

     75,167         74,498         65,842   

Other long-term liabilities

     10,809         7,442         6,440   
  

 

 

    

 

 

    

 

 

 

Total liabilities

     772,121         735,661         653,771   

Commitments and contingencies

        

Total stockholders’ equity

     1,343,789         1,247,509         1,126,041   
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 2,115,910       $ 1,983,170       $ 1,779,812   
  

 

 

    

 

 

    

 

 

 


Exhibit 4

Ulta Salon, Cosmetics & Fragrance, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

     26 Weeks Ended  
     August 1, 2015     August 2, 2014  
     (Unaudited)  

Operating activities

    

Net income

   $ 141,115      $ 110,747   

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

    

Depreciation and amortization

     76,738        62,372   

Deferred income taxes

     683        (642

Non-cash stock compensation charges

     7,578        7,603   

Excess tax benefits from stock-based compensation

     (7,257     (1,423

Loss on disposal of property and equipment

     1,629        2,582   

Change in operating assets and liabilities:

    

Receivables

     7,163        4,939   

Merchandise inventories

     (124,431     (83,575

Prepaid expenses and other current assets

     (528     (2,866

Income taxes

     (14,030     (4,036

Accounts payable

     24,942        15,177   

Accrued liabilities

     (10,812     1,601   

Deferred rent

     21,804        19,718   

Other assets and liabilities

     1,102        1,031   
  

 

 

   

 

 

 

Net cash provided by operating activities

     125,696        133,228   

Investing activities

    

Purchases of short-term investments

     (50,000     (100,146

Proceeds from short-term investments

     50,000        —     

Purchases of property and equipment

     (137,218     (94,097
  

 

 

   

 

 

 

Net cash used in investing activities

     (137,218     (194,243

Financing activities

    

Repurchase of common shares

     (73,753     —     

Stock options exercised

     15,561        4,510   

Excess tax benefits from stock-based compensation

     7,257        1,423   

Purchase of treasury shares

     (1,478     (1,336
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (52,413     4,597   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (63,935     (56,418

Cash and cash equivalents at beginning of period

     389,149        419,476   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 325,214      $ 363,058   
  

 

 

   

 

 

 


Exhibit 5

2015 Store Expansion

 

Fiscal 2015

   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

     774         24         1         797   

2nd Quarter

     797         20         0         817   

 

Fiscal 2015

   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

     8,182,404         253,429         10,452         8,425,381   

2nd Quarter

     8,425,381         202,832         0         8,628,213   


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