01—Abstract
Summary
Summary of the 10-K filed April 3, 2013. Cited figures are marked; the original filing is the authoritative source.
Ulta Salon, Cosmetics & Fragrance, Inc. reported fiscal 2012 (53 weeks ended February 2, 2013) net sales of $2,220.3 milliona, up from $1,776.2 million in fiscal 2011, with net income of $172.5 million, or $2.68 per diluted share, compared to $120.3 million, or $1.90 per diluted share, a year earlier.
The company operated 550 stores in 45 states at year-end after opening 102 new stores during the year. Comparable store sales increased 8.8%, primarily driven by a 6.5% increase in store traffic, and operating income rose to $280.0 millionb from $196.2 million, with operating margin reaching 12.6% of net sales versus 11.0% in fiscal 2011. Management changes and capital allocation were notable in the filing.
President and CEO Carl S. Rubin resigned in February 2013, and director Dennis K. Eck is serving as Interim Chief Executive Officer until a permanent replacement is found.
Scott M. Settersten was named permanent Chief Financial Officer in March 2013. The Board authorized a stock repurchase program of up to $150 millionc on March 18, 2013, and the company paid a $1.00 per share special cash dividend totaling $62.5 million in May 2012.
The company had no borrowings outstanding under its $200 milliond secured revolving credit facility at fiscal year-end. The company identified ongoing risks including concentration among its top ten vendors, which accounted for approximately 53% of net sales in fiscal 2012, reliance on power-center locations and their anchor-store traffic, and the planned expansion toward approximately 1,200 U.S. stores. The filing also notes that management expects comparable store sales growth in the long term of 4% to 6%, below the 8.8% achieved in fiscal 2012, and it states that the company does not expect the 8.8% increase to continue.
02—Key points
Key Highlights
- Net sales rose 25.0% to $2,220.3 million in fiscal 2012 from $1,776.2 million in fiscal 2011.
- Net income increased 43.5% to $172.5 million, or $2.68 per diluted share, versus $120.3 million, or $1.90 per diluted share, in fiscal 2011.
- Gross margin expanded to 35.3% of net sales from 34.7%, and SG&A fell to 22.0% of net sales from 23.1%, lifting operating margin to 12.6%.
- The company opened 102 new stores in fiscal 2012 and ended the year with 550 stores in 45 states; the long-term target is approximately 1,200 U.S. stores.
- Comparable store sales increased 8.8%, driven primarily by a 6.5% increase in store traffic, though management does not expect that rate to continue; the long-term target is 4% to 6%.
- Leadership transition: CEO Carl S. Rubin resigned in February 2013, Dennis K. Eck is Interim CEO, and Scott M. Settersten was named permanent CFO.
- The Board authorized a $150 million stock repurchase program on March 18, 2013, following a $1.00 per share special dividend ($62.5 million) paid in May 2012.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Ulta Beauty kept $0.08.
- Revenue$2.22B100.0%
- Cost of revenue−$1.44B64.7%
- Gross profit$783.7M35.3%
- Operating costs−$503.7M22.7%
- Operating income$280.0M12.6%
- Interest, other & tax−$107.4M4.8%
- Net income$172.5M7.8%
Where FY2013 revenue went
$2.22B- Cost of revenue: $1.44B, 65% of revenue
- SG&A: $488.9M, 22% of revenue
- Net income: $172.5M, 7.8% of revenue
- Other operating costs: $14.8M, 0.7% of revenue
- Interest, other & tax: $107.4M, 4.8% of revenue
Kept 7.8% as net incomeOther operating costs $14.8M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed April 3, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $2.22B$1.78B | +25.0% |
| Cost of Revenue | $1.44B$1.16B | +23.9% |
| Gross Profit | $783.67M$616.84M | +27.0% |
| SG&A Expenses | $488.88M$410.66M | +19.0% |
| Operating Income | $279.98M$196.19M | +42.7% |
| Interest Expense | $185K$587K | −68.5% |
| Net Income | $172.55M$120.26M | +43.5% |
| EPS (Basic) | $2.73$1.96 | +39.3% |
| EPS (Diluted) | $2.68$1.90 | +41.1% |
| Shares Outstanding (Basic) | 63.25M61.26M | +3.3% |
| Shares Outstanding (Diluted) | 64.40M63.33M | +1.7% |
05—Questions
Frequently Asked Questions
How did Ulta perform financially in fiscal 2012?
Net sales increased 25.0% to $2,220.3 million, gross profit rose to $783.7 million, operating income grew to $280.0 million from $196.2 million, and net income reached $172.5 million, or $2.68 per diluted share. The fiscal year contained 53 weeks, with the extra week contributing approximately $40 million in net sales.
What is driving Ulta's growth?
The filing attributes sales growth to 101 net new stores opened in 2012 and an 8.8% comparable store sales increase, which was primarily due to a 6.5% increase in store traffic. Non-comparable stores contributed $291.0 million of the net sales increase, while comparable stores contributed $153.1 million.
What are the key risks to the business described in the filing?
Key risks include weakness in consumer spending, intense competition from department stores, drug stores, mass merchandisers and online retailers, dependence on top vendors (the top ten represented approximately 53% of fiscal 2012 net sales), reliance on power-center traffic, the ability to execute new store growth and distribution capacity, and the CEO transition.
What is Ulta doing with its capital?
Capital expenditures were $188.6 million in fiscal 2012 for new, remodeled and relocated stores and technology. The company paid a $1.00 per share special dividend totaling $62.5 million in May 2012, and the Board authorized a repurchase program of up to $150 million on March 18, 2013. The company had no borrowings outstanding under its $200 million revolving credit facility at year-end.
Who is leading Ulta now, and what changed in the management team?
Carl S. Rubin resigned as President and CEO effective February 2013. Director Dennis K. Eck is serving as Interim CEO while the company searches for a permanent replacement. Scott M. Settersten, who had been Acting CFO since October 2012, was named permanent Chief Financial Officer on March 12, 2013.
06—Continue