01—Abstract
Summary
Summary of the 10-K filed March 25, 2022. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported fiscal 2021 (year ended January 29, 2022) net sales of $8.63 billiona, up from $6.15 billion in fiscal 2020, with comparable sales increasing 37.9% after a 17.9% decline the prior year.
Gross profit rose to $3.37 billionb, or 39.0% of net sales, compared with 31.7% a year earlier, driven by fixed-cost leverage, merchandise margin improvements and favorable channel mix. Net income increased to $985.8 million, or $17.98 per diluted share, from $175.8 million in fiscal 2020, and no impairment, restructuring or other costs were recognized in fiscal 2021. The company ended the year with 1,308 stores across 50 states, no borrowings under its $1.0 billion revolving credit facility, and cash and cash equivalents of $431.6 million, down from $1.05 billion.
Management repurchased $1.52 billionc of common stock during fiscal 2021, nearly exhausting the $1.6 billion 2020 program, and on March 7, 2022 the Board authorized a new $2.0 billion repurchase program. Management expects fiscal 2022 capital expenditures of $425 million, focused on new, remodeled and relocated stores, information technology (including the Project SOAR ERP upgrade) and supply chain optimization.
The filing flags continuing risks, including inflationary cost pressures on payroll, benefits, transportation and supply chain, ongoing COVID-19 uncertainty that has limited salon services, and dependence on top ten brand partners, which accounted for approximately 54% of net sales in fiscal 2021 versus 56% in fiscal 2020. Inventory rose to $1.50 billiond from $1.17 billion, which management attributed to new stores, new brand launches and accelerated receipts to mitigate supply chain disruptions.
02—Key points
Key Highlights
- Net sales rose to $8,630,889 thousand in fiscal 2021 from $6,151,953 thousand in fiscal 2020, with comparable sales up 37.9% after a 17.9% decline.
- Gross profit margin expanded to 39.0% from 31.7%, with the filing citing 300 basis points of fixed-cost leverage and 190 basis points of merchandise margin improvement.
- Net income was $985.8 million ($17.98 diluted EPS) versus $175.8 million in fiscal 2020; there were no impairment or restructuring charges in fiscal 2021.
- The company operated 1,308 stores across 50 states, opening 48 and closing 4 during fiscal 2021, and had no borrowings outstanding under its $1.0 billion credit facility.
- Share repurchases totaled $1.52 billion in fiscal 2021, and a new $2.0 billion repurchase program was authorized on March 7, 2022.
- Fiscal 2022 capital expenditures are expected to be $425 million, including $150 million budgeted for information technology systems.
- Top ten brand partners represented approximately 54% of net sales in fiscal 2021, a concentration risk the filing highlights.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Ulta Beauty kept $0.11.
- Revenue$8.63B100.0%
- Cost of revenue−$5.26B61.0%
- Gross profit$3.37B39.0%
- Operating costs−$2.07B24.0%
- Operating income$1.30B15.0%
- Interest, other & tax−$311.5M3.6%
- Net income$986.0M11.4%
Where FY2022 revenue went
$8.63B- Cost of revenue: $5.26B, 61% of revenue
- SG&A: $2.06B, 24% of revenue
- Net income: $986.0M, 11% of revenue
- Interest, other & tax: $311.5M, 3.6% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed March 25, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $8.63B$6.15B | +40.3% |
| Cost of Revenue | $5.26B$4.20B | +25.2% |
| Gross Profit | $3.37B$1.95B | +72.8% |
| SG&A Expenses | $2.06B$1.58B | +30.2% |
| Operating Income | $1.30B$236.82M | +447.9% |
| Net Income | $986.00M$175.84M | +460.8% |
| EPS (Basic) | $18.09$3.12 | +479.8% |
| EPS (Diluted) | $17.98$3.11 | +478.1% |
| Shares Outstanding (Basic) | 54.48M56.35M | −3.3% |
| Shares Outstanding (Diluted) | 54.84M56.56M | −3.0% |
05—Questions
Frequently Asked Questions
What drove the large increase in fiscal 2021 profitability?
The filing attributes the increase primarily to stronger consumer confidence, government stimulus payments and the easing of COVID-19 restrictions, which lifted net sales by $2.5 billion. Gross profit grew $1.4 billion, and SG&A expenses rose $0.5 billion but leveraged to 23.9% of net sales from 25.7%.
How is the company returning capital to shareholders?
During fiscal 2021 Ulta repurchased shares for a total cost of $1,521.9 million, nearly exhausting the $1.6 billion 2020 program. The Board authorized a new program of up to $2.0 billion on March 7, 2022, which has no expiration date and may be suspended at any time.
What are the main risks investors should monitor?
The filing highlights cost pressures from rising wage rates, transportation and shipping costs, and inflation; ongoing COVID-19 uncertainty affecting salon services and consumer spending; dependence on top ten brand partners that accounted for approximately 54% of net sales; and cybersecurity and information system risks tied to the Project SOAR ERP upgrade.
How strong is the balance sheet and liquidity position?
Ulta ended fiscal 2021 with $431.6 million in cash and cash equivalents, no borrowings under its $1.0 billion secured revolving credit facility, and total stockholders' equity of $1.54 billion. Net cash provided by operating activities was $1.06 billion for the year.
What is the store growth outlook?
Ulta opened 48 stores and closed 4 in fiscal 2021, ending with 1,308 stores. The filing states that over the long term the company has the potential to grow to between 1,500 and 1,700 freestanding stores in the United States and expects to open up to 800 Ulta Beauty at Target shops.
06—Continue