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    Ulta Beauty Inc (ULTA)

    CEO Change
    Board Change

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    Business Description

    Ulta Beauty is the largest specialty beauty retailer in the United States, offering a wide range of products and services through over 1,400 stores and digital platforms . The company sells cosmetics, fragrance, skincare, haircare products, and provides salon services, featuring approximately 25,000 products from about 600 established and emerging beauty brands, covering mass to prestige price points . Ulta Beauty also operates full-service salons in nearly every store, offering hair, skin, and brow services .

    1. Cosmetics - Offers a diverse range of makeup products from various brands, catering to different price points and consumer preferences.
    2. Skincare - Provides a wide selection of skincare products, including cleansers, moisturizers, and treatments from both established and emerging brands.
    3. Haircare Products and Styling Tools - Sells shampoos, conditioners, styling products, and tools designed for various hair types and styling needs.
    4. Fragrance and Bath - Features a variety of perfumes, colognes, and bath products, appealing to a broad spectrum of scent preferences.
    5. Services - Operates full-service salons offering hair, skin, and brow services to enhance customer beauty experiences.
    6. Accessories and Other - Includes beauty accessories and miscellaneous products that complement the main product lines.

    Q3 2025 Summary

    Initial Price$345.64August 2, 2024
    Final Price$377.65November 2, 2024
    Price Change$32.01
    % Change+9.26%

    What went well

    • Strong Loyalty Program Growth and Member Engagement: Ulta Beauty's loyalty program grew by 5% in active members during the quarter, driven by attracting new members, reactivating lapsed members, and improving existing member retention. High engagement and spending from their platinum and diamond members, who are their top customers, demonstrate robust customer loyalty.
    • Improved Performance Through Strategic Adjustments and Exciting Collaborations: The company achieved sequential improvement in Q3 performance, attributed to effective promotional strategies, new brand launches like ILIA, and exciting collaborations such as Wicked and Mini Brands, which drove guest engagement and sales. Adjustments in promotional strategies made their efforts more effective, contributing to better-than-expected sales and profitability.
    • Confidence in Long-Term Growth Drivers and Strategic Investments: Ulta Beauty is focusing on four key pillars—assortment, experience, access, and loyalty—to drive long-term growth. The company remains confident in reinforcing its market position and delivering stronger performance, planning strategic investments to reaccelerate growth, while ensuring an operating margin of at least above 11%.

    What went wrong

    • Ulta Beauty is facing significant competitive pressures, with over 1,000 new points of distribution in prestige beauty opening over the last couple of years, affecting 80% of their stores, and more than half experiencing multiple competitive openings, leading to meaningful disruption and uncertainty about when these pressures will abate. [10] [12]
    • The company is experiencing gross margin pressure and expects gross margin deleverage to continue, driven by an intensely competitive environment, increased promotions, and unfavorable category mix, which could impact profitability. [11]
    • Ulta Beauty expects Q4 comp sales to decline in the low single-digit range, and views 2024 and 2025 as transitional periods, anticipating further investments that may pressure operating margins, potentially impacting near-term earnings growth. [14]

    Q&A Summary

    1. Gross Margin Outlook
      Q: Can you quantify gross margin pressures and outlook?
      A: Paula explained that they continue to expect gross margin deleverage for the full year and into Q4, reflecting top-line expectations in a competitive environment. Headwinds include deleverage from fixed costs and merchandise margin pressure due to promotions and category mix, while lower transportation costs provide some offsets.

    2. 2025 Operating Margin Guidance
      Q: Has this quarter changed your 2025 margin outlook?
      A: Paula stated that they maintain the same directional guidance provided at the Investor Day. They expect 2024 and 2025 to be transitional periods with investments to reaccelerate growth, aiming to deliver operating margins at least above 11%.

    3. Competitive Pressures and Headwinds
      Q: Can you quantify the drag from new competition and when it will ease?
      A: David acknowledged over 1,000 new points of distribution in prestige beauty, impacting 80% of their stores, with more than half experiencing multiple openings. While improvements were seen in Q3, they're still navigating these dynamics and have more work ahead.

    4. Drivers of Q3 Improvement
      Q: What drove the sequential performance improvement?
      A: David attributed the improvement to a combination of factors: introducing newness like brands such as ILIA, successful collaborations, more effective promotions including tentpole events like 21 Days of Beauty, and operational enhancements that improved conversion both in-store and online.

    5. Prestige Makeup Performance
      Q: How did prestige makeup perform and what's the innovation pipeline?
      A: Prestige makeup was flat for the quarter, showing improvement from prior trends. The overall category grew in low single digits, so they faced some share pressure but saw improvement from Q2. Innovation includes launching brands like ILIA and focusing on core brands like Clinique and MAC.

    6. Mass Beauty Competitiveness
      Q: How is competition affecting your mass beauty business?
      A: David noted that mass beauty continues to perform in the mid-single-digit range. The mass makeup category is decelerating, but there's continued strength in mass skin care. Ulta remains focused on delivering a compelling assortment across price points and engaging guests in the mass segment.

    7. Holiday Season Outlook
      Q: Are you positive quarter-to-date, and how is the holiday shaping up?
      A: Paula mentioned that the holiday season is off to a solid start, with teams executing well. They're expecting Q4 comp sales to decline in the low single-digit range, considering the dynamic environment and factors like fewer shopping days.

    Guidance Changes

    **Quarterly guidance for Q4 (from the most recent issued period Q3 2025) **

    • Comparable sales: decline in the low single-digit range (no prior guidance)
    • Operating margin: 11.6% to 12.4% (no prior guidance)

    **Annual guidance for FY 2024 (from the most recent issued period Q3 2025) **

    • Net sales: $11.1B to $11.2B (raised from $11.0B to $11.2B )
    • Comparable sales growth: negative 1% to flat (raised from down 2% to flat )
    • Operating margin: 12.9% to 13.1% (raised from 12.7% to 13.0% )
    • Diluted EPS: $23.20 to $23.75 (raised from $22.60 to $23.50 )
    • Capital expenditures: $400M to $425M (lowered from $400M to $450M )
    • New store openings: 60 to 65 net new stores; remodel or relocate 40 to 45 stores (no prior guidance)

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    David C. KimbellChief Executive Officer and Member of the Board of DirectorsJune 2021David C. Kimbell has been the Chief Executive Officer of Ulta Beauty since June 2021. Prior to this role, he served as the company's President from December 2019 to June 2021, and as Chief Merchandising and Marketing Officer from March 2015 to December 2019. He also held the position of Chief Marketing Officer from February 2014 to March 2015. Before joining Ulta Beauty, Mr. Kimbell was the Chief Marketing Officer and Executive Vice President at U.S. Cellular, and he has held various marketing roles at Seventh Generation, PepsiCo, and The Procter and Gamble Company .
    Kecia L. SteelmanPresident and Chief Operating OfficerSeptember 2023Kecia L. Steelman was named President and Chief Operating Officer of Ulta Beauty in September 2023. She has been serving as the Chief Operating Officer since June 2021. Prior to her current roles, she was the Chief Store Operations Officer from September 2015 and Senior Vice President of Store Operations since July 2014. Before joining Ulta Beauty, Steelman held various positions at Family Dollar Stores and The Home Depot Corporation, and she began her career at Target Corporation .
    Scott M. SetterstenChief Financial Officer, Treasurer, and Assistant SecretaryMarch 2013Scott M. Settersten has been serving as the Chief Financial Officer, Treasurer, and Assistant Secretary at Ulta Beauty since March 2013. Before this role, he was the Acting Chief Financial Officer and Assistant Secretary starting in October 2012. He joined Ulta Beauty in January 2005 as a Director of Financial Reporting and later became Vice President of Accounting in 2010. Prior to his tenure at Ulta Beauty, Mr. Settersten spent 15 years with PricewaterhouseCoopers LLP, where he held various senior manager roles in the assurance and risk management practices .
    Jodi J. CaroGeneral Counsel, Chief Risk & Compliance Officer, and Corporate SecretaryAugust 2015Jodi J. Caro was named General Counsel, Chief Risk & Compliance Officer, and Corporate Secretary at Ulta Beauty in August 2015. She oversees the company's Legal, Risk & Governance Services team, delivering legal, governance, compliance, risk management, and environmental, health, and safety services. Additionally, she leads Ulta Beauty's Environmental, Social, and Governance efforts, including responsibility for the Ulta Beauty Charitable Foundation. Before joining Ulta Beauty, Ms. Caro was Vice President, General Counsel, and Secretary for Integrys Energy Group and held the role of Integrys' Chief Compliance and Ethics Officer. Prior to Integrys, she owned and operated her own law practice and was co-founder and General Counsel of Looking Glass Networks. She also served as an in-house attorney with MCI/WORLDCOM .
    Anita J. RyanChief Human Resources OfficerApril 2022Anita J. Ryan was named Chief Human Resources Officer at Ulta Beauty in April 2022. Before this role, she served as Senior Vice President of Human Resources since 2018 and Vice President of Human Resources since 2016. Ms. Ryan is responsible for Ulta Beauty's Human Resources strategy and innovation, overseeing the company's people success business partner team and centers of excellence in talent acquisition, associate care and support, leadership and organization development, diversity, equity, and inclusion, compliance, internal communications, and training for the enterprise. Prior to her career at Ulta Beauty, Ms. Ryan began her career in the grocery industry, where she held numerous operations leadership roles before transitioning to human resources .

    Questions to Ask Management

    1. Despite improved performance in Q3, your prestige skin care segment declined while mass skin care was flat; what specific strategies are you implementing to address the weakness in prestige skin care and stimulate growth in this critical category?

    2. You mentioned elevated competition, particularly in prestige beauty, with competitor store openings impacting your business; how confident are you in regaining market share, and what's your timeline for returning to market share gains?

    3. Given the decline in the makeup and hair care categories, both decreasing low single digits, what plans do you have to revitalize these segments and counteract the competitive pressures from mass and prestige retailers expanding their beauty offerings?

    4. Inventory increased by 1.9% to $2.4 billion, partly due to new store openings; with sales growth slowing, how are you managing inventory levels to avoid overstocking and potential markdown risks?

    5. With the fourth quarter expected to be impacted by a compressed holiday season and continued uncertainty around consumer demand, how are you adjusting your promotional strategies and operational plans to mitigate these risks and ensure a successful holiday performance?

    Share Repurchase Program

    Program DetailsProgram 1Program 2Program 3
    Approval DateMarch 2022 March 2024 October 2024
    End Date/DurationNo expiration No expiration No expiration
    Total additional amount$2.0 billion $2.0 billion $3.0 billion
    Remaining authorizationRevoked Revoked $2.9 billion
    DetailsRevoked by March 2024Revoked by October 2024Active as of Nov 2024

    Past Guidance

    Q3 2025 Earnings Call

    • Issued Period: Q3 2025
    • Guided Period: FY 2024
    • Guidance:
      1. Net Sales: $11.1 billion to $11.2 billion
      2. Comparable Sales Growth: Negative 1% to flat
      3. Operating Margin: 12.9% to 13.1%
      4. Diluted EPS: $23.20 to $23.75
      5. Capital Expenditures: $400 million to $425 million
      6. New Store Openings: 60 to 65 net new stores; remodel or relocate 40 to 45 stores
      7. Q4 Comparable Sales: Decline in the low single-digit range
      8. Q4 Operating Margin: 11.6% to 12.4% .

    Q2 2025 Earnings Call

    • Issued Period: Q2 2025
    • Guided Period: FY 2025
    • Guidance:
      1. Diluted EPS: $22.60 to $23.50 per share
      2. Net Sales: $11 billion to $11.2 billion
      3. Comparable Sales: Down 2% to flat
      4. Operating Margin: 12.7% to 13%
      5. Gross Margin: Deleverage by 70 to 90 basis points
      6. SG&A Expense: Increase in the mid-single-digit range
      7. Capital Expenditures: $400 million to $450 million
      8. Share Repurchases: $1 billion .

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2025
    • Guidance:
      1. Operating Margin: 13.7% to 14%
      2. SG&A Growth: Mid- to high single-digit range for the full year
      3. Gross Margin: Down modestly for the year
      4. Diluted EPS: $25.20 to $26 per share
      5. Stock Repurchase: $1 billion
      6. Net Sales: $11.5 billion to $11.6 billion
      7. Comp Sales Growth: 2% to 3%
      8. Capital Expenditures: Not explicitly guided; Q1 CapEx was $91 million
      9. Inventory: Increased 8.8% to $1.9 billion .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Net Sales: $11.7 billion to $11.8 billion
      2. Comparable Sales Growth: 4% to 5%
      3. Operating Margin: 14% to 14.3%
      4. SG&A Growth: High single-digit range
      5. Gross Margin: Down modestly
      6. Diluted EPS: $26.20 to $27 per share
      7. Capital Expenditures: $415 million to $490 million
      8. Depreciation: $275 million to $280 million .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Traditional department stores
    • Specialty stores
    • Grocery stores
    • Drug stores
    • Mass merchandisers
    • Online capabilities of national retailers and brands
    • Pure-play e-commerce companies
    • Online marketplaces
    • Chain salons
    • Independent salons

    Latest news

    Recent developments and announcements about ULTA.

    Corporate Leadership

      Board Change

      ·
      Jan 6, 2025, 9:29 PM

      Key Update: On January 6, 2025, Ulta Beauty announced that David C. Kimbell, the company's Chief Executive Officer, has retired from his position and the Board of Directors. Kecia L. Steelman, previously the President and Chief Operating Officer, has succeeded him as CEO and has also joined the Board of Directors effective immediately.

      Leadership Change

      ·
      Jan 6, 2025, 9:29 PM

      Dave Kimbell is retiring as CEO of Ulta Beauty after an 11-year tenure. Kecia Steelman will step up as the new President and CEO, effective January 6, 2025. Kimbell will remain as an advisor until June 28, 2025.

      CEO Change

      ·
      Jan 6, 2025, 9:29 PM

      Dave Kimbell, the CEO of Ulta Beauty, has announced his retirement after 11 years with the company. Kecia Steelman, who was the President and Chief Operating Officer, has been appointed as the new President and CEO, effective January 6, 2025. Kimbell will continue to serve as an advisor to the company until June 28, 2025.

    Financial Reporting

      Earnings Call

      ·
      Dec 6, 2024, 9:36 AM

      Ulta Beauty recently released its earnings call transcript for the third quarter of fiscal 2024. Here are the key points from the call:

      • Financial Performance: Ulta Beauty reported a 1.7% increase in net sales to $2.5 billion, with comparable sales rising by 0.6%. The diluted earnings per share (EPS) increased by 1.4% to $5.14. The company is navigating headwinds such as a dynamic consumer environment and elevated competition, particularly in prestige beauty, but is seeing benefits from actions taken to reinforce its market position .

      • Revenue and Profit: The company experienced growth in fragrance and skincare categories, with fragrance delivering high single-digit comp growth. However, there was a decline in prestige skincare, and mass skincare was flat. The makeup category saw a decrease in comp sales in the low single-digit range, primarily due to softness in mass makeup .

      • Management's Forward Guidance: Ulta Beauty has refined its sales and EPS guidance for fiscal 2024, expecting net sales between $11.1 billion and $11.2 billion, with comp sales growth between negative 1% and flat. The company plans to open approximately 60 to 65 net new stores and remodel or relocate 40 to 45 stores. Operating margin is expected to be between 12.9% and 13.1% of net sales .

      • Market Conditions and Strategic Initiatives: Ulta Beauty is focusing on strengthening its market position by enhancing its brand portfolio and expanding wellness offerings. The company launched new makeup and skincare brands during the third quarter and plans more brand launches in the fourth quarter .

      • Analyst Questions and Management Responses: Analysts inquired about the competitive landscape, particularly in the mass beauty segment, and the impact of new points of distribution in prestige beauty. Ulta Beauty acknowledged the competitive pressures but expressed confidence in its ability to recover and strengthen its market position over time .

      • Promotional Strategies: The company adjusted its promotional strategies to improve effectiveness, focusing on key events like 21 Days of Beauty and Fall Haul, which drove growth and engagement .

      Overall, Ulta Beauty is optimistic about its strategic initiatives and market position, despite the challenges in the current operating environment.

      For more detailed information, you can refer to the full earnings call transcript from December 5, 2024.

      Earnings Report

      ·
      Dec 5, 2024, 9:32 PM

      Ulta Beauty, Inc. has released its third quarter fiscal 2024 earnings results. Net sales for the quarter were $2.53 billion, a 1.7% increase from the $2.49 billion reported in the same quarter last year. Comparable sales increased by 0.6%, driven by a 0.5% increase in transactions and a 0.1% increase in average ticket .

      Net income for the quarter was $242.2 million, or $5.14 per diluted share, compared to $249.5 million, or $5.07 per diluted share, in the prior year .

      The company opened 28 new stores and closed two during the quarter, bringing the total to 1,437 stores .

      Significant trends affecting financial performance include a slight decrease in gross profit margin to 39.7% from 39.9% due to deleverage of store and supply chain fixed costs, and an increase in SG&A expenses to 27.0% of net sales from 26.6% due to strategic investments .

      Ulta Beauty's CEO, Dave Kimbell, noted that the company delivered better-than-expected sales and profitability, reflecting improved sales trends and strong financial discipline. The company remains focused on executing key initiatives to deliver in a dynamic environment .