Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) announced financial results for the thirteen week period and fifty-two week period (“Fiscal Year”) ended January 30, 2016, which compares to the same periods ended January 31, 2015.
“Our fourth quarter results capped an exceptional year during which we made significant progress against our strategic imperatives, while achieving outstanding sales and earnings growth. We continue to benefit from the powerful combination of strong demand in the beauty category and Ulta Beauty’s highly differentiated offering that propels our business to transcend prevailing trends across the retail landscape,” said Mary Dillon, Chief Executive Officer. “Today we are pleased to announce an accelerated share repurchase plan that demonstrates our commitment to creating and returning value to shareholders.”
For the Fourth Quarter
- Net sales increased 21.1% to $1,268.3 million from $1,047.6 million in the fourth quarter of fiscal 2014;
- Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 12.5% compared to an increase of 11.1% in the fourth quarter of fiscal 2014. The 12.5% same store sales increase was driven by 8.6% growth in transactions and 3.9% growth in average ticket;
- Retail comparable sales increased 10.4%, including salon comparable sales growth of 9.2%;
- Salon sales increased 16.7% to $54.6 million from $46.8 million in the fourth quarter of fiscal 2014;
- E-commerce sales grew 44.2% to $94.8 million from $65.7 million in the fourth quarter of fiscal 2014, representing 210 basis points of the total company comparable sales increase of 12.5%;
- Gross profit increased 120 basis points to 34.6% from 33.4% in the fourth quarter of fiscal 2014, due to increased merchandise margins, an improvement in e-commerce profit contribution, and leverage in fixed store costs, offset by supply chain investments including the Greenwood, Indiana distribution center;
- Selling, general and administrative (SG&A) expense as a percentage of net sales increased 100 basis points to 21.1% compared to 20.1% in the fourth quarter of 2014, due to planned investments in marketing to enhance brand awareness and in store payroll hours to improve the guest experience, and higher incentive compensation compared to the prior year;
- Pre-opening expenses were $1.4 million, compared to $1.6 million in the fourth quarter of fiscal 2014. Real estate activity in the fourth quarter of fiscal 2015 included 14 new stores and one relocation compared to 10 new stores in the fourth quarter of fiscal 2014;
- Operating income increased 23.3% to $169.5 million, or 13.4% of net sales, compared to $137.5 million, or 13.1% of net sales, in the fourth quarter of fiscal 2014;
- Tax rate decreased to 36.5% compared to 36.6% in the fourth quarter of fiscal 2014;
- Net income increased 23.6% to $107.8 million compared to $87.3 million in the fourth quarter of fiscal 2014; and
- Income per diluted share increased 25.2% to $1.69 compared to $1.35 in the fourth quarter of fiscal 2014.
For the Fiscal Year 2015
- Net sales increased 21.1% to $3,924.1 million from $3,241.4 million in fiscal 2014;
- Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 11.8% compared to an increase of 9.9% in fiscal 2014. The 11.8% same store sales increase was driven by 8.4% growth in transactions and 3.4% growth in average ticket;
- Retail comparable sales increased 10.0%, including salon comparable sales growth of 10.1%;
- Salon sales increased 19.2% to $209.2 million from $175.5 million in fiscal 2014;
- E-commerce sales grew 47.5% to $221.1 million from $149.9 million in fiscal 2014, representing 180 basis points of the total company same store sales increase of 11.8%;
- Gross profit increased 20 basis points to 35.3% compared to 35.1% in fiscal 2014;
- SG&A expense as a percentage of net sales was flat compared to fiscal 2014 at 22.0%;
- Pre-opening expense increased to $14.7 million compared to $14.4 million in fiscal 2014; Real estate activity for fiscal 2015 included 103 new stores, five relocations and four remodels compared to 100 new stores, two relocations and nine remodels in fiscal 2014;
- Operating income increased 23.4% to $506.3 million, or 12.9% of net sales, compared to $410.4 million, or 12.7% of net sales, in fiscal 2014;
- Tax rate decreased to 36.9% compared to 37.5% in fiscal 2014;
- Net income increased 24.5% to $320.0 million compared to $257.1 million in fiscal 2014; and
- Income per diluted share increased 25.1% to $4.98 compared to $3.98 in fiscal 2014.
Merchandise inventories at the end of the fourth quarter of fiscal 2015 totaled $761.8 million, compared to $581.2 million at the end of the fourth quarter of fiscal 2014, representing an increase of $180.6 million. This increase was driven by 100 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 16.1%, compared to the fourth 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 sales growth and incremental inventory for new brands and in-store prestige brand boutiques.
Share Repurchase Program
During the fourth quarter, the Company repurchased 262,342 shares of its stock at a cost of approximately $46 million under its 10b5-1 plan. For fiscal 2015, the Company repurchased 1,034,418 shares of its stock at a cost of approximately $167 million. As ofJanuary 30, 2016, $192.7 million remained available under the $400 million share repurchase program.
The Company’s board of directors approved a new share repurchase authorization of $425 million, effective March 15, 2016, which replaces the prior authorization implemented in September 2014. The Company today announced that it plans to enter into an accelerated share repurchase agreement with Goldman, Sachs & Co. to repurchase $200 million of its common stock. In addition, the Company plans to continue its open market share repurchases consistent with its repurchase activities during fiscal 2015.
During the fourth quarter, the Company opened 14 stores located in Ardmore, OK; Cullman, AL; Edinburg, TX; Franklin, TN; Gulfport, MS; Lady Lake, FL; Lake Worth, TX; Manteca, CA; Orange City, FL; Renton, WA; Riverside, CA; Rolling Hills Estates, CA; Staten Island, NYand West Long Branch, NJ. The Company ended the fourth quarter with 874 stores and square footage of 9,225,957 which represents a 13% increase in square footage compared to the fourth quarter of fiscal 2014.
For fiscal 2016, the Company plans to:
- achieve comparable sales growth of approximately 8% to 10%, including the impact of the e-commerce business;
- increase total sales in the mid to high teens percentage range;
- grow e-commerce sales in the 40% range;
- expand square footage by approximately 11% with the opening of 100 net new stores;
- remodel 12 locations;
- deliver earnings per share growth in the range of 18% to 20%, including the impact of the new Dallas distribution center, the accelerated rollout of prestige brand boutiques, the accelerated share repurchase program, and continued open market share repurchases; and
- incur capital expenditures in the $390 million range in fiscal 2016, compared to $299 million in fiscal 2015. The planned increase in capital expenditures includes approximately $80 million to fund an accelerated rollout of prestige brand boutiques and enhancements to the Ulta Beauty Collection and fragrance fixtures in hundreds of stores.
For the first quarter of fiscal 2016, the Company currently expects net sales in the range of $1.016 billion to $1.033 billion, compared to actual net sales of $868.1 million in the first quarter of fiscal 2015. Comparable sales for the first quarter of 2016, including e-commerce sales, are expected to increase 9% to 11%. The Company reported a comparable sales increase of 11.4% in the first quarter of 2015.
Income per diluted share for the first quarter of fiscal 2016 is estimated to be in the range of $1.25 to $1.30. This compares to income per diluted share for the first quarter of fiscal 2015 of $1.04. (Original Source)
Shares of Ulta Salon jumped nearly 11% in after-hours trading. ULTA has a 1-year high of $188.48 and a 1-year low of $120.38. The stock’s 50-day moving average is $165.77 and its 200-day moving average is $169.58.
On the ratings front, Ulta Salon has been the subject of a number of recent research reports. In a report issued on March 8, Oppenheimer analyst Rupesh Parikh assigned a Buy rating on ULTA, with a price target of $195, which represents a potential upside of 22.2% from where the stock is currently trading. Separately, on March 7, Piper Jaffray’s Stephanie Wissink maintained a Buy rating on the stock and has a price target of $185.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Rupesh Parikh and Stephanie Wissink have a total average return of 18.3% and 1.6% respectively. Parikh has a success rate of 68.3% and is ranked #17 out of 3694 analysts, while Wissink has a success rate of 57.1% and is ranked #1179.
Overall, 6 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $194.60 which is 22.0% above where the stock opened today.
Ulta Salon Cosmetics & Fragrance Inc is a beauty retailer that provides one-stop shopping for mass and salon products and salon services in United States. Its brands include Bare Minerals and Urban Decay prestige cosmetics.