01—Abstract
Summary
Summary of the 10-K filed March 28, 2017. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. (formerly Ulta Salon, Cosmetics & Fragrance, Inc.) reported fiscal 2016 (year ended January 28, 2017) net sales of $4,854.7 milliona, up from $3,924.1 million in fiscal 2015, an increase of $930.6 million, or 23.7%.
Total comparable sales rose 15.8%, with retail and salon comparable sales up 13.4% and e-commerce comparable sales up 56.2%. Net income increased 28.0% to $409.8 millionb, and diluted earnings per share were $6.52, compared with $4.98 in fiscal 2015. Gross margin expanded to 36.0% of net sales from 35.3%, while SG&A rose to 22.1% of net sales from 22.0%.
The company operated 974 stores across 48 states and the District of Columbia at year-end, after opening 104 new stores and closing four. Management expects to open approximately 100 stores per year for the next several years, with a long-term potential of 1,400 to 1,700 U.S. stores. E-commerce represented approximately 7%c of sales, and the company targets about 10% of total sales by the end of fiscal 2019.
Operating cash flow was $634.7 milliond, capital expenditures were $373.7 million, and the company repurchased $344.3 million of common shares. It had no borrowings outstanding under its $200 million secured revolving credit facility at year-end. The filing also reflects the holding company reorganization completed on January 29, 2017, under which Ulta Beauty, Inc. became successor to the former public company.
On March 9, 2017, the Board authorized a new $425 million share repurchase program. Approximately 23 million active Ultamate Rewards members generated more than 90% of annual net sales, a key dependency highlighted in the filing.
02—Key points
Key Highlights
- Net sales rose 23.7% to $4,854.7 million in fiscal 2016, with total comparable sales up 15.8%.
- Net income increased 28.0% to $409.8 million; diluted EPS was $6.52 versus $4.98 in fiscal 2015.
- Gross profit as a percentage of net sales increased 70 basis points to 36.0%, driven by merchandise margin gains and fixed store cost leverage.
- E-commerce sales grew 56.2% to $345.3 million, with a goal of reaching about 10% of total sales by fiscal 2019.
- The company opened 104 new stores in fiscal 2016, ending the year with 974 stores, and expects to open about 100 stores per year.
- Operating cash flow was $634.7 million, capital expenditures were $373.7 million, and share repurchases totaled $344.3 million.
- A new $425 million share repurchase program was announced on March 9, 2017, and the company had no borrowings under its $200 million credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Ulta Beauty kept $0.08.
- Revenue$4.85B100.0%
- Cost of revenue−$3.11B64.0%
- Gross profit$1.75B36.0%
- Operating costs−$1.09B22.5%
- Operating income$654.8M13.5%
- Interest, other & tax−$245.1M5.0%
- Net income$409.8M8.4%
Where FY2017 revenue went
$4.85B- Cost of revenue: $3.11B, 64% of revenue
- SG&A: $1.07B, 22% of revenue
- Net income: $409.8M, 8.4% of revenue
- Interest, other & tax: $245.1M, 5.0% of revenue
Kept 8.4% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 28, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $4.85B$3.92B | +23.7% |
| Cost of Revenue | $3.11B$2.54B | +22.4% |
| Gross Profit | $1.75B$1.38B | +26.2% |
| SG&A Expenses | $1.07B$863.35M | +24.4% |
| Operating Income | $654.82M$506.30M | +29.3% |
| Net Income | $409.76M$320.01M | +28.0% |
| EPS (Basic) | $6.55$5.00 | +31.0% |
| EPS (Diluted) | $6.52$4.98 | +30.9% |
| Shares Outstanding (Basic) | 62.52M63.95M | −2.2% |
| Shares Outstanding (Diluted) | 62.85M64.28M | −2.2% |
05—Questions
Frequently Asked Questions
What drove the increase in Ulta Beauty's fiscal 2016 net sales?
Net sales increased $930.6 million, or 23.7%, to $4,854.7 million. The filing attributes the increase to opening 100 net new stores and a 15.8% increase in comparable sales. Non-comparable stores contributed $320.9 million of the increase, and comparable stores contributed $609.8 million.
How did profitability change in fiscal 2016?
Operating income rose to $654.8 million from $506.3 million. Net income increased 28.0% to $409.8 million. Gross margin improved to 36.0% from 35.3%, while SG&A expenses rose to 22.1% of net sales from 22.0%.
What are the company's store growth and e-commerce plans?
Management expects to open approximately 100 new stores per year for the next several years and believes it could grow to between 1,400 and 1,700 stores in the United States over the long term. It aims to grow e-commerce from approximately 7% of sales as of January 28, 2017 to approximately 10% of total sales by the end of fiscal 2019.
How much capital did the company return to shareholders, and what is remaining under its buyback authorization?
The company repurchased $344.3 million of common stock in fiscal 2016, including the $200 million accelerated share repurchase. As of January 28, 2017, $101.0 million remained under the $425 million 2016 program. On March 9, 2017, the Board authorized a new $425 million program. The filing states no cash dividends were declared in 2016 or 2015.
What is the company's liquidity position and key financial risks?
Cash and cash equivalents were $385.0 million, with $30.0 million in short-term investments at year-end. The company had no borrowings under its $200 million secured revolving credit facility, which matures in December 2018. Risk factors cited include dependence on discretionary consumer spending, competition, reliance on a few key vendors (top ten vendors were about 50% of net sales), and dependence on loyalty program members, who generated more than 90% of annual net sales.
06—Continue