01—Abstract
Summary
Summary of the 10-K filed April 2, 2014. Cited figures are marked; the original filing is the authoritative source.
Ulta Salon, Cosmetics & Fragrance, Inc. reported net sales of $2,670.6 milliona for fiscal 2013 (the 52 weeks ended February 1, 2014), up from $2,220.3 million in fiscal 2012, with net income of $202.8 million, or $3.15 per diluted share, compared with $172.5 million, or $2.68 per diluted share, the prior year.
The company operated 675 stores in 46 states at year-end after opening 127 new stores, and its comparable store sales increased 7.9%, with retail and salon comparable store sales up 6.1% and e-commerce comparable store sales up 76.6%. Gross margin was 35.2% versus 35.3% a year earlier, as SG&A rose to 22.3% of net sales from 22.0%, reflecting planned investments in supply chain, e-commerce and store labor. The balance sheet remained unlevered, with cash and cash equivalents of $419.5 millionb at year-end and no borrowings outstanding under the $200 million secured revolving credit facility, which was extended to December 2018.
Operating cash flow was $327.7 millionc and capital expenditures were $226.0 million. The company repurchased $37.3 million of stock during the year and had $112.7 million remaining under its $150 million repurchase program. Management plans to open about 100 new stores in fiscal 2014, budgets roughly $265 million in capital expenditures, and is embarking on a multi-year supply chain project that includes a fourth distribution center expected to open in 2015.
Management expects to share its long-term growth plan and financial targets in the fall of 2014. The filing also highlights risks including economic sensitivity of discretionary beauty spending, competition, dependence on a top ten vendor group that represented approximately 51%d of net sales, the pending California wage-and-hour class action, and rising store opening costs.
02—Key points
Key Highlights
- Net sales rose to $2,670.6 million in fiscal 2013 from $2,220.3 million in fiscal 2012.
- Net income increased to $202.8 million, or $3.15 per diluted share, from $172.5 million, or $2.68 per diluted share.
- Comparable store sales increased 7.9%, including a 6.1% increase in retail and salon stores and a 76.6% increase in e-commerce.
- The company opened 127 new stores in fiscal 2013, ending the year with 675 stores in 46 states, and plans to grow toward approximately 1,200 stores long term.
- Cash and cash equivalents were $419.5 million with no borrowings outstanding under the $200 million revolving credit facility.
- Gross profit margin was 35.2% versus 35.3% the prior year, while SG&A rose to 22.3% of net sales from 22.0%.
- Fiscal 2014 plans include about 100 new stores, roughly $265 million in capital expenditures, and a multi-year supply chain project with a fourth distribution center expected in 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Ulta Beauty kept $0.08.
- Revenue$2.67B100.0%
- Cost of revenue−$1.73B64.8%
- Gross profit$941.2M35.2%
- Operating costs−$613.7M23.0%
- Operating income$327.6M12.3%
- Interest, other & tax−$124.7M4.7%
- Net income$202.8M7.6%
Where FY2014 revenue went
$2.67B- Cost of revenue: $1.73B, 65% of revenue
- SG&A: $596.4M, 22% of revenue
- Net income: $202.8M, 7.6% of revenue
- Other operating costs: $17.3M, 0.6% of revenue
- Interest, other & tax: $124.7M, 4.7% of revenue
Kept 7.6% as net incomeOther operating costs $17.3M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed April 2, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $2.67B$2.22B | +20.3% |
| Cost of Revenue | $1.73B$1.44B | +20.4% |
| Gross Profit | $941.25M$783.67M | +20.1% |
| SG&A Expenses | $596.39M$488.88M | +22.0% |
| Operating Income | $327.59M$279.98M | +17.0% |
| Net Income | $202.85M$172.55M | +17.6% |
| EPS (Basic) | $3.17$2.73 | +16.1% |
| EPS (Diluted) | $3.15$2.68 | +17.5% |
| Shares Outstanding (Basic) | 63.99M63.25M | +1.2% |
| Shares Outstanding (Diluted) | 64.46M64.40M | +0.1% |
05—Questions
Frequently Asked Questions
How did Ulta perform financially in fiscal 2013?
Net sales increased to $2,670.6 million from $2,220.3 million, and net income rose to $202.8 million from $172.5 million. Diluted earnings per share were $3.15 compared with $2.68 in fiscal 2012. Operating income was $327.6 million, up from $280.0 million.
What drove the growth in comparable store sales?
Total comparable store sales increased 7.9%. The filing attributes this to a 6.9% increase in average ticket and a 1.0% increase in traffic, with e-commerce comparable sales up 76.6% and its inclusion adding about 180 basis points to the consolidated figure.
What is Ulta's financial position and capital allocation?
Ulta ended the year with $419.5 million in cash and no borrowings under its revolving credit facility. Operating cash flow was $327.7 million, capital expenditures were $226.0 million, and the company repurchased $37.3 million of stock, leaving $112.7 million available under its $150 million program.
What are the main risks highlighted for investors?
Key risks include reduced consumer spending on discretionary beauty products, intense competition, dependence on vendors (the top ten represented approximately 51% of net sales), reliance on distribution and information systems, and a pending California employment class action. The filing also notes that management does not expect the lawsuit to have a material adverse effect on financial position or liquidity.
What does management expect for fiscal 2014?
Management plans to open approximately 100 new stores and remodel about 12, with capital expenditures of approximately $265 million. Spending will shift toward supply chain, including a fourth distribution center expected to open in 2015. The company expects to share its long-term growth plan and financial targets in the fall of 2014.
06—Continue