01—Abstract
Summary
Summary of the 10-Q filed August 29, 2024. Cited figures are marked; the original filing is the authoritative source.
Ulta Beauty, Inc. reported its second quarter of fiscal 2024 (13 weeks ended August 3, 2024) with net sales of $2.55 billiona, up $22.3 million, or 0.9%, from $2.53 billion a year earlier.
Comparable sales declined 1.2%, driven by a 1.8% decrease in transactions partly offset by a 0.6% increase in average ticket. Gross profit fell $15.4 millionb, or 1.6%, to $978.2 million, and gross margin compressed to 38.3% from 39.3%, reflecting lower merchandise margins and store fixed-cost deleverage. SG&A rose $44.1 million, or 7.3%, to $644.8 million, pushing operating income down to $329.2 million from $391.6 million and net income to $252.6 million from $300.1 million.
For the 26 weeks, net sales rose 2.2% to $5.3 billionc and comparable sales increased 0.2%, but net income declined to $565.7 million from $647.2 million, as SG&A growth of $97.9 million outpaced sales gains. Management attributed the SG&A increase to strategic investments in corporate overhead, store payroll, and marketing. The company ended the period with $414.0 million in cash, no borrowings under its credit facility, and merchandise inventories of $2.0 billion, up 10.1% from a year earlier.
Cash flow remained sizable, with operating cash flow of $358.9 milliond for the first 26 weeks, against $186.3 million in capital expenditures. Ulta repurchased $501.8 million of common stock in the period, and $1.6 billion remained under its 2024 $2.0 billion repurchase authorization. The company operated 1,411 stores as of August 3, 2024, and management stated that macroeconomic and inflationary pressures may continue to weigh on consumer spending.
02—Key points
Key Highlights
- Net sales of $2.55 billion for the 13 weeks ended August 3, 2024, up 0.9% year over year, with comparable sales down 1.2%.
- Gross margin declined to 38.3% from 39.3%, driven by lower merchandise margins and deleverage of store fixed costs.
- SG&A expenses rose 7.3% to $644.8 million, reaching 25.3% of net sales versus 23.7% a year earlier, primarily from strategic investments and store payroll.
- Quarterly net income fell to $252.6 million from $300.1 million; diluted EPS was $5.30 versus $6.02.
- Year-to-date operating cash flow was $358.9 million versus $428.8 million, with capital expenditures of $186.3 million.
- The company repurchased $501.8 million of common stock in the first 26 weeks and had $1.6 billion remaining under its 2024 repurchase program.
- No borrowings were outstanding under the $800.0 million revolving credit facility, and the company operated 1,411 stores at period end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Ulta Beauty kept $0.10.
- Revenue$2.55B100.0%
- Cost of revenue−$1.57B61.7%
- Gross profit$978.2M38.3%
- Operating costs−$649.0M25.4%
- Operating income$329.2M12.9%
- Interest, other & tax−$76.6M3.0%
- Net income$252.6M9.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed August 29, 2024Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $2.55B$2.53B | +0.9% |
| Cost of Revenue | $1.57B$1.54B | +2.5% |
| Gross Profit | $978.18M$993.61M | −1.6% |
| SG&A Expenses | $644.82M$600.69M | +7.3% |
| Operating Income | $329.20M$391.64M | −15.9% |
| Net Income | $252.56M$300.10M | −15.8% |
| EPS (Basic) | $5.32$6.05 | −12.1% |
| EPS (Diluted) | $5.30$6.02 | −12.0% |
| Shares Outstanding (Basic) | 47.51M49.62M | −4.3% |
| Shares Outstanding (Diluted) | 47.67M49.85M | −4.4% |
05—Questions
Frequently Asked Questions
How did Ulta Beauty's sales perform in the second quarter of fiscal 2024?
Net sales rose $22.3 million, or 0.9%, to $2.55 billion, mainly from new store contributions and a $5.7 million increase in other revenue. Comparable sales decreased 1.2%, driven by an 1.8% decrease in transactions partly offset by a 0.6% increase in average ticket.
Why did profitability decline in the quarter?
Gross profit fell $15.4 million, or 1.6%, as gross margin dropped to 38.3% from 39.3% due to lower merchandise margins and store fixed-cost deleverage. SG&A expenses also increased $44.1 million, or 7.3%, primarily from store payroll, corporate overhead tied to strategic investments, store expenses, and marketing, partly offset by lower incentive compensation.
What is the company's liquidity position?
As of August 3, 2024, Ulta held $414.0 million in cash and cash equivalents and had no borrowings outstanding under its credit facility. The company stated it believes its primary sources of liquidity will satisfy its cash requirements over the next twelve months and the long term.
How is Ulta returning capital to shareholders?
In the first 26 weeks, the company repurchased shares totaling $501.8 million, including excise tax. The 2024 Share Repurchase Program authorizes up to $2.0 billion, of which $1.6 billion remained available as of August 3, 2024. The program has no expiration date and may be suspended or discontinued at any time.
What risks did management highlight?
Management cited persistent inflationary and macroeconomic pressures that may be weighing on consumer spending and could lead to a recession. The filing also noted there were no material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended February 3, 2024.
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