Ulta Salon (NASDAQ: ULTA) reported Q4 EPS of $3.41, $1.06 better than the analyst estimate of $2.35. Revenue for the quarter came in at $2.2 billion versus the consensus estimate of $2.08 billion.

For the Fourth Quarter of Fiscal 2020

• Net sales decreased 4.6% to $2.2 billion compared to $2.3 billion in the fourth quarter of fiscal 2019 due to the impact of COVID-19.
• Comparable sales (sales for stores open at least 14 months, including stores temporarily closed due to COVID-19, and e-commerce sales) decreased 4.8% compared to an increase of 4.0% in the fourth quarter of fiscal 2019. In the fourth quarter of fiscal 2020, transactions declined 12.2%, and average ticket increased 8.3%.
• Gross profit decreased 4.4% to $771.0 million compared to $806.9 million in the fourth quarter of fiscal 2019. As a percentage of net sales, gross profit increased to 35.1% compared to 35.0% in the fourth quarter of fiscal 2019, primarily due to improvement in merchandise margins driven by lower promotional activity and enhanced merchandising strategies, partially offset by channel mix shifts and deleverage in fixed costs due to lower sales.
• SG&A expenses decreased to $514.1 million compared to $515.5 million in the fourth quarter of fiscal 2019. As a percentage of net sales, SG&A expenses increased to 23.4% compared to 22.4% in the fourth quarter of fiscal 2019, primarily due higher marketing expenses, higher corporate overhead expenses, personal protective equipment (PPE) and COVID-related expenses, and the deleverage of variable store expenses due to lower sales, partially offset by leverage related to the store payroll and benefits.
• Impairment, restructuring and other costs of $30.4 million includes $13.2 million related to the suspension of the planned expansion to Canada, $10.0 million due to employee severance costs, $5.6 million lease termination costs related to the permanent closure of 19 stores, and $1.5 million due to the impairment of tangible long-lived assets and operating lease assets associated with certain retail stores.
• Pre-opening expenses decreased to $2.2 million compared to $3.6 million in the fourth quarter of fiscal 2019 due to current quarter real estate activity and stores expected to open in the first quarter of fiscal 2021. Real estate activity in the fourth quarter of fiscal 2020 included two new stores and two relocations compared to 13 new stores and two relocations in the fourth quarter of fiscal 2019.
• Operating income decreased to $224.3 million, or 10.2% of net sales, compared to $287.8 million, or 12.5% of net sales, in the fourth quarter of fiscal 2019. Adjusted operating income was $254.7 million, or 11.6% of net sales.
• Tax rate increased to 23.4% compared to 22.7% in the fourth quarter of fiscal 2019. The higher effective tax rate is primarily due to less investment tax credits received.
• Net income was $171.5 million compared to $222.7 million in the fourth quarter of fiscal 2019. Adjusted net income was $193.4 million compared to $219.5 million in the fourth quarter of fiscal 2019.
• Diluted earnings per share was $3.03 compared to $3.89 in the fourth quarter of fiscal 2019. Adjusted diluted earnings per share was $3.41 compared to $3.83 in the fourth quarter of fiscal 2019.

“The Ulta Beauty team delivered better-than-expected results for the fourth quarter. Strong, enterprise-wide execution of our plans, combined with improving trends in consumer demand, resulted in solid results across multiple metrics, including sales, transactions and profitability,” said Mary Dillon, chief executive officer. “I want to express my sincere appreciation to all Ulta Beauty associates for their continued flexibility, collaboration and unwavering commitment to our guests and each other.”

“Fiscal 2020 was a difficult year, and I am proud of how our teams navigated the unprecedented challenges with agility and purpose,” continued Dillon. “We begin fiscal 2021 with a strong foundation in place and good operational momentum. We are strategically investing in our business to drive further market share gains, and, as separately announced today, we are beginning to execute a thoughtful succession plan that ensures we continue to benefit from strong, experienced leadership for the next chapter of growth. I remain excited about the long-term opportunity for Ulta Beauty, and I am confident we will continue to shape and lead the beauty industry for many years to come.”

GUIDANCE:

Ulta Salon sees FY2021 EPS of $8.85-$9.30.

For fiscal 2021, the Company plans to:

• open approximately 40 net new stores and execute approximately 21 remodel or relocation projects;
• achieve net revenues of between $7.2 billion and $7.3 billion;
• achieve comparable sales growth of approximately 15% to 17%;
• expand operating margin to approximately 9% of sales, driven by gross margin expansion;
• deliver diluted earnings per share in the range of $8.85 to $9.30, including the impact of approximately $850 million in share repurchases and assuming an effective tax rate of 24.8%;
• incur capital expenditures between $200 million and $250 million; and
• incur depreciation and amortization expense between $270 million and $280 million.

“We are encouraged by the momentum we are seeing in store traffic trends,” continued Dillon. “Although our visibility as to when demand will fully recover is limited, we are confident our business will continue to strengthen in fiscal 2021, as COVID-19 vaccines become more accessible.”

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