01—Abstract
Summary
Summary of the 10-K filed March 31, 2010. Cited figures are marked; the original filing is the authoritative source.
Ulta Salon, Cosmetics & Fragrance, Inc. reported net sales of $1,222.8 milliona for fiscal 2009 (ended January 30, 2010), up from $1,084.6 million in fiscal 2008, with net income of $39.4 million, or $0.66 per diluted share, compared with $25.3 million in fiscal 2008.
The company describes itself as the largest beauty retailer offering one-stop shopping for prestige, mass and salon products and salon services in the United States. It operated 346 stores in 38 states at year-end after opening 37 stores and remodeling 6 in fiscal 2009, and it reduced its new store program for 2009 because of the economic downturn. Comparable store sales rose 1.4%b for the year after a 0.2% increase in fiscal 2008, with positive comparable store sales in the third and fourth quarters of 2009.
Balance sheet and cash flow improved meaningfully. Net cash provided by operating activities was $172.8 millionc, compared with $75.2 million in fiscal 2008, and the company had no outstanding borrowings under its $200 million credit facility at January 30, 2010, versus $106.0 million a year earlier. Gross profit as a percentage of net sales rose to 30.5% from 30.2%, while SG&A expenses decreased to 24.4% of net sales from 24.6%.
Management stated that its long-term target for new store growth is 15%d to 20%, that it sees potential for more than 1,000 stores in the United States, and that its growth depends on its store expansion, prestige brand offerings and e-commerce. Key risks highlighted in the filing include sensitivity of discretionary spending to the economy, competition from department stores, specialty and mass retailers, dependence on vendors (the top ten vendors represented approximately 46% of net sales), a pending California class action over the classification of store and salon managers, and concentration of ownership, with principal stockholders controlling approximately 35% of outstanding common stock. The company has never declared cash dividends and its credit agreement restricts them.
02—Key points
Key Highlights
- Net sales rose to $1,222.8 million in fiscal 2009 from $1,084.6 million in fiscal 2008.
- Net income increased to $39.4 million, or $0.66 per diluted share, from $25.3 million in fiscal 2008.
- Operating cash flow was $172.8 million, compared with $75.2 million in fiscal 2008.
- Comparable store sales increased 1.4% in fiscal 2009, with a 6.2% increase in the fourth quarter.
- The company ended the year with 346 stores in 38 states and no outstanding borrowings under its $200 million credit facility, versus $106.0 million at the prior year end.
- Gross profit margin improved to 30.5% of net sales from 30.2%, and SG&A fell to 24.4% of net sales from 24.6%.
- Top ten vendors accounted for approximately 46% of net sales, and principal stockholders own or control approximately 35% of common stock.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Ulta Beauty kept $0.03.
- Revenue$1.22B100.0%
- Cost of revenue−$846.2M69.2%
- Gross profit$376.6M30.8%
- Operating costs−$308.4M25.2%
- Operating income$68.2M5.6%
- Interest, other & tax−$28.8M2.4%
- Net income$39.4M3.2%
Where FY2010 revenue went
$1.22B- Cost of revenue: $846.2M, 69% of revenue
- SG&A: $302.4M, 25% of revenue
- Net income: $39.4M, 3.2% of revenue
- Interest, other & tax: $28.8M, 2.4% of revenue
Kept 3.2% as net incomeNet income $39.4M · 3.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed March 31, 2010Financial Statements
| Revenue | $1.22B |
| Cost of Revenue | $846.20M |
| Gross Profit | $376.57M |
| SG&A Expenses | $302.41M |
| Operating Income | $68.15M |
| Interest Expense | $2.20M |
| Net Income | $39.36M |
| EPS (Basic) | $0.68 |
| EPS (Diluted) | $0.66 |
| Shares Outstanding (Basic) | 57.91M |
| Shares Outstanding (Diluted) | 59.24M |
05—Questions
Frequently Asked Questions
How did Ulta perform financially in fiscal 2009?
Net sales increased $138.2 million, or 12.7%, to $1,222.8 million, and net income rose $14.1 million, or 55.8%, to $39.4 million. Operating income was $68.2 million, compared with $46.3 million in fiscal 2008.
Is Ulta expanding its store base?
Growth slowed in fiscal 2009 because of the economic downturn. The company opened 37 stores and remodeled 6, and it reduced its new store program for 2009. It says it expects to return to its long-term target of 15% to 20% store growth as the economy recovers and sees potential for more than 1,000 U.S. stores over the long term.
What are the main risks to Ulta's business?
The filing cites weak consumer spending on discretionary beauty products, competition from department stores, specialty, drug and mass retailers, Internet and direct response channels, and dependence on vendors without long-term supply agreements. It also cites risks from its distribution infrastructure, information systems, overseas sourcing, and a pending putative California class action alleging misclassification of store general managers and salon managers.
Does Ulta pay dividends, and what restricts them?
No cash dividends have been declared to date, and no decision has been made to pay one in the foreseeable future. The company's credit agreement currently restricts its ability to pay cash dividends.
06—Continue