How did Ulta perform financially in fiscal 2008?

Net sales grew 18.9% to $1,084.6 million, but comparable store sales rose only 0.2%. Gross profit increased to $327.9 million, although gross margin fell to 30.2% from 31.1%. Net income was flat at $25.3 million.

What is the company's outlook for store growth?

Ulta reduced its 2009 new store program to approximately 35 stores, representing expected square footage growth of approximately 11%, due to a significant decline in suitable commercial real estate projects. The company believes it has long-term potential to grow to over 1,000 stores in the United States.

How much debt does Ulta carry and what are the key terms?

At January 31, 2009, the company had $106.0 million of outstanding borrowings under its $200 million secured revolving credit facility, which matures in May 2011. Borrowings bear interest at the prime rate or the Eurodollar rate plus 1.00% up to $100 million and 1.25% thereafter. The facility requires tangible net worth of at least $80 million, and the company's tangible net worth was approximately $245 million at year-end.

What legal risks does Ulta face?

Ulta and certain current and former executive officers are defendants in consolidated securities class action lawsuits in the U.S. District Court for the Northern District of Illinois. The suits allege the IPO prospectus and registration statement contained materially false and misleading statements. The motion to dismiss was denied on March 19, 2009, and the company cannot reasonably estimate potential losses.

Does Ulta pay dividends, and who controls the company?

No cash dividends have been declared to date, and no decisions have been made to pay a dividend in the foreseeable future. The company's credit agreement currently restricts its ability to pay cash dividends. Principal stockholders own or control approximately 44% of the outstanding common stock and have significant influence over matters requiring stockholder approval.

ULTA 10-K FY2009 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed April 2, 2009. Cited figures are marked; the original filing is the authoritative source.

Ulta Salon, Cosmetics & Fragrance, Inc. reported net sales of $1,084.6 million^a for fiscal 2008 (ended January 31, 2009), up from $912.1 million in fiscal 2007, driven mainly by 62 net new stores and a 0.2% comparable store sales increase.

Comparable store sales decelerated through the year, with a 5.5% decrease in the fourth quarter. Gross profit rose to $327.9 million^b, but gross margin fell to 30.2% from 31.1%, and net income was $25.3 million, essentially flat versus $25.3 million in fiscal 2007. Diluted EPS was $0.43 versus $0.48 a year earlier.

The company ended the year with 311 stores in 36 states and $106.0 million^c of outstanding borrowings under its $200 million secured revolving credit facility. Management said it reduced its 2009 new store program to approximately 35 stores, representing expected square footage growth of approximately 11%, citing a decline in suitable commercial real estate, and expects comparable store sales to be negatively affected in fiscal 2009. Cash provided by operating activities was $75.2 million, and capital expenditures were $110.9 million.

The filing also highlights ongoing risk, including a consolidated securities class action related to the company's IPO. The court denied the defendants' motion to dismiss on March 19, 2009, and the company says it cannot reasonably estimate potential losses. Principal stockholders control approximately 44%^d of common stock, and the company does not expect to pay dividends in the foreseeable future.

02—Key points

Key Highlights

Net sales rose 18.9% to $1,084.6 million in fiscal 2008, with 63 stores opened and 311 stores in operation at year-end across 36 states.
Comparable store sales increased only 0.2% for the year after 6.4% in fiscal 2007, with a 5.5% decrease in the fourth quarter.
Gross margin declined to 30.2% from 31.1%, and operating income was $46.3 million versus $46.7 million a year earlier.
Net income was $25.3 million, or $0.43 per diluted share, compared with $25.3 million, or $0.48 per diluted share, in fiscal 2007.
The new store program for 2009 was reduced to approximately 35 stores, representing expected square footage growth of approximately 11%.
Total debt was $106.0 million under a $200 million secured revolving credit facility maturing May 2011, and the company had a tangible net worth covenant of at least $80 million.
Securities class action litigation related to the October 2007 IPO remains pending after the motion to dismiss was denied on March 19, 2009.

03—Questions

Frequently Asked Questions

How did Ulta perform financially in fiscal 2008?
Net sales grew 18.9% to $1,084.6 million, but comparable store sales rose only 0.2%. Gross profit increased to $327.9 million, although gross margin fell to 30.2% from 31.1%. Net income was flat at $25.3 million.
What is the company's outlook for store growth?
Ulta reduced its 2009 new store program to approximately 35 stores, representing expected square footage growth of approximately 11%, due to a significant decline in suitable commercial real estate projects. The company believes it has long-term potential to grow to over 1,000 stores in the United States.
How much debt does Ulta carry and what are the key terms?
At January 31, 2009, the company had $106.0 million of outstanding borrowings under its $200 million secured revolving credit facility, which matures in May 2011. Borrowings bear interest at the prime rate or the Eurodollar rate plus 1.00% up to $100 million and 1.25% thereafter. The facility requires tangible net worth of at least $80 million, and the company's tangible net worth was approximately $245 million at year-end.
What legal risks does Ulta face?
Ulta and certain current and former executive officers are defendants in consolidated securities class action lawsuits in the U.S. District Court for the Northern District of Illinois. The suits allege the IPO prospectus and registration statement contained materially false and misleading statements. The motion to dismiss was denied on March 19, 2009, and the company cannot reasonably estimate potential losses.
Does Ulta pay dividends, and who controls the company?
No cash dividends have been declared to date, and no decisions have been made to pay a dividend in the foreseeable future. The company's credit agreement currently restricts its ability to pay cash dividends. Principal stockholders own or control approximately 44% of the outstanding common stock and have significant influence over matters requiring stockholder approval.

04—Continue

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