01—Abstract
Summary
Summary of the 10-Q filed November 30, 2023. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported its Form 10-Q for the 13 and 39 weeks ended October 28, 2023.
For the third quarter, net sales rose to $2.49 billiona from $2.34 billion, and comparable sales increased 4.5%, driven by a 5.9% increase in transactions and a 1.4% decrease in average ticket. Net income declined to $249.5 million from $274.6 million, primarily because SG&A expenses increased $64.2 million, partly offset by a $29.3 million increase in gross profit. Gross margin fell to 39.9% from 41.2%, citing lower merchandise margin, higher inventory shrink, and higher supply chain costs.
For the 39 weeks, net sales reached $7.65 billionb, up from $6.98 billion, with comparable sales up 7.3%. Net income was $896.6 million versus $901.7 million a year earlier, and diluted EPS was $17.99 compared with $17.35. Operating cash flow was $358.0 million, down from $573.4 million, mainly due to a $717.9 million increase in merchandise inventories.
Cash and cash equivalents fell to $121.8 millionc, while $195.4 million was drawn on the credit facility at a weighted average rate of 8.21%. The company repurchased $848.4 million of common stock during the 39 weeks under its $2.0 billion authorization, leaving $259.4 million available as of October 28, 2023.
The filing states that the company operated 1,374 stores and that there have been no material changes to the risk factors in its Form 10-K for the year ended January 28, 2023. Management concluded that disclosure controls and procedures were effective.
02—Key points
Key Highlights
- Third-quarter net sales increased to $2,488.9 million from $2,338.8 million, with comparable sales up 4.5%.
- Third-quarter gross margin declined to 39.9% from 41.2%, reflecting lower merchandise margin, higher inventory shrink, and higher supply chain costs.
- Third-quarter SG&A expenses rose to $661.4 million from $597.2 million, or 26.6% of net sales versus 25.5%, due to strategic investments, store costs, and marketing.
- Third-quarter net income was $249.5 million versus $274.6 million, with diluted EPS of $5.07 compared with $5.34.
- Inventories were $2.32 billion at October 28, 2023, up from $2.11 billion a year earlier, while cash fell to $121.8 million.
- The company borrowed $195.4 million under its credit facility, which matures March 11, 2025; it was in covenant compliance at quarter end.
- During the 39 weeks, the company repurchased $848.4 million of shares and operated 1,374 stores at quarter end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Ulta Beauty kept $0.10.
- Revenue$2.49B100.0%
- Cost of revenue−$1.50B60.1%
- Gross profit$992.1M39.9%
- Operating costs−$664.8M26.7%
- Operating income$327.2M13.1%
- Interest, other & tax−$77.7M3.1%
- Net income$249.5M10.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 30, 2023Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $2.49B$2.34B | +6.4% |
| Cost of Revenue | $1.50B$1.38B | +8.8% |
| Gross Profit | $992.07M$962.82M | +3.0% |
| SG&A Expenses | $661.38M$597.16M | +10.8% |
| Operating Income | $327.23M$361.86M | −9.6% |
| Net Income | $249.48M$274.58M | −9.1% |
| EPS (Basic) | $5.09$5.37 | −5.2% |
| EPS (Diluted) | $5.07$5.34 | −5.1% |
| Shares Outstanding (Basic) | 49.01M51.13M | −4.2% |
| Shares Outstanding (Diluted) | 49.23M51.42M | −4.3% |
05—Questions
Frequently Asked Questions
How did Ulta Beauty perform in the third quarter of fiscal 2023?
Net sales rose 6.4% to $2.49 billion, and comparable sales increased 4.5%. Net income declined to $249.5 million from $274.6 million, mainly because SG&A expenses grew faster than gross profit.
Why did gross margin decline?
The filing attributes the decline in gross profit margin to lower merchandise margin, higher inventory shrink, and higher supply chain costs, partially offset by strong growth in other revenue.
Why did operating cash flow decrease?
Net cash provided by operating activities fell to $358.0 million from $573.4 million for the 39 weeks, mainly due to a larger increase in merchandise inventories, along with timing of accrued liabilities, accounts payable, and receivable collections.
How is the company funding share repurchases and its balance sheet?
The company used operating cash flow and $195.4 million of credit facility borrowings. Cash and cash equivalents were $121.8 million at quarter end, and $259.4 million remained available under the $2.0 billion repurchase authorization.
What did management say about the outlook and risks?
The filing states the company's long-term growth strategy includes supporting a 1,500 to 1,700 store chain in the U.S. It also lists macroeconomic pressures such as inflation and rising interest rates, and says there have been no material changes to risk factors from the fiscal 2022 Form 10-K.
06—Continue