Ulta Beauty, Inc. [ULTA] Filings

10-Q 1 ulta-20241102x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended November 2, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _____________

Commission File Number: 001-33764

ULTA BEAUTY, INC.

(Exact name of Registrant as specified in its charter)

incorporation or organization)

Identification No.)

Delaware

(State or other jurisdiction of
incorporation or organization)

38-4022268

(I.R.S. Employer
Identification No.)

1000 Remington Blvd., Suite 120

Bolingbrook, Illinois

(Address of principal executive offices)

60440

(Zip code)

Registrant’s telephone number, including area code: (630) 410-4800

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ULTA	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of December 2, 2024 was 46,372,538 shares.

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ULTA BEAUTY, INC.

TABLE OF CONTENTS


Part I - Financial Information

Item 1. Financial Statements
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Cash Flows		5
Consolidated Statements of Stockholders’ Equity		6
Notes to Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3. Quantitative and Qualitative Disclosures about Market Risk		24

Item 4. Controls and Procedures		25

Part II - Other Information		25

Item 1. Legal Proceedings		25

Item 1A. Risk Factors		25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25

Item 3. Defaults Upon Senior Securities		26

Item 4. Mine Safety Disclosures		26

Item 5. Other Information		26

Item 6. Exhibits		26

SIGNATURES		28

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Part I - Financial Information

Item 1.Financial Statements

Ulta Beauty, Inc.

Consolidated Balance Sheets


	November 2,		February 3,		October 28,
(In thousands, except per share data)	2024		2024		2023
Assets		(Unaudited)				(Unaudited)
Current assets:
Cash and cash equivalents	$	177,782	$	766,594	$	121,811
Receivables, net		213,621		207,939		202,868
Merchandise inventories, net		2,365,186		1,742,136		2,321,306
Prepaid expenses and other current assets		135,514		115,598		117,282
Prepaid income taxes		62,759		4,251		28,773
Total current assets		2,954,862		2,836,518		2,792,040

Property and equipment, net		1,264,419		1,182,335		1,117,874
Operating lease assets		1,619,055		1,574,530		1,578,316
Goodwill		10,870		10,870		10,870
Other intangible assets, net		281		510		591
Deferred compensation plan assets		48,872		43,516		38,371
Other long-term assets		60,127		58,732		56,946
Total assets	$	5,958,486	$	5,707,011	$	5,595,008

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	593,219	$	544,001	$	597,373
Accrued liabilities		333,463		382,468		405,443
Deferred revenue		405,040		436,591		350,937
Current operating lease liabilities		284,985		283,821		287,786
Accrued income taxes		—		11,310		—
Short-term debt		199,700		—		195,400
Total current liabilities		1,816,407		1,658,191		1,836,939

Non-current operating lease liabilities		1,656,317		1,627,271		1,616,747
Deferred income taxes		91,729		85,921		56,874
Other long-term liabilities		65,024		56,300		55,906
Total liabilities		3,629,477		3,427,683		3,566,466

Commitments and contingencies (Note 6)

Stockholders' equity:
Common stock, $0.01 par value, 400,000 shares authorized; 47,412, 49,123, and 49,458 shares issued; 46,569, 48,324, and 48,659 shares outstanding; at November 2, 2024 (unaudited), February 3, 2024, and October 28, 2023 (unaudited), respectively		474		491		495
Treasury stock-common, at cost		(106,598)		(83,032)		(82,798)
Additional paid-in capital		1,104,952		1,075,104		1,058,969
Retained earnings		1,330,181		1,286,765		1,051,876
Total stockholders’ equity		2,329,009		2,279,328		2,028,542
Total liabilities and stockholders’ equity	$	5,958,486	$	5,707,011	$	5,595,008

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Income

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
	November 2,		October 28,		November 2,		October 28,
(In thousands, except per share data)	2024		2023		2024		2023
Net sales	$	2,530,100	$	2,488,933	$	7,808,035	$	7,653,005
Cost of sales		1,524,456		1,496,866		4,754,434		4,612,469
Gross profit		1,005,644		992,067		3,053,601		3,040,536

Selling, general and administrative expenses		682,259		661,380		1,992,993		1,874,201
Pre-opening expenses		4,883		3,460		11,957		5,396
Operating income		318,502		327,227		1,048,651		1,160,939
Interest income, net		(1,674)		(2,497)		(13,100)		(14,294)
Income before income taxes		320,176		329,724		1,061,751		1,175,233
Income tax expense		77,997		80,241		253,903		278,597
Net income	$	242,179	$	249,483	$	807,848	$	896,636

Net income per common share:
Basic	$	5.16	$	5.09	$	17.00	$	18.08
Diluted	$	5.14	$	5.07	$	16.93	$	17.99

Weighted average common shares outstanding:
Basic		46,928		49,007		47,519		49,592
Diluted		47,092		49,226		47,710		49,846

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	39 Weeks Ended
	November 2,		October 28,
(In thousands)	2024		2023
Operating activities
Net income	$	807,848	$	896,636
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		197,075		181,273
Non-cash lease expense		235,950		232,772
Deferred income taxes		5,808		1,528
Stock-based compensation expense		27,691		33,477
Loss on disposal of property and equipment		7,280		6,310
Change in operating assets and liabilities:
Receivables		(5,682)		(3,446)
Merchandise inventories		(623,050)		(717,855)
Prepaid expenses and other current assets		(19,916)		12,964
Income taxes		(69,818)		9,535
Accounts payable		54,210		41,817
Accrued liabilities		(45,777)		(34,955)
Deferred revenue		(31,551)		(43,740)
Operating lease liabilities		(250,267)		(248,469)
Other assets and liabilities		12,240		(9,836)
Net cash provided by operating activities		302,041		358,011

Investing activities
Capital expenditures		(300,536)		(311,030)
Other investments		(6,108)		(4,870)
Net cash used in investing activities		(306,644)		(315,900)

Financing activities
Borrowings from credit facility		199,700		195,400
Repurchase of common shares		(765,384)		(840,551)
Stock options exercised		9,200		9,302
Purchase of treasury shares		(23,566)		(22,328)
Debt issuance costs		(4,159)		—
Net cash used in financing activities		(584,209)		(658,177)

Net decrease in cash and cash equivalents		(588,812)		(616,066)
Cash and cash equivalents at beginning of period		766,594		737,877
Cash and cash equivalents at end of period	$	177,782	$	121,811

Supplemental information
Income taxes paid, net of refunds	$	316,790	$	266,802
Non-cash capital expenditures		47,431		53,936

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)


				Treasury -
	Common Stock			Common Stock			Additional				Total
	Issued			Treasury			Paid-In		Retained		Stockholders'
(In thousands)	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
Balance – February 3, 2024	49,123	$	491	(799)	$	(83,032)	$	1,075,104	$	1,286,765	$	2,279,328
Net income	—		—	—		—		—		313,113		313,113
Stock-based compensation	—		—	—		—		10,082		—		10,082
Stock options exercised and other awards	153		2	—		—		8,911		—		8,913
Purchase of treasury shares	—		—	(44)		(23,283)		—		—		(23,283)
Repurchase of common shares, including excise tax	(588)		(6)	—		—		(2,275)		(285,129)		(287,410)
Balance – May 4, 2024	48,688	$	487	(843)	$	(106,315)	$	1,091,822	$	1,314,749	$	2,300,743
Net income	—		—	—		—		—		252,556		252,556
Stock-based compensation	—		—	—		—		9,190		—		9,190
Stock options exercised and other awards	5		—	—		—		283		—		283
Purchase of treasury shares	—		—	—		(176)		—		—		(176)
Repurchase of common shares, including excise tax	(550)		(6)	—		—		(2,098)		(212,332)		(214,436)
Balance – August 3, 2024	48,143	$	481	(843)	$	(106,491)	$	1,099,197	$	1,354,973	$	2,348,160
Net income	—		—	—		—		—		242,179		242,179
Stock-based compensation	—		—	—		—		8,419		—		8,419
Stock options exercised and other awards	—		—	—		—		4		—		4
Purchase of treasury shares	—		—	—		(107)		—		—		(107)
Repurchase of common shares, including excise tax	(731)		(7)	—		—		(2,668)		(266,971)		(269,646)
Balance – November 2, 2024	47,412	$	474	(843)	$	(106,598)	$	1,104,952	$	1,330,181	$	2,329,009

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)


				Treasury -
	Common Stock			Common Stock			Additional				Total
	Issued			Treasury			Paid-In		Retained		Stockholders'
(In thousands)	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
Balance – January 28, 2023	51,120	$	511	(756)	$	(60,470)	$	1,023,997	$	995,773	$	1,959,811
Net income	—		—	—		—		—		347,051		347,051
Stock-based compensation	—		—	—		—		9,721		—		9,721
Stock options exercised and other awards	150		1	—		—		8,926		—		8,927
Purchase of treasury shares	—		—	(41)		(21,659)		—		—		(21,659)
Repurchase of common shares, including excise tax	(541)		(5)	—		—		(2,266)		(283,512)		(285,783)
Balance – April 29, 2023	50,729	$	507	(797)	$	(82,129)	$	1,040,378	$	1,059,312	$	2,018,068
Net income	—		—	—		—		—		300,102		300,102
Stock-based compensation	—		—	—		—		11,818		—		11,818
Stock options exercised and other awards	4		—	—		—		220		—		220
Purchase of treasury shares	—		—	(1)		(100)		—		—		(100)
Repurchase of common shares, including excise tax	(594)		(6)	—		—		(2,737)		(275,488)		(278,231)
Balance – July 29, 2023	50,139	$	501	(798)	$	(82,229)	$	1,049,679	$	1,083,926	$	2,051,877
Net income	—		—	—		—		—		249,483		249,483
Stock-based compensation	—		—	—		—		11,938		—		11,938
Stock options exercised and other awards	5		1	—		—		154		—		155
Purchase of treasury shares	—		—	(1)		(569)		—		—		(569)
Repurchase of common shares, including excise tax	(686)		(7)	—		—		(2,802)		(281,533)		(284,342)
Balance – October 28, 2023	49,458	$	495	(799)	$	(82,798)	$	1,058,969	$	1,051,876	$	2,028,542

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share and store count data) (Unaudited)

1.Business and basis of presentation

Ulta Beauty, Inc. was founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services. Nearly every store features a full-service salon. As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc. and its consolidated subsidiaries.

As of November 2, 2024, the Company operated 1,437 stores across 50 states, as shown in the table below.


	Number of		Number of
Location	stores	Location	stores
Alabama	27	Montana	6
Alaska	3	Nebraska	5
Arizona	38	Nevada	16
Arkansas	11	New Hampshire	8
California	172	New Jersey	46
Colorado	27	New Mexico	7
Connecticut	21	New York	57
Delaware	4	North Carolina	47
Florida	101	North Dakota	4
Georgia	44	Ohio	48
Hawaii	4	Oklahoma	23
Idaho	10	Oregon	21
Illinois	56	Pennsylvania	46
Indiana	26	Rhode Island	5
Iowa	12	South Carolina	27
Kansas	14	South Dakota	3
Kentucky	16	Tennessee	34
Louisiana	18	Texas	138
Maine	3	Utah	17
Maryland	29	Vermont	1
Massachusetts	27	Virginia	36
Michigan	50	Washington	37
Minnesota	21	West Virginia	7
Mississippi	12	Wisconsin	22
Missouri	26	Wyoming	4
		Total	1,437

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X. These financial statements were prepared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

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The Company’s business is subject to seasonal fluctuation, with significant portions of net sales and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season. The results for the 13 and 39 weeks ended November 2, 2024 are not necessarily indicative of the results to be expected for the fiscal year ending February 1, 2025, or for any other future interim period or for any future year.

These unaudited interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended February 3, 2024. All amounts are stated in thousands, with the exception of per share amounts and number of stores.

2.Summary of significant accounting policies

Information regarding significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Annual Report on Form 10-K for the year ended February 3, 2024. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” in the Annual Report.

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The third quarter in fiscal 2024 and 2023 ended on November 2, 2024 and October 28, 2023, respectively.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. Actual results could differ from those estimates. The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and right-of-use assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recent accounting pronouncements not yet adopted

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. The guidance updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The ASU is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07 on related disclosures.

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024 and should be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on related disclosures.

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Securities and Exchange Commission (SEC) Climate-Related Disclosures

In March 2024, the SEC adopted rules intended to enhance and standardize climate-related disclosures in registration statements and annual reports. The new rules will require disclosure of material climate-related risks, including disclosure of Board of Directors' oversight and risk management activities, the material impacts of these risks to us and the quantification of material impacts to us as a result of severe weather events and other natural conditions. The rules also require disclosure of material greenhouse gas emissions and any material climate-related targets and goals. The new rules will be effective for annual reporting periods beginning in fiscal year 2025, except for the greenhouse gas emissions disclosures which will be effective for annual reporting periods beginning in fiscal year 2026. However the new rules have been stayed by the federal courts and, as a result, the SEC has indefinitely delayed their effectiveness. The Company is currently evaluating the impact of these new rules.

Income Statement – Reporting Comprehensive Income (Topic 220-40): Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income (Topic 220-40): Expense Disaggregation Disclosures. This update requires, among other things, more detailed disclosure about types of expenses in commonly presented expense captions such as cost of sales and SG&A and is intended to improve the disclosures about an entity’s expenses including purchases of inventory, employee compensation, depreciation, and amortization. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of adopting ASU 2024-03 on the consolidated financial statements and disclosures.

3.Revenue

Net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue. Other revenue includes the private label and co-branded credit card programs, royalties derived from the partnership with Target Corporation, and deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

The following table sets forth the approximate percentage of net sales by primary category:


	13 Weeks Ended		39 Weeks Ended
	November 2,	October 28,	November 2,	October 28,
(Percentage of net sales)	2024	2023	2024	2023
Cosmetics	41%	42%	41%	42%
Skincare	23%	22%	24%	22%
Haircare	20%	21%	19%	21%
Fragrance	10%	9%	10%	9%
Services	4%	4%	4%	4%
Other	2%	2%	2%	2%
	100%	100%	100%	100%

Certain sales departments were reclassified between categories in the prior year to conform to current year presentation, including moving the bath category from Fragrance to Skincare.

Deferred revenue

Deferred revenue primarily represents contract liabilities for the obligation to transfer additional goods or services to a guest for which the Company has received consideration, such as unredeemed Ulta Beauty Rewards loyalty points and unredeemed Ulta Beauty gift cards. In addition, breakage on gift cards is recognized proportionately as redemption occurs.

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The following table provides a summary of the changes included in deferred revenue during the 13 and 39 weeks ended November 2, 2024 and October 28, 2023:

13 Weeks Ended

39 Weeks Ended

November 2,

October 28,

November 2,

October 28,

(In thousands)

2024

2023

2024

2023

Beginning balance

387,817

346,067

428,788

388,583

Additions to contract liabilities (1)