01—Abstract
Summary
Summary of the 10-K filed April 1, 2015. Cited figures are marked; the original filing is the authoritative source.
Ulta Salon, Cosmetics & Fragrance, Inc. (now Ulta Beauty, Inc.) reported fiscal 2014 (year ended January 31, 2015) net sales of $3,241.4 milliona, up 21.4% from $2,670.6 million in fiscal 2013, and net income of $257.1 million, up 26.8% from $202.8 million.
Total comparable sales increased 9.9%, driven by a 8.1% increase in retail and salon comparable sales and a 56.4% increase in e-commerce comparable sales. Operating income rose to $410.4 millionb, with gross margin of 35.1% and SG&A at 22.0% of net sales. Diluted EPS was $3.98, compared with $3.15 in the prior year.
The company operated 774 stores in 47 states at year-end, after opening 100 new stores in fiscal 2014. Management expects to open approximately 100 new stores per year for the next several years, with a long-term potential of more than 1,200 stores in the United States. The company plans to build two additional distribution centers, in Greenwood, Indiana (expected 2015) and Dallas, Texas (expected 2016), and projects fiscal 2015 capital expenditures of approximately $297 millionc.
Cash and cash equivalents were $389.1 milliond, plus $150.2 million of short-term investments, and the company had no borrowings outstanding under its $200 million secured revolving credit facility. The company's loyalty program, with approximately fifteen million active members, generates more than 80% of annual total net sales.
Key risks disclosed include economic conditions affecting discretionary spending, competition, distribution capacity, dependence on vendors (top ten vendors represented approximately 50% of net sales), and a pending California wage-and-hour class action. On March 12, 2015, the Board authorized a $100 million increase to the 2014 Share Repurchase Program, bringing available authorization to approximately $360.1 million after the increase, and no cash dividends were declared in fiscal 2014 or 2013.
02—Key points
Key Highlights
- Net sales rose 21.4% to $3,241.4 million in fiscal 2014, with 9.9% total comparable sales growth.
- Net income increased 26.8% to $257.1 million; diluted EPS was $3.98 versus $3.15 in fiscal 2013.
- Gross profit margin held near 35% at 35.1%, and SG&A leveraged to 22.0% of net sales from 22.3%.
- E-commerce sales grew 56.4% to $149.9 million, with a stated long-term goal of about 10% of total sales.
- The company operated 774 stores in 47 states after opening 100 new stores in fiscal 2014, with plans for about 100 openings per year.
- Fiscal 2015 capital expenditure budget is approximately $297 million, including new distribution centers in Greenwood, Indiana and Dallas, Texas.
- The company held no borrowings under its $200 million revolving credit facility and had $389.1 million in cash and $150.2 million in short-term investments at year-end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Ulta Beauty kept $0.08.
- Revenue$3.24B100.0%
- Cost of revenue−$2.10B64.9%
- Gross profit$1.14B35.1%
- Operating costs−$726.4M22.4%
- Operating income$410.4M12.7%
- Interest, other & tax−$153.3M4.7%
- Net income$257.1M7.9%
Where FY2015 revenue went
$3.24B- Cost of revenue: $2.10B, 65% of revenue
- SG&A: $712.0M, 22% of revenue
- Net income: $257.1M, 7.9% of revenue
- Interest, other & tax: $153.3M, 4.7% of revenue
Kept 7.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed April 1, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $3.24B$2.67B | +21.4% |
| Cost of Revenue | $2.10B$1.73B | +21.7% |
| Gross Profit | $1.14B$941.25M | +20.8% |
| SG&A Expenses | $712.01M$596.39M | +19.4% |
| Operating Income | $410.42M$327.59M | +25.3% |
| Net Income | $257.13M$202.85M | +26.8% |
| EPS (Basic) | $4.00$3.17 | +26.2% |
| EPS (Diluted) | $3.98$3.15 | +26.3% |
| Shares Outstanding (Basic) | 64.33M63.99M | +0.5% |
| Shares Outstanding (Diluted) | 64.65M64.46M | +0.3% |
05—Questions
Frequently Asked Questions
How did Ulta's sales and profitability perform in fiscal 2014?
Net sales increased 21.4% to $3,241.4 million, operating income rose to $410.4 million from $327.6 million, and net income grew 26.8% to $257.1 million. Diluted EPS was $3.98, compared with $3.15 in fiscal 2013.
What is driving Ulta's growth?
Growth came from opening 99 net new stores and a 9.9% total comparable sales increase, which included 8.1% growth in retail and salon stores and 56.4% growth in e-commerce. The company attributes comparable sales growth to its marketing and merchandising strategies, and the loyalty program generates more than 80% of annual total net sales.
What are the company's plans for expansion?
Management expects to open approximately 100 new stores per year for the next several years and believes it can grow to more than 1,200 U.S. stores over the long term. It is also adding distribution centers in Greenwood, Indiana (expected 2015) and Dallas, Texas (expected 2016), and expects fiscal 2015 capital expenditures of approximately $297 million.
Does Ulta pay dividends or repurchase shares?
No cash dividends were declared in fiscal 2014 or 2013, and the filing states no decisions have been made to pay a dividend in the foreseeable future. The company has a share repurchase program: a $300 million 2014 program had $260.1 million remaining as of January 31, 2015, and on March 12, 2015 the Board authorized a $100 million increase effective March 17, 2015.
What are the key risks investors should consider?
Key risks include weakness in the economy reducing discretionary beauty spending, intense competition, capacity constraints in distribution as the company grows, dependence on vendors whose top ten supplied approximately 50% of net sales, and a pending California employment class action in which the company denies the allegations and cannot estimate a loss.
06—Continue