01—Abstract
Summary
Summary of the 10-K filed March 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported fiscal 2022 (ended January 28, 2023) net sales of $10.21 billiona, up from $8.63 billion in fiscal 2021, with comparable sales increasing 15.6%.
Gross profit rose to $4.04 billionb, with gross margin of 39.6% versus 39.0% a year earlier, driven by fixed-cost leverage, other revenue growth and channel mix, partially offset by inventory shrink and merchandise margin deleverage. Operating income increased to $1.64 billion and net income rose to $1.24 billion, or $24.01 per diluted share, compared with $985.8 million a year earlier. The company operated 1,355 stores across 50 states at year-end and opened 47 new stores during the year.
The balance sheet remained strong, with cash and cash equivalents of $737.9 millionc, no borrowings outstanding under its $1.0 billion secured revolving credit facility, and stockholders' equity of $1.96 billion. Cash provided by operating activities was $1.48 billion, while the company repurchased $900.0 million of common stock during the year and had $1.1 billion remaining under its 2022 share repurchase program. Management expects fiscal 2023 capital expenditures of up to $475 million, primarily for new, remodeled and relocated stores, information technology (including the Project SOAR ERP upgrade) and supply chain optimization.
The filing highlights ongoing risks, including cost pressures from inflation, wages and shipping, rising shrink, reliance on top brand partners (top ten accounted for 56%d of fiscal 2022 net sales), macroeconomic and consumer spending uncertainty, and cybersecurity exposure. Management states that inflation did not have a material impact on fiscal 2022 sales, but it expects inflationary cost pressures to continue in 2023.
02—Key points
Key Highlights
- Net sales rose 18.3% to $10.21 billion in fiscal 2022, with comparable sales up 15.6% driven by a 10.8% increase in transactions and a 4.3% increase in average ticket.
- Gross margin expanded to 39.6% from 39.0%, while SG&A fell to 23.5% of net sales from 23.9%, supporting operating income of $1.64 billion (16.1% of net sales) versus $1.30 billion a year earlier.
- Net income increased to $1.24 billion, or $24.01 per diluted share, compared with $985.8 million, or $17.98 per diluted share, in fiscal 2021.
- The company ended the year with 1,355 stores across 50 states, opening 47 stores and remodeling 20, and expects to grow to a long-term potential of 1,500 to 1,700 freestanding U.S. stores.
- Cash flow from operations was $1.48 billion, with $312.1 million of capital expenditures; no borrowings were outstanding under the $1.0 billion credit facility at year-end.
- The company repurchased $900.0 million of common stock in fiscal 2022 and had $1.1 billion remaining under its $2.0 billion 2022 share repurchase program.
- Top ten brand partners accounted for 56% of fiscal 2022 net sales, and the loyalty program Ultamate Rewards had 40.2 million active members generating more than 95% of total sales.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Ulta Beauty kept $0.12.
- Revenue$10.21B100.0%
- Cost of revenue−$6.16B60.4%
- Gross profit$4.04B39.6%
- Operating costs−$2.41B23.6%
- Operating income$1.64B16.1%
- Interest, other & tax−$396.6M3.9%
- Net income$1.24B12.2%
Where FY2023 revenue went
$10.21B- Cost of revenue: $6.16B, 60% of revenue
- SG&A: $2.40B, 23% of revenue
- Net income: $1.24B, 12% of revenue
- Interest, other & tax: $396.6M, 3.9% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 24, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $10.21B$8.63B | +18.3% |
| Cost of Revenue | $6.16B$5.26B | +17.1% |
| Gross Profit | $4.04B$3.37B | +20.1% |
| SG&A Expenses | $2.40B$2.06B | +16.2% |
| Operating Income | $1.64B$1.30B | +26.3% |
| Net Income | $1.24B$986.00M | +26.0% |
| EPS (Basic) | $24.17$18.09 | +33.6% |
| EPS (Diluted) | $24.01$17.98 | +33.5% |
| Shares Outstanding (Basic) | 51.40M54.48M | −5.7% |
| Shares Outstanding (Diluted) | 51.74M54.84M | −5.7% |
05—Questions
Frequently Asked Questions
How did Ulta Beauty perform financially in fiscal 2022?
Net sales increased 18.3% to $10.21 billion, gross profit rose to $4.04 billion, and net income reached $1.24 billion, or $24.01 per diluted share, up from $985.8 million in fiscal 2021.
What drove the improvement in gross margin?
Gross profit as a percentage of net sales increased 60 basis points to 39.6%, primarily due to 100 basis points of fixed-cost leverage and 60 basis points of leverage in other revenue, including credit card income and Target royalty income. These were partially offset by 70 basis points of deleverage in inventory shrink and 50 basis points of deleverage in merchandise margins.
How is Ulta Beauty managing its cash and capital allocation?
The company ended fiscal 2022 with $737.9 million in cash and no credit facility borrowings. It repurchased $900.0 million of stock during the year, leaving $1.1 billion available under its 2022 program, and expects fiscal 2023 capital expenditures of up to $475 million.
What are the main risks flagged in the filing?
Key risks include persistent inflation in labor, transportation and shipping costs, macroeconomic and consumer spending pressures, elevated inventory shrink, dependence on brand partners, competition, cybersecurity and data privacy exposure, and disruptions to distribution centers.
What is the company's store growth outlook?
Ulta Beauty opened 47 stores in fiscal 2022 and ended the year with 1,355 stores. The company believes it has the potential over the long term to grow to between 1,500 and 1,700 freestanding U.S. stores, and expects Ulta Beauty at Target to reach up to 800 Target locations.
06—Continue