01—Abstract
Summary
Summary of the 10-Q filed May 25, 2023. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported results for the 13 weeks ended April 29, 2023 in its first-quarter Form 10-Q.
Net sales rose to $2,634.3 milliona from $2,345.9 million, an increase of $288.4 million or 12.3%, driven by a total comparable sales increase of 9.3% (11.0% growth in transactions, offset by a 1.5% decrease in average ticket). Gross profit increased to $1,054.9 million, but gross margin slipped to 40.0% from 40.1%, reflecting higher inventory shrink, lower merchandise margins, higher supply chain costs and salon deleverage, partly offset by growth in other revenue. Net income was $347.1 million, or $6.88 per diluted share, compared with $331.4 million, or $6.30 per diluted share, a year earlier, helped by $7.3 million of net interest income and a lower effective tax rate of 22.8% versus 24.2%.
SG&A expenses rose 22.2% to $612.1 millionb, or 23.2% of net sales versus 21.4%, driven by store payroll and benefits, corporate overhead tied to strategic investments, and marketing. The company ended the quarter with 1,359 stores, up from 1,318, and $636.4 million in cash with no borrowings under its credit facility. Operating cash flow was $304.9 million, down from $426.3 million, mainly due to a larger inventory build.
Merchandise inventories rose 11.5% to $1.75 billionc, and the company repurchased $285.8 million of common stock under its $2.0 billion 2022 Share Repurchase Program. Management stated that inflation did not materially affect sales in the quarter but warned that continued inflation or a recession could pressure consumer spending and margins. The filing reports no material changes to risk factors from the fiscal 2022 Form 10-K and no material changes to internal control over financial reporting.
02—Key points
Key Highlights
- Net sales increased 12.3% to $2.63 billion, with comparable sales up 9.3% driven by an 11.0% increase in transactions.
- Gross margin declined slightly to 40.0% from 40.1%, due to higher inventory shrink, lower merchandise margins, and higher supply chain costs.
- SG&A expenses rose 22.2% to $612.1 million, or 23.2% of net sales versus 21.4%, reflecting store payroll, corporate investments, and marketing deleverage.
- Net income rose to $347.1 million, with diluted EPS of $6.88 versus $6.30, supported by a lower effective tax rate of 22.8%.
- Operating cash flow fell to $304.9 million from $426.3 million, mainly due to a $147.8 million inventory build; merchandise inventories were $1.75 billion.
- Ulta repurchased $285.8 million of stock in the quarter and held $636.4 million in cash with no borrowings under its credit facility.
- The company operated 1,359 stores at quarter end, up from 1,318 a year earlier, with 5 new stores opened in the quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Ulta Beauty kept $0.13.
- Revenue$2.63B100.0%
- Cost of revenue−$1.58B60.0%
- Gross profit$1.05B40.0%
- Operating costs−$612.8M23.3%
- Operating income$442.1M16.8%
- Interest, other & tax−$95.0M3.6%
- Net income$347.1M13.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 25, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $2.63B$2.35B | +12.3% |
| Cost of Revenue | $1.58B$1.40B | +12.4% |
| Gross Profit | $1.05B$941.03M | +12.1% |
| SG&A Expenses | $612.13M$500.97M | +22.2% |
| Operating Income | $442.07M$437.71M | +1.0% |
| Net Income | $347.05M$331.39M | +4.7% |
| EPS (Basic) | $6.92$6.34 | +9.1% |
| EPS (Diluted) | $6.88$6.30 | +9.2% |
| Shares Outstanding (Basic) | 50.15M52.25M | −4.0% |
| Shares Outstanding (Diluted) | 50.47M52.58M | −4.0% |
05—Questions
Frequently Asked Questions
How did Ulta Beauty perform in the first quarter of fiscal 2023?
Net sales grew 12.3% to $2,634.3 million, comparable sales rose 9.3%, and net income increased to $347.1 million from $331.4 million. Diluted EPS was $6.88 compared with $6.30.
Did profitability margins change?
Gross profit as a percentage of net sales declined to 40.0% from 40.1%, and operating income as a percentage of net sales fell to 16.8% from 18.7%, as SG&A expenses rose to 23.2% of net sales from 21.4%.
What drove the decline in operating cash flow?
Net cash provided by operating activities was $304.9 million versus $426.3 million, mainly due to a larger increase in merchandise inventories and the timing of accrued liabilities and receivable collections.
How much capital has Ulta returned to shareholders and what remains authorized?
Ulta repurchased $285.8 million of common stock in the quarter, including excise tax. Approximately $816.5 million remained available under the $2.0 billion 2022 Share Repurchase Program.
Does the company have debt or liquidity concerns?
No borrowings were outstanding under the credit facility at April 29, 2023, and the company was in compliance with all loan covenants. Cash and cash equivalents totaled $636.4 million.
06—Continue