01—Abstract
Summary
Summary of the 10-K filed April 2, 2019. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported fiscal 2018 (52 weeks ended February 2, 2019) net sales of $6.72 billiona, up from $5.88 billion in fiscal 2017, with net sales increasing $832.1 million, or 14.1%.
Comparable sales rose 8.1%, driven by a 5.1% increase in retail stores and salon services and a 35.4% increase in e-commerce. Net income increased $103.3 millionb, or 18.6%, to $658.6 million, and diluted EPS was $10.94 versus $8.96 in fiscal 2017. Gross profit margin rose to 35.9% from 35.6%, while SG&A expenses rose to 22.9% of net sales from 21.9%, reflecting new revenue recognition accounting (ASC 606) and investments in store labor and growth initiatives.
The company ended the year with 1,174 stores across 50 states, after opening 107 and closing 7, and with 31.8 million active Ultamate Rewards loyalty members who generated more than 95% of net sales. Management expects to open approximately 70 to 80 new stores per year and sees long-term potential for 1,500 to 1,700 U.S. stores. Expected capital expenditures for fiscal 2019 are approximately $390 millionc, and the company plans to fund them from operations.
Cash and cash equivalents were $409.3 milliond at year-end, with no borrowings under its $400 million credit facility. Shareholder returns were significant: the company repurchased $616.2 million of common stock in fiscal 2018, and on March 14, 2019 announced a new $875.0 million share repurchase program.
The company also announced a three-year Efficiencies for Growth cost program targeting savings of $150 million to $200 million. Management's risk factors highlight dependence on discretionary consumer spending, competition, vendor concentration (top ten vendors were approximately 62% of fiscal 2018 net sales), and distribution capacity as the store base grows.
02—Key points
Key Highlights
- Net sales rose 14.1% to $6.72 billion; comparable sales increased 8.1%, including a 35.4% increase in e-commerce comparable sales.
- Net income grew 18.6% to $658.6 million; diluted EPS was $10.94 versus $8.96 in fiscal 2017.
- Gross profit margin improved to 35.9% from 35.6%, with ASC 606 adoption contributing 55 basis points of leverage.
- SG&A expenses rose to 22.9% of net sales from 21.9%, with ASC 606 driving 80 basis points of deleverage.
- Store base grew to 1,174 stores after 107 openings; management plans 70 to 80 new stores per year over the next several years.
- Repurchased $616.2 million of common stock in fiscal 2018 and announced an $875.0 million share repurchase program on March 14, 2019.
- Ended the year with $409.3 million in cash and no borrowings under its $400 million credit facility; fiscal 2019 capital expenditures are expected to be approximately $390 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Ulta Beauty kept $0.10.
- Revenue$6.72B100.0%
- Cost of revenue−$4.31B64.1%
- Gross profit$2.41B35.9%
- Operating costs−$1.56B23.2%
- Operating income$854.1M12.7%
- Interest, other & tax−$195.5M2.9%
- Net income$658.6M9.8%
Where FY2019 revenue went
$6.72B- Cost of revenue: $4.31B, 64% of revenue
- SG&A: $1.54B, 23% of revenue
- Net income: $658.6M, 9.8% of revenue
- Interest, other & tax: $195.5M, 2.9% of revenue
Kept 9.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed April 2, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $6.72B$5.88B | +14.1% |
| Cost of Revenue | $4.31B$3.79B | +13.7% |
| Gross Profit | $2.41B$2.10B | +14.9% |
| SG&A Expenses | $1.54B$1.29B | +19.3% |
| Operating Income | $854.08M$785.29M | +8.8% |
| Net Income | $658.56M$555.23M | +18.6% |
| EPS (Basic) | $11.00$9.02 | +22.0% |
| EPS (Diluted) | $10.94$8.96 | +22.1% |
| Shares Outstanding (Basic) | 59.86M61.56M | −2.7% |
| Shares Outstanding (Diluted) | 60.18M61.98M | −2.9% |
05—Questions
Frequently Asked Questions
How much did Ulta Beauty's sales and profits grow in fiscal 2018?
Net sales increased $832.1 million, or 14.1%, to $6,716.6 million. Net income increased $103.3 million, or 18.6%, to $658.6 million, and diluted net income per share was $10.94 compared with $8.96 in fiscal 2017.
What drove comparable sales growth?
Total comparable sales rose 8.1%, consisting of a 5.1% increase in retail stores and salon services and a 35.4% increase in e-commerce. The company attributes the increase to its marketing and merchandising strategies, with transactions up 5.3% and average ticket up 2.8%.
What is the company's store expansion plan?
Ulta Beauty expects to open approximately 70 to 80 new stores per year for the next several years and believes it can grow to between 1,500 and 1,700 U.S. stores over the long term. The average investment to open a new store is approximately $1.4 million.
How is the company returning capital to shareholders?
The company repurchased $616.2 million of common stock in fiscal 2018 and announced on March 14, 2019 a new share repurchase program of up to $875.0 million. The program has no expiration date and may be suspended or discontinued at any time.
What are the key risks highlighted in the filing?
Key risks include sensitivity of discretionary beauty spending to economic conditions, competition from a range of retailers, dependence on vendor partners (the top ten vendors represented approximately 62% of fiscal 2018 net sales), capacity of distribution infrastructure as the store base grows, and cybersecurity or information system disruptions.
06—Continue