01—Abstract
Summary
Summary of the 10-Q filed August 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported its second quarter of fiscal 2023 (13 weeks ended July 29, 2023) with net sales of $2.53 billiona, up $232.7 million or 10.1% from $2.30 billion a year earlier, driven by a comparable sales increase of 8.0%, strong new store performance, and higher other revenue.
Net income rose to $300.1 millionb from $295.7 million, and diluted earnings per share were $6.02 versus $5.70. Gross profit margin fell to 39.3% from 40.4%, reflecting lower merchandise margin, higher inventory shrink, and higher supply chain costs, while SG&A rose to 23.7% of net sales from 23.3%, driven by corporate overhead tied to strategic investments. For the 26 weeks ended July 29, 2023, net sales were $5.16 billion, up 11.2%, with comparable sales up 8.7%, and net income of $647.2 million compared with $627.1 million.
Operating cash flow was $428.8 millionc versus $540.7 million a year earlier, mainly due to the timing of payables and accrued liabilities and a larger inventory build. Capital expenditures rose to $204.7 million from $120.5 million, and share repurchases totaled $559.0 million in cash flow terms during the period. Cash and cash equivalents ended the quarter at $388.6 million, and the company had no borrowings outstanding under its $1.0 billion revolving credit facility, which matures March 11, 2025.
The company operated 1,362 stores across 50 states as of July 29, 2023, up from 1,325 a year earlier, and management reported no material changes to risk factors from its fiscal 2022 Form 10-K. The 2022 Share Repurchase Program authorizes up to $2.0 billiond of common stock repurchases, and $540.956 million remained available under it at quarter end.
02—Key points
Key Highlights
- Net sales of $2,529.8 million in the 13 weeks ended July 29, 2023, up 10.1% from $2,297.1 million, with comparable sales up 8.0%.
- Net income of $300.1 million for the quarter, versus $295.7 million, and diluted EPS of $6.02 versus $5.70.
- Gross profit margin declined to 39.3% from 40.4%, due to lower merchandise margin, higher inventory shrink and higher supply chain costs.
- SG&A expenses rose 12.4% to $600.7 million, or 23.7% of net sales, reflecting corporate overhead from strategic investments.
- Store count reached 1,362 across 50 states, up from 1,325 a year earlier.
- Operating cash flow for the first 26 weeks fell to $428.8 million from $540.7 million, while capital expenditures increased to $204.7 million from $120.5 million.
- No borrowings outstanding under the $1.0 billion revolving credit facility, and $540.956 million remained available under the 2022 share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Ulta Beauty kept $0.12.
- Revenue$2.53B100.0%
- Cost of revenue−$1.54B60.7%
- Gross profit$993.6M39.3%
- Operating costs−$602.0M23.8%
- Operating income$391.6M15.5%
- Interest, other & tax−$91.5M3.6%
- Net income$300.1M11.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 24, 2023Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $2.53B$2.30B | +10.1% |
| Cost of Revenue | $1.54B$1.37B | +12.2% |
| Gross Profit | $993.61M$928.16M | +7.1% |
| SG&A Expenses | $600.69M$534.46M | +12.4% |
| Operating Income | $391.64M$391.43M | +0.1% |
| Net Income | $300.10M$295.68M | +1.5% |
| EPS (Basic) | $6.05$5.73 | +5.6% |
| EPS (Diluted) | $6.02$5.70 | +5.6% |
| Shares Outstanding (Basic) | 49.62M51.61M | −3.9% |
| Shares Outstanding (Diluted) | 49.85M51.90M | −4.0% |
05—Questions
Frequently Asked Questions
How did Ulta Beauty's sales and profitability trend in the second quarter of fiscal 2023?
Net sales rose 10.1% to $2.53 billion, led by a comparable sales increase of 8.0% and strong new store performance. Net income grew modestly to $300.1 million, but gross margin contracted to 39.3% from 40.4%, and SG&A rose to 23.7% of net sales.
What drove the decline in gross margin?
The filing attributes the decline primarily to lower merchandise margin, higher inventory shrink, and higher supply chain costs, partially offset by strong growth in other revenue and leverage of store fixed costs.
Why did operating cash flow decline year over year?
For the 26 weeks ended July 29, 2023, operating cash flow fell to $428.8 million from $540.7 million, mainly due to the timing of accounts payable and accrued liabilities, a larger increase in merchandise inventories, and the timing of receivable collections.
How is the company returning capital and managing its debt?
Cash paid for share repurchases totaled $559.0 million for the 26 weeks, under a $2.0 billion authorization with $540.956 million still available at quarter end. The company had no borrowings outstanding under its credit facility and was in compliance with all covenants.
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