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March 15, 2024

Ulta Posts Solid Q4, Readies International Expansion

Posted In: Retail Articles

Ulta Beauty welcomed continued gains in the fourth quarter, which announced, even as the company issued financial results, that it is preparing to begin international expansion with a deal to enter Mexico.

The company also noted that its partnership with Target Corp. continues to grow with the addition of new brands and new locations.

Net income was $394.4 million, or $8.08 per diluted share, including 46 cents due to an extra week of sales in the fourth quarter, versus $340.8 million, or $6.68 per diluted share, including a two-cent benefit due to stock-based compensation income tax accounting, in the year-previous period.

A Yahoo Finance-published analyst consensus estimate called for $7.53 per diluted share and revenue of $3.53 billion.

Comparable sales, including e-commerce, increased 2.5% year over year, resulting from a 4.5% increase in transactions and a 1.9% decrease in average ticket, Ulta pointed out. Net sales increased to $3.55 billion from $3.23 billion in the year-prior quarter primarily due to increased comps, strong new store performance, growth in other revenue and the benefit of an extra sales week in fiscal 2023. Operating income was $517.1 million versus $447.6 million in the year-earlier period.

For the full fiscal year, net income was $1.29 billion, or $26.03 per diluted share, including a 14-cent benefit due to stock-based compensation income tax accounting and the 46-cent benefit due to the 53rd week, versus $1.24 billion, or $24.01 per diluted share, including a seven cent benefit due to income tax accounting for stock-based compensation, in the year previous, the company reported.

Comparable sales increased 5.7% year over year, Ulta reported, resulting from a 7.4% increase in transactions and a 1.5% decrease in average ticket.

Net sales increased to $11.21 billion from $10.21 billion, primarily due to increased comparable sales, strong new store performance, strong growth in other revenue, and the benefit of the 53rd sales week in fiscal 2023.

Operating income was $1.68 billion, versus $1.64 billion in the year earlier.

In a conference call, Dave Kimbell, Ulta CEO, noted that the company had strengthened its partnership with Target with the introduction of new brands and the opening of 155 more Ulta Beauty at Target locations, ending the year with 510 shops. Among other operational highlights he mentioned were the company’s surpassing one million followers on TikTok late last year, reinforcing Ulta’s position as a social brand leader in beauty. Then, in its loyalty initiative, he said Ulta improved member retention and enjoyed strong new member acquisition, as well as seeing healthy reactivation of lapsed members. As such, loyalty program membership gained 8%, ending the year with 43.3 million participants, customers who shopped more frequently and spent more with Ulta on average.

In announcing the financial results, Kimbell said, “We closed out a strong 2023 with better-than-expected fourth-quarter financial performance. Our compelling holiday plans and thoughtfully curated assortment resonated with our guests and delivered healthy traffic, record brand awareness and strong member growth. I am proud of how our teams drove these results while making meaningful progress on our multi-year, transformational investment agenda to enable new capabilities for future growth. We enter 2024 well-positioned to drive strong top and bottom-line growth, build on our foundational capabilities and unlock further advantages of our differentiated model. While we are mindful the near-term macro environment remains dynamic, we are optimistic about the resiliency of the beauty category, energized by the growth opportunities ahead of us, and confident in our ability to deliver for our guests and our shareholders.”

Beyond the United States, Kimbell said, “International expansion represents an incremental, long-term opportunity for Ulta Beauty to extend our reach and leverage our differentiated value proposition. We have evaluated various operating models and partners, and geographies, and we are excited to announce the formation of a joint venture with Axo, a highly experienced operator of global brands, to launch and operate Ulta Beauty in Mexico in 2025.”

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