01—Abstract
Summary
Summary of the 10-K filed March 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported fiscal 2020 (ended January 30, 2021) results sharply affected by the COVID-19 pandemic.
Net sales declined $1.2 billiona, or 16.8%, to $6.2 billion from $7.4 billion, and comparable sales decreased 17.9%. Transactions fell 24.5% while average ticket rose 8.8%. Gross profit fell 27.3% to $1.9 billion, and gross margin contracted 450 basis points to 31.7%.
Net income declined 75.1% to $175.8 millionb, or $3.11 per diluted share, versus $705.9 million in fiscal 2019. The company recorded $114.3 million of impairment, restructuring and other costs, including the permanent closure of 19 stores and the suspension of its planned Canadian expansion. The balance sheet strengthened over the year.
Cash and cash equivalents rose to $1.05 billionc from $392.3 million, and the company drew $800.0 million on its $1.0 billion revolving credit facility in March 2020 and repaid it in full on September 2, 2020. Operating cash flow was $810.4 million, and capital expenditures were reduced to $151.9 million from $298.5 million. The company had no borrowings outstanding at fiscal year-end.
Share repurchases resumed in the fourth quarter after being suspended in April 2020, and $1.5 billiond remained available under the $1.6 billion 2020 program. Management expects the beauty category to return to growth as consumers recover, but states that the full extent of the pandemic's impact remains uncertain.
The company continues to pursue its six strategic priorities, including omnichannel operations, loyalty program growth, and its Efficiencies for Growth cost program. It also plans a long-term store footprint of 1,500 to 1,700 U.S. stores, versus 1,264 at year-end.
02—Key points
Key Highlights
- Net sales fell 16.8% to $6.15 billion; comparable sales declined 17.9%, with transactions down 24.5% and average ticket up 8.8%.
- Gross margin fell 450 basis points to 31.7%, driven by channel mix shifts and fixed-cost deleverage.
- Net income decreased 75.1% to $175.8 million, or $3.11 per diluted share, compared with $705.9 million in fiscal 2019.
- Impairment, restructuring and other costs totaled $114.3 million, including permanent closure of 19 stores and suspension of the Canadian expansion.
- Year-end cash rose to $1.05 billion, the $800.0 million revolver draw was fully repaid on September 2, 2020, and no debt was outstanding at year-end.
- Operating cash flow was $810.4 million, and capital expenditures were reduced to $151.9 million from $298.5 million in fiscal 2019.
- Share repurchases resumed in Q4 fiscal 2020 after suspension; $1.5 billion remained available under the $1.6 billion 2020 program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Ulta Beauty kept $0.03.
- Revenue$6.15B100.0%
- Cost of revenue−$4.20B68.3%
- Gross profit$1.95B31.7%
- Operating costs−$1.71B27.8%
- Operating income$236.8M3.8%
- Interest, other & tax−$61.0M1.0%
- Net income$175.8M2.9%
Where FY2021 revenue went
$6.15B- Cost of revenue: $4.20B, 68% of revenue
- SG&A: $1.58B, 26% of revenue
- Net income: $175.8M, 2.9% of revenue
- Other operating costs: $129.3M, 2.1% of revenue
- Interest, other & tax: $61.0M, 1.0% of revenue
Kept 2.9% as net incomeNet income $175.8M · 2.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed March 26, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $6.15B$7.40B | −16.8% |
| Cost of Revenue | $4.20B$4.72B | −10.9% |
| Gross Profit | $1.95B$2.68B | −27.3% |
| SG&A Expenses | $1.58B$1.76B | −10.1% |
| Operating Income | $236.82M$901.09M | −73.7% |
| Net Income | $175.84M$705.95M | −75.1% |
| EPS (Basic) | $3.12$12.21 | −74.4% |
| EPS (Diluted) | $3.11$12.15 | −74.4% |
| Shares Outstanding (Basic) | 56.35M57.84M | −2.6% |
| Shares Outstanding (Diluted) | 56.56M58.10M | −2.7% |
05—Questions
Frequently Asked Questions
How much did the COVID-19 pandemic affect Ulta Beauty's fiscal 2020 results?
The filing attributes the net sales decline to the temporary closing of brick-and-mortar stores, social distancing, reduced operating hours and limited in-store capacity. Comparable sales fell 17.9%, transactions declined 24.5%, and operating income dropped to $236.8 million from $901.1 million.
What drove the decline in gross margin?
The filing cites 220 basis points of deleverage from channel mix shifts and 220 basis points of fixed-cost deleverage, plus 90 basis points of salon services deleverage. These were partially offset by 80 basis points of leverage from lower promotional activity and cost optimization.
How did Ulta Beauty manage its liquidity during the pandemic?
The company drew $800.0 million on its revolving credit facility in March 2020 and repaid it in full by September 2, 2020. It also limited new hires, delayed merit increases, reduced marketing and controllable expenses, reduced new store openings and remodels, and suspended the share repurchase program until the fourth quarter.
What is the company's store expansion outlook?
Ulta Beauty operated 1,264 stores at January 30, 2021, after opening 30 and closing 20 during fiscal 2020. The filing states that over the long term it has the potential to grow to between 1,500 and 1,700 U.S. stores, and it suspended its planned Canadian expansion in September 2020.
What did the filing say about future demand for the beauty category?
Management expects the beauty category will return to growth as consumers recover from COVID-19 impacts. It also notes that a lack of incremental product innovation has created a challenging cycle for cosmetics, with the U.S. cosmetics category experiencing mid-single digit declines through fiscal 2019 and 2020.
06—Continue