ULTA BEAUTY, INC.

(ULTA)
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ULTA BEAUTY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/25/2021 | 04:15pm EDT
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes included elsewhere in this quarterly report. This discussion
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 Form 10-Q 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 negative impacts the COVID-19 pandemic has had, and will continue to have,

? on our business, financial condition, profitability, cash flows, and supply

chain, as well as consumer spending (including future uncertain impacts);

? epidemics, pandemics like COVID-19 or natural disasters that have and could

continue to negatively impact sales;

changes in the overall level of consumer spending and volatility in the

? economy, including as a result of the COVID-19 pandemic and/or government aid

programs;

? a decline in operating results that has and may continue to lead to asset

impairment and store closure charges;

? our ability to sustain our growth plans and successfully implement our

long-range strategic and financial plan;

? our ability to gauge beauty trends and react to changing consumer preferences

in a timely manner;

? the possibility that we may be unable to compete effectively in our highly

competitive markets;

? our ability to execute our Efficiencies for Growth cost optimization program;

the possibility that cybersecurity breaches and other disruptions could

? compromise our information or result in the unauthorized disclosure of

confidential information;

? the possibility of material disruptions to our information systems;

the possibility that the capacity of our distribution and order fulfillment

? infrastructure and the performance of our distribution centers and fast

fulfillment centers may not be adequate to support our expected future growth

plans;

? changes in the wholesale cost of our products;

? the possibility that new store openings and existing locations may be impacted

by developer or co-tenant issues;

? 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; and

other risk factors detailed in our public filings with the Securities and

? Exchange Commission (the SEC), including risk factors contained in Item 1A,

   "Risk Factors" of our Annual Report on Form 10-K for the year


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  ended January 30, 2021, as such may be amended or supplemented in our

subsequently filed Quarterly Reports on Form 10-Q (including this report).

Except to the extent required by the federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise.

References in the following discussion to "we," "us," "our," "Ulta Beauty," the
"Company," and similar references mean Ulta Beauty, Inc. and its consolidated
subsidiaries, unless otherwise expressly stated or the context otherwise
requires.

Overview

We were founded in 1990 as a beauty retailer at a time when prestige, mass, and
salon products were sold through distinct channels - department stores for
prestige products; drug stores and mass merchandisers for mass products; and
salons and authorized retail outlets for professional hair care products. We
developed a unique specialty retail concept that offers a broad range of brands
and price points, a compelling value proposition, and a convenient and welcoming
shopping environment. We define our target consumer as a beauty enthusiast, a
consumer who is passionate about the beauty category and has high expectations
for the shopping experience. We believe our strategy provides us with the
competitive advantages that have contributed to our financial performance.

We are the largest beauty retailer in the United States and the premier beauty
destination for cosmetics, fragrance, skin care products, hair care products,
and salon services. We provide unmatched product breadth, value, and convenience
in a distinctive specialty retail environment. Key aspects of our business
include: our ability to offer our guests a unique combination of more than
25,000 beauty products from across the categories of prestige and mass
cosmetics, fragrance, haircare, prestige and mass skincare, bath and body
products, and salon styling tools, as well as a full-service salon in every
store featuring hair, skin, and brow services; our focus on delivering a
compelling value proposition to our guests across all of our product categories;
and convenience, as our stores are predominantly located in convenient,
high-traffic locations such as power centers.

The continued growth of our business and any future increases in net sales, net
income, and cash flows is dependent on our ability to execute our strategic
priorities: 1) build omnichannel operations that more deeply connects guests
across channels, 2) reimagine how guests experience and discover beauty, 3)
drive market share growth through the deployment of winning category strategies,
4) deepen Ulta Beauty love and loyalty, 5) drive holistic cost optimization, and
6) develop our talent and strengthen our culture. We believe that the expanding
U.S. beauty products and salon services industry, the shift in distribution
channel of prestige beauty products from department stores to specialty retail
stores, coupled with Ulta Beauty's competitive strengths, position us to capture
additional market share in the industry.

Comparable sales is a key metric that is monitored closely within the retail
industry. Our comparable sales have fluctuated in the past, and we expect them
to continue to fluctuate in the future. A variety of factors affect our
comparable sales, including general U.S. economic conditions, changes in
merchandise strategy or mix, and timing and effectiveness of our marketing
activities, among others.

Over the long term, our growth strategy is to increase total net sales through
increases in our comparable sales, opening new stores, and increasing
omnichannel capabilities. Long term operating profit is expected to increase as
a result of our ability to expand merchandise margin and leverage our fixed
store costs with comparable sales increases and operating efficiencies offset by
incremental investments in people, systems, and supply chain required to support
a 1,500 to 1,700 store chain in the U.S. with successful e-commerce and
competitive omnichannel capabilities.

Impact of COVID-19

We continue to closely monitor the impact of COVID-19 on all facets of our
business. As we navigated the impact of the COVID pandemic, we proactively took
steps to optimize our cost structure, while also investing in new capabilities
to support future growth. As of July 31, 2021, all our stores, salons and brow
service offerings were open and operating under our Shop Safe Standards. We
intend to resume skin and make-up services when it is safe to do so.
Additionally,

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during the first half of fiscal 2021, as local restrictions lifted, we increased
our operating hours and, as store traffic trends improved, we adjusted staffing
levels to support the increased demand.

During the first half of fiscal 2021, we experienced an increase in sales driven
primarily by the favorable impact from stronger consumer confidence, government
stimulus payments and the easing of COVID-19 restrictions. While operations
during the first half of fiscal 2021 did not appear to be negatively impacted,
the COVID-19 pandemic had a material negative impact on fiscal 2020 operations
and financial results and could have additional negative impacts in the future.
The extent of the impact of pandemic on our business and financial results will
depend on future developments, including, but not limited to, the potential
temporary reclosing of certain stores, the potential temporary restrictions on
certain store operating hours and/or in-store capacity, the duration of
potential future quarantines, shelter-in-place and other travel restrictions
within the U.S. and other affected countries, supply chain disruptions, the
potential for increased freight costs and higher wholesale costs, the duration
of the pandemic and any variants of the virus, the duration, timing and severity
of the impact on consumer spending, the timing and effectiveness of vaccine
distribution, vaccination rates, and how quickly and to what extent normal
economic and operating conditions can resume.

Industry trends


Our research indicates that Ulta Beauty has captured meaningful market share
across all categories over the last several years. However, the COVID-19
pandemic and its various impacts have changed consumer behavior and consumption
of beauty products due to the closures of offices, retail stores and other
businesses and the significant decline in social gatherings. Despite the overall
beauty market decline in 2020, we expect the beauty category will return to
growth in 2021 as consumers recover from the impacts of COVID-19, and we remain
confident that our differentiated and diverse business model, our commitment to
strategic investments, and our highly engaged associates will continue to drive
market share gains over the long term.

Basis of presentation

The Company has one reportable segment, which includes retail stores, salon services, and e-commerce.

We recognize merchandise revenue at the point of sale in our retail stores.
E-commerce sales are recognized upon shipment or guest pickup of the merchandise
based on meeting the transfer of control criteria. Retail store and e-commerce
sales are recorded net of estimated returns. Shipping and handling are treated
as costs to fulfill the contract and not a separate performance obligation.
Accordingly, we recognize revenue for our single performance obligation related
to online sales at the time control of the merchandise passes to the customer,
which is at the time of shipment or guest pickup. We provide refunds for
merchandise returns within 60 days from the original purchase date. State sales
taxes are presented on a net basis as we consider our self a pass-through
conduit for collecting and remitting state sales tax. Salon service revenue is
recognized at the time the service is provided to the guest. Gift card sales
revenue is deferred until the guest redeems the gift card. Company coupons and
other incentives are recorded as a reduction of net sales. Other revenue sources
include the private label and co-branded credit card programs, as well as
deferred revenue related to the loyalty program and gift card breakage.

Comparable sales reflect sales for stores beginning on the first day of the
14th month of operation. Therefore, a store is included in our comparable store
base on the first day of the period after one year of operations plus the
initial one-month grand opening period. Non-comparable store sales include sales
from new stores that have not yet completed their 13th month of operation and
stores that were closed for part or all of the period in either year. Remodeled
stores are included in comparable sales unless the store was closed for a
portion of the current or prior period. Comparable sales include retail sales
and salon services (including stores temporarily closed due to COVID-19), and
e-commerce. There may be variations in the way in which some of our competitors
and other retailers calculate comparable or same store sales.

Measuring comparable sales allows us to evaluate the performance of our store
base as well as several other aspects of our overall strategy. Several factors
could positively or negatively impact our comparable sales results:

? the general national, regional, and local economic conditions and corresponding

impact on customer spending levels;


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? the introduction of new products or brands;

? the location of new stores in existing store markets;

? competition;

? our ability to respond on a timely basis to changes in consumer preferences;

? the effectiveness of our various merchandising and marketing activities; and

? the number of new stores opened and the impact on the average age of all of our

   comparable stores.




Cost of sales includes:

? the cost of merchandise sold, including substantially all vendor allowances,

which are treated as a reduction of merchandise costs;

? distribution costs including labor and related benefits, freight, rent,

depreciation and amortization, real estate taxes, utilities, and insurance;

? shipping and handling costs;

? retail stores occupancy costs including rent, depreciation and amortization,

real estate taxes, utilities, repairs and maintenance, insurance, and licenses;

? salon services payroll and benefits; and

? shrink and inventory valuation reserves.

Our cost of sales may be negatively impacted as we open new stores. Changes in
our merchandise mix may also have an impact on cost of sales. This presentation
of items included in cost of sales may not be comparable to the way in which our
competitors or other retailers compute their cost of sales.

Selling, general and administrative expenses include:

? payroll, bonus, and benefit costs for retail store and corporate employees;

? advertising and marketing costs;

? occupancy costs related to our corporate office facilities;

? stock-based compensation expense;

depreciation and amortization for all assets, except those related to our

? retail stores and distribution operations, which are included in cost of

sales; and

? legal, finance, information systems, and other corporate overhead costs.

This presentation of items in selling, general and administrative expenses may
not be comparable to the way in which our competitors or other retailers compute
their selling, general and administrative expenses.

Impairment, restructuring and other costs include long-lived asset impairment charges and restructuring costs associated with store closings.


Pre-opening expenses include non-capital expenditures during the period prior to
store opening for new, remodeled, and relocated stores including rent during the
construction period for new and relocated stores, store set-up labor, management
and employee training, and grand opening advertising.

Interest expense (income), net includes both interest expense and income.
Interest expense includes interest costs and facility fees associated with our
credit facility, which is structured as an asset-based lending instrument. Our
credit facility interest is based on a variable interest rate structure which
can result in increased cost in periods of rising interest rates. Interest
income represents interest from cash equivalents and short-term investments with
maturities of twelve months or less from the date of purchase.

Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores.



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Results of operations


Our quarterly periods are the 13 weeks ending on the Saturday closest to
April 30, July 31, October 31, and January 31. The Company's second quarter in
fiscal 2021 and 2020 ended on July 31, 2021 and August 1, 2020, respectively.
Our quarterly results of operations have varied in the past and are likely to do
so again in the future. As such, we believe that period-to-period comparisons of
our results of operations should not be relied upon as an indication of our
future performance.

The following tables present the components of our consolidated results of operations for the periods indicated:


                                                     13 Weeks Ended                26 Weeks Ended
                                                July 31,       August 1,      July 31,       August 1,
(Dollars in thousands)                            2021           2020           2021           2020
Net sales                                      $ 1,967,207    $ 1,228,009    $ 3,905,726    $ 2,401,219
Cost of sales                                    1,169,244        899,002      2,353,975      1,768,607
Gross profit                                       797,963        329,007      1,551,751        632,612

Selling, general and administrative expenses 464,299 271,587

      908,174        652,499
Impairment, restructuring and other costs                -         40,758              -         60,300
Pre-opening expenses                                 1,357          3,907          5,946          8,542
Operating income (loss)                            332,307         12,755        637,631       (88,729)
Interest expense, net                                  425          2,617            783          3,889
Income (loss) before income taxes                  331,882         10,138  
     636,848       (92,618)
Income tax expense (benefit)                        80,989          2,086        155,666       (22,161)
Net income (loss)                              $   250,893    $     8,052    $   481,182    $  (70,457)

Other operating data:
Number of stores end of period                       1,296          1,264  
       1,296          1,264
Comparable sales                                     56.3%        (26.7)%          60.9%        (31.1)%





                                                    13 Weeks Ended              26 Weeks Ended
                                               July 31,      August 1,     July 31,      August 1,
(Percentage of net sales)                        2021          2020          2021          2020
Net sales                                         100.0%         100.0%       100.0%         100.0%
Cost of sales                                      59.4%          73.2%        60.3%          73.7%
Gross profit                                       40.6%          26.8%        39.7%          26.3%

Selling, general and administrative expenses 23.6% 22.1%

    23.3%          27.2%
Impairment, restructuring and other costs           0.0%           3.3%    
    0.0%           2.5%
Pre-opening expenses                                0.1%           0.3%         0.1%           0.3%
Operating income (loss)                            16.9%           1.1%        16.3%         (3.7)%
Interest expense, net                               0.0%           0.2%         0.0%           0.1%
Income (loss) before income taxes                  16.9%           0.9%    
   16.3%         (3.8)%
Income tax expense (benefit)                        4.1%           0.2%         4.0%         (0.9)%
Net income (loss)                                  12.8%           0.7%        12.3%         (2.9)%






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Comparison of 13 weeks ended July 31, 2021 to 13 weeks ended August 1, 2020

Net sales


Net sales increased $739.2 million or 60.2%, to $2.0 billion for the 13 weeks
ended July 31, 2021, compared to $1.2 billion for the 13 weeks ended August 1,
2020. The net sales increase was primarily due to the favorable impact from
improving consumer confidence and the easing of COVID-19 restrictions. The total
comparable sales increase of 56.3% during the 13 weeks ended July 31, 2021 was
driven by a 52.5% increase in transactions and a 2.5% increase in average
ticket.

Gross profit

Gross profit increased $469.0 million or 142.5%, to $798.0 million for the 13
weeks ended July 31, 2021, compared to $329.0 million for the 13 weeks ended
August 1, 2020. Gross profit as a percentage of net sales increased to 40.6% for
the 13 weeks ended July 31, 2021, compared to 26.8% for the 13 weeks ended
August 1, 2020. The increase in gross profit margin was primarily due to
leverage of fixed costs, improvement in merchandise margins, favorable channel
mix shifts, and leverage of salon expenses.

Selling, general and administrative expenses


Selling, general and administrative (SG&A) expenses increased $192.7 million or
71.0%, to $464.3 million for the 13 weeks ended July 31, 2021, compared to
$271.6 million for the 13 weeks ended August 1, 2020. SG&A expenses as
a percentage of net sales increased to 23.6% for the 13 weeks ended July 31,
2021, compared to 22.1% for the 13 weeks ended August 1, 2020, due to deleverage
related to higher store payroll and benefits primarily due to less employee
retention credits received under the CARES Act, and higher marketing expense,
partially offset by leverage in corporate overhead and store expenses due to
higher sales.

Impairment, restructuring and other costs

There were no impairment, restructuring and other costs recognized in the 13 weeks ended July 31, 2021, compared to $40.8 million for the 13 weeks ended August 1, 2020.

Pre-opening expenses


Pre-opening expenses decreased $2.6 million to $1.4 million for the 13 weeks
ended July 31, 2021 compared to $3.9 million for the 13 weeks ended August
1,
2020.

Interest expense, net
Interest expense, net was $0.4 million for the 13 weeks ended July 31, 2021
compared to $2.6 million of interest expense, net for the 13 weeks ended August
1, 2020. Interest expense represents interest on borrowings and fees related to
the credit facility. Interest income results from cash equivalents and
short-term investments with maturities of twelve months or less from the date of
purchase. We did not have any outstanding borrowings on our credit facility as
of July 31, 2021 and January 30, 2021. We had $800.0 million outstanding under
the credit facility as of August 1, 2020.

Income tax expense


Income tax expense of $81.0 million for the 13 weeks ended July 31, 2021
represents an effective tax rate of 24.4%, compared to $2.1 million of tax
expense representing an effective tax rate of 20.6% for the 13 weeks ended
August 1, 2020. The higher effective tax rate is primarily due to a decrease in
the benefit of state tax credits compared to the 13 weeks ended August 1, 2020
as a result of an increase in pre-tax income.

Net income


Net income was $250.9 million for the 13 weeks ended July 31, 2021, compared to
$8.1 million for the 13 weeks ended August 1, 2020. The increase in net income
is primarily due to the $469.0 million increase in gross profit and $40.8

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million decrease in impairment, restructuring and other costs, partially offset
by a $192.7 million increase in SG&A expenses and a $78.9 million increase in
income taxes.

Comparison of 26 weeks ended July 31, 2021 to 26 weeks ended August 1, 2020

Net sales

Net sales increased $1.5 billion or 62.7%, to $3.9 billion for the 26 weeks
ended July 31, 2021, compared to $2.4 billion for the 26 weeks ended August 1,
2020. The net sales increase was primarily due to the favorable impact from
stronger consumer confidence, government stimulus payments, and the easing of
COVID-19 restrictions. The total comparable sales increase of 60.9% during the
26 weeks ended July 31, 2021 was driven by a 52.5% increase in transactions and
a 5.5% increase in average ticket.



Gross profit

Gross profit increased $919.1 million or 145.3%, to $1.6 billion for the 26
weeks ended July 31, 2021, compared to $632.6 million for the 26 weeks ended
August 1, 2020. Gross profit as a percentage of net sales increased to 39.7% for
the 26 weeks ended July 31, 2021, compared to 26.3% for the 26 weeks ended
August 1, 2020. The increase in gross profit margin was primarily due to
leverage of fixed costs, improvement in merchandise margins, leverage of salon
expenses, and favorable channel mix shifts.

Selling, general and administrative expenses

SG&A expenses increased $255.7 million or 39.2%, to $908.2 million for the 26
weeks ended July 31, 2021, compared to $652.5 million for the 26 weeks ended
August 1, 2020. SG&A expenses as a percentage of net sales decreased to 23.3%
for the 26 weeks ended July 31, 2021, compared to 27.2% for the 26 weeks ended
August 1, 2020, due to leverage in corporate overhead and store expenses due to
higher sales, partially offset by deleverage related to higher store payroll and
benefits primarily due to less employee retention credits received under the
CARES Act, and higher marketing expense.

Impairment, restructuring and other costs

There were no impairment, restructuring and other costs recognized in the 26 weeks ended July 31, 2021, compared to $60.3 million for the 26 weeks ended August 1, 2020.

Pre-opening expenses


Pre-opening expenses decreased $2.6 million to $5.9 million for the 26 weeks
ended July 31, 2021, compared to $8.5 million for the 26 weeks ended August
1,
2020.

Interest expense, net
Interest expense, net was $0.8 million for the 26 weeks ended July 31, 2021
compared to $3.9 million of interest expense, net for the 26 weeks ended August
1, 2020. Interest expense represents interest on borrowings and fees related to
the credit facility. Interest income results from cash equivalents and
short-term investments with maturities of twelve months or less from the date of
purchase. We did not have any outstanding borrowings on our credit facility as
of July 31, 2021 and January 30, 2021. We had $800.0 million outstanding under
the credit facility as of August 1, 2021.

Income tax expense (benefit)


Income tax expense of $155.7 million for the 26 weeks ended July 31, 2021
represents an effective tax rate of 24.4%, compared to $22.2 million of tax
benefit representing an effective tax rate of 23.9% for the 26 weeks ended
August 1, 2020. The higher effective tax rate is primarily due to a decrease in
the benefit of state tax credits compared to the 26 weeks ended August 1, 2020
as a result of an increase in pre-tax income.



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Net income (loss)
Net income was $481.2 million for the 26 weeks ended July 31, 2021 compared to a
net loss of $70.5 million for the 26 weeks ended August 1, 2020. The increase in
net income is primarily due to a $919.1 million increase in gross profit and a
$60.3 million decrease in impairment, restructuring and other costs, partially
offset by a $255.7 million increase in SG&A expenses and a $177.8 million
increase in income taxes.

Liquidity and capital resources


Our primary cash needs are for rent, capital expenditures for new, remodeled,
and relocated stores, increased merchandise inventories related to store
expansion and new brand additions, supply chain improvements, share repurchases,
and continued improvement in our information technology systems.

Our primary sources of liquidity are cash and cash equivalents, short-term
investments, cash flows from operations, including changes in working capital,
and borrowings under our credit facility. As of July 31, 2021, January 30, 2021,
and August 1, 2020, we had cash and cash equivalents of $770.1 million, $1.0
billion, and $1.2 billion, respectively.

The most significant components of our working capital are merchandise
inventories and cash and cash equivalents reduced by related accounts payable
and accrued expenses. Our working capital needs are greatest from August through
November each year as a result of our inventory build-up during this period for
the approaching holiday season. Based on past performance and current
expectations, we believe that cash and cash equivalents, short-term investments,
cash generated from operations, and borrowings under the credit facility will
satisfy the Company's working capital needs, capital expenditure needs,
commitments, and other liquidity requirements through at least the next
twelve months.

The following table presents a summary of our cash flows for the 26 weeks ended July 31, 2021 and August 1, 2020:


                                                                      26 Weeks Ended
                                                                 July 31,       August 1,
(In thousands)                                                     2021            2020
Net cash provided by operating activities                       $   401,413    $     15,989
Net cash provided by (used in) investing activities                (57,305)

26,304

Net cash provided by (used in) financing activities               (619,959)

722,670

Effect of exchange rate changes on cash and cash equivalents           (56)              30
Net increase (decrease) in cash and cash equivalents            $ (275,907)
   $    764,993


Operating activities

Operating activities consist of net income (loss) adjusted for certain non-cash
items, including depreciation and amortization, non-cash lease expense,
long-lived asset impairment charges, deferred income taxes, stock-based
compensation expense, realized gains or losses on disposal of property and
equipment, and the effect of working capital changes. The first 26 weeks of 2021
increase over the first 26 weeks of 2020 is mainly due to the increase in net
income, and the timing of accounts payable and accrued liabilities, partially
offset by decreases in merchandise inventories and long-lived asset impairment
charges. The increase in net income was primarily due to an increase in gross
profit resulting from higher sales and a decrease in impairment, restructuring
and other costs, partially offset by an increase in SG&A expenses and income
taxes.

Merchandise inventories, net were $1.44 billion at July 31, 2021, compared to
$1.37 billion at August 1, 2020, representing an increase of $75.14 million or
5.5%. The increase in total inventory was primarily driven by the addition of 32
net new stores opened since August 1, 2020, the opening of the Jacksonville, FL
fast fulfillment center, and increased purchases to support strong demand.

Investing activities

We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems. Investment activities for capital


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expenditures were $57.3 million during the 26 weeks ended July 31, 2021, compared to $77.1 million during the 26 weeks ended August 1, 2020. During the 26 weeks ended August 1, 2020, we received $110.0 million in short-term investments and we contributed $5.4 million to equity investments.

During the 26 weeks ended July 31, 2021, we opened 35 new stores, relocated two
stores and remodeled five stores, compared to the 26 weeks ended August 1, 2020,
when we opened 11 new stores and relocated one store.

Our future investments will depend primarily on the number of new, remodeled,
and relocated stores, information technology systems, and supply chain
investments we undertake and the timing of these expenditures. Based on past
performance and current expectations, we believe our sources of liquidity will
be sufficient to fund future capital expenditures.

Financing activities


Financing activities consist principally of borrowings on our revolving credit
facility, share repurchases, and capital stock transactions. Purchases of
treasury shares represent the fair value of common shares repurchased from plan
participants in connection with shares withheld to satisfy minimum statutory tax
obligations upon the vesting of restricted stock.

We had no borrowings outstanding under the credit facility as of July 31, 2021
and January 30, 2021. As of August 1, 2020, we had $800.0 million outstanding
under the credit facility. The zero outstanding borrowings position at July 31,
2021 and January 30, 2021 continues to be due to a combination of factors
including an improvement in sales trends as compared to the 26 weeks ended
August 1, 2020, overall performance of management initiatives including expense
control, as well as inventory and other working capital reductions. We may
require borrowings under the facility from time to time in future periods for
unexpected business disruptions, to support our new store program, share
repurchases, and seasonal inventory needs.

Share repurchase program


On March 14, 2019, the Board of Directors authorized a share repurchase program
(the 2019 Share Repurchase Program) pursuant to which the Company could
repurchase up to $875.0 million of the Company's common stock. The 2019 Share
Repurchase Program authorization revoked the previously authorized but unused
amount of $25.4 million from the earlier share repurchase program. The 2019
Share Repurchase Program did not have an expiration date but provided for
suspension or discontinuation at any time.

On March 12, 2020, the Board of Directors authorized a share repurchase program
(the 2020 Share Repurchase Program) pursuant to which the Company may repurchase
up to $1.6 billion of the Company's common stock. The 2020 Share Repurchase
Program authorization revoked the previously authorized but unused amount of
$177.8 million from the 2019 Share Repurchase Program. The 2020 Share Repurchase
Program does not have an expiration date and may be suspended or discontinued at
any time.

A summary of common stock repurchase activity is presented in the following
table:


                                        26 Weeks Ended
                                    July 31,      August 1,
(Dollars in millions)                 2021           2020
Shares repurchased                   1,989,576       326,970

Total cost of shares repurchased $ 635.8 $ 73.0




Credit facility

On March 11, 2020, we entered into Amendment No. 1 to the Second Amended and
Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo
Bank, National Association, as Administrative Agent, Collateral Agent and a
Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase
Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as
Syndication Agent and a Lender; PNC Bank, National Association, as Documentation
Agent and a Lender; and the other lenders party thereto. The Loan Agreement
matures on March 11,

                                       26

  Table of Contents
2025, provides maximum revolving loans equal to the lesser of $1.0 billion or a
percentage of eligible owned inventory and eligible owned receivables (which
borrowing base may, at the election of the Company and satisfaction of certain
conditions, include a percentage of qualified cash), contains a $50.0 million
subfacility for letters of credit and allows the Company to increase the
revolving facility by an additional $100.0 million, subject to the consent by
each lender and other conditions. The Loan Agreement contains a requirement to
maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such
periods when availability under the Loan Agreement falls below a specified
threshold. Substantially all of the Company's assets are pledged as collateral
for outstanding borrowings under the Loan Agreement. Outstanding borrowings bear
interest, at the Company's election, at either a base rate plus a margin of 0%
to 0.125% or the London Interbank Offered Rate plus a margin of 1.125% to
1.250%, with such margins based on the Company's borrowing availability, and the
unused line fee is 0.20% per annum.

As of July 31, 2021 and January 30, 2021, we had no borrowings outstanding under
the credit facility. As of August 1, 2020, we had $800.0 million outstanding
under the credit facility and the weighted average interest rate was 1.59%.

As of July 31, 2021, we were in compliance with all terms and covenants of the Loan Agreement.


Seasonality

Our business is subject to seasonal fluctuation. Significant portions of our net
sales and profits are realized during the fourth quarter of the fiscal year due
to the holiday selling season. To a lesser extent, our business is also affected
by Mother's Day and Valentine's Day. Any decrease in sales during these higher
sales volume periods could have an adverse effect on our business, financial
condition, or operating results for the entire fiscal year. Our quarterly
results of operations have varied in the past and are likely to do so again in
the future. As such, we believe that period-to-period comparisons of our results
of operations should not be relied upon as an indication of our future
performance.

Off-balance sheet arrangements

As of July 31, 2021, we have not entered into any "off-balance sheet" arrangements, as that term is described by the SEC. We do, however, have off-balance sheet purchase obligations incurred in the ordinary course of business.

Contractual obligations


Our contractual obligations consist of operating lease obligations, purchase
obligations, and our revolving line of credit. No material changes outside the
ordinary course of business have occurred in our contractual obligations during
the 26 weeks ended July 31, 2021.

Critical accounting policies and estimates

Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles. The
preparation of these consolidated financial statements required the use of
estimates and judgments that affect the reported amounts of our assets,
liabilities, revenues, and expenses. Management bases estimates on historical
experience and other assumptions it believes to be reasonable under the
circumstances and evaluates these estimates on an on-going basis. Actual results
may differ from these estimates. There have been no significant changes to the
critical accounting policies and estimates included in our Annual Report on
Form 10-K for the fiscal year ended January 30, 2021.

Recently adopted accounting pronouncements

See Note 2 to our consolidated financial statements, "Summary of significant accounting policies - Recently adopted accounting pronouncements."

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Analyst Recommendations on ULTA BEAUTY, INC.
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Financials (USD)
Sales 2023 9 163 M - -
Net income 2023 969 M - -
Net cash 2023 346 M - -
P/E ratio 2023 18,5x
Yield 2023 -
Capitalization 17 917 M 17 917 M -
EV / Sales 2023 1,92x
EV / Sales 2024 1,77x
Nbr of Employees 28 500
Free-Float 97,3%
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Number of Analysts 31
Last Close Price 343,05 $
Average target price 439,05 $
Spread / Average Target 28,0%
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Managers and Directors
David C. Kimbell President, Chief Executive Officer & Director
Scott M. Settersten Director-Financial Reporting
Mary N. Dillon Executive Chairman
Elliott Rodgers Senior Vice President-Logistics
Kecia Steelman Chief Operating Officer
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