BOLINGBROOK, Ill - Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the fourteen-week period ('fourth quarter') and fifty-three-week period ('fiscal year') ended February 3, 2024, both of which contain one extra week ('53rd week') versus the comparable thirteen-week and fifty-two-week periods ended January 28, 2023.
Highlights:
* Net Sales of $3.6 Billion Compared to $3.2 Billion in the Year-Ago Quarter
* Comparable Sales Increased 2.5%
* Net Income of $394.4 Million or $8.08 Per Diluted Share
'We closed out a strong 2023 with better-than-expected fourth quarter financial performance. Our compelling holiday plans and thoughtfully curated assortment resonated with our guests and delivered healthy traffic, record brand awareness, and strong member growth. I am proud of how our teams drove these results while making meaningful progress on our multi-year, transformational investment agenda to enable new capabilities for future growth,' said Dave Kimbell, chief executive officer. 'We enter 2024 well-positioned to drive strong top and bottom-line growth, build on our foundational capabilities, and unlock further advantages of our differentiated model. While we are mindful the near-term macro environment remains dynamic, we are optimistic about the resiliency of the beauty category, energized by the growth opportunities ahead of us, and confident in our ability to deliver for our guests and our shareholders.'
Kimbell continued, 'International expansion represents an incremental, long-term opportunity for Ulta Beauty to extend our reach and leverage our differentiated value proposition. We have evaluated various operating models and partners, and geographies, and we are excited to announce the formation of a joint venture with Axo, a highly experienced operator of global brands, to launch and operate Ulta Beauty in Mexico in 2025.'
Fourth Quarter of Fiscal 2023 Compared to Fourth Quarter of Fiscal 2022
Net sales increased 10.2% to $3.6 billion compared to $3.2 billion, primarily due to increased comparable sales, strong new store performance, strong growth in other revenue, and the benefit of an extra week of sales in fiscal 2023. Net sales in the 53rd week were approximately $181.9 million.
Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 2.5% compared to an increase of 15.6%, driven by a 4.5% increase in transactions and a 1.9% decrease in average ticket.
Gross profit increased 10.6% to $1.3 billion compared to $1.2 billion. As a percentage of net sales, gross profit increased to 37.7% compared to 37.6%, primarily due to strong growth in other revenue, lower shipping rates, and leverage of supply chain costs, largely offset by lower merchandise margin.
Selling, general and administrative (SG&A) expenses increased 7.6% to $820.4 million compared to $762.7 million. As a percentage of net sales, SG&A expenses decreased to 23.1% compared to 23.6%, primarily due to lower incentive compensation and leverage of marketing expenses and store payroll and benefits, partially offset by deleverage of corporate overhead due to strategic investments and store expenses.
Operating income increased 15.5% to $517.1 million, or 14.5% of net sales, compared to $447.6 million, or 13.9% of net sales.
Net interest income decreased to $3.3 million compared to $4.4 million due to interest paid on borrowings during the quarter.
The tax rate decreased to 24.2% compared to 24.6% primarily due to benefits from a decrease in state income taxes.
Net income increased 15.7% to $394.4 million compared to $340.8 million.
Diluted earnings per share increased 21.0% to $8.08, including $0.46 due to the extra week of sales, compared to $6.68, including a $0.02 benefit due to income tax accounting for stock-based compensation.
Full Year of Fiscal 2023 Compared to Full Year of Fiscal 2022
Net sales increased 9.8% to $11.2 billion compared to $10.2 billion, primarily due to increased comparable sales, strong new store performance, strong growth in other revenue, and the benefit of the 53rd week of sales in fiscal 2023.
Comparable sales increased 5.7% compared to an increase of 15.6%, driven by a 7.4% increase in transactions and a 1.5% decrease in average ticket.
Gross profit increased 8.3% to $4.4 billion compared to $4.0 billion. As a percentage of net sales, gross profit decreased to 39.1% compared to 39.6%, primarily due to lower merchandise margin and higher inventory shrink, partially offset by strong growth in other revenue and leverage of store fixed costs.
SG&A expenses increased 12.5% to $2.7 billion compared to $2.4 billion. As a percentage of net sales, SG&A expenses increased to 24.0% compared to 23.5%, primarily due to higher corporate overhead due to strategic investments, higher store payroll and benefits, higher marketing expenses, and higher store expenses, partially offset by lower incentive compensation.
Operating income increased 2.4% to $1.7 billion, or 15.0% of net sales, compared to $1.6 billion, or 16.1% of net sales.
Net interest income increased to $17.6 million compared to $4.9 million, due to higher average interest rates on cash balances.
The tax rate decreased to 23.9% compared to 24.4%, primarily due to a decrease in state income taxes and benefits from income tax accounting for stock-based compensation.
Net income increased 3.9% to $1.3 billion compared to $1.2 billion.
Diluted earnings per share increased 8.4% to $26.03, including a $0.14 benefit due to income tax accounting for stock-based compensation and a $0.46 benefit due to the 53rd week, compared to $24.01, including a $0.07 benefit due to income tax accounting for stock-based compensation.
Balance Sheet
Cash and cash equivalents at the end of the fourth quarter of fiscal 2023 totaled $766.6 million.
Merchandise inventories, net at the end of the fourth quarter of fiscal 2023 increased 8.6% to $1.7 billion compared to $1.6 billion at the end of the fourth quarter of fiscal 2022. The increase was primarily due to inventory to support new brand launches, 30 net new stores, increase in distribution center inventory primarily due to the opening of the new market fulfillment center in Greer, SC, and product cost increases.
As previously announced, during the third quarter of fiscal 2023, the Company borrowed $195.4 million on its revolving credit facility to support ongoing capital allocation priorities, including share repurchases and capital expenditures, and merchandise inventory growth. During the fourth quarter of fiscal 2023, the Company repaid all amounts borrowed, together with interest due. At the end of the fourth quarter of fiscal 2023, the Company had no borrowings outstanding under the revolving credit facility.
On March 13, 2024, the Company entered into an Amendment No. 3 to its Second Amended and Restated Loan Agreement, which amended and restated the existing agreement. The new loan agreement extends the maturity of the facility to March 13, 2029, provides maximum revolving loans equal to the lesser of $800 million or a percentage of eligible owned inventory, contains a $50 million sub-facility for letters of credit and allows the Company to increase the revolving facility by an additional $200 million.
Share Repurchase Program
During the fourth quarter of fiscal 2023, the Company repurchased 352,005 shares of its common stock at a cost of $159.5 million. During fiscal 2023, the Company repurchased 2.2 million shares of its common stock at a cost of $1.0 billion. As of February 3, 2024, $99.9 million remained available under the $2.0 billion share repurchase program announced in March 2022.
Since 2014, Ulta Beauty has returned $5.8 billion to shareholders through its share repurchase program, while continuing to make strategic growth investments.
On March 12, 2024, the Company's board of directors approved a new share repurchase authorization of $2.0 billion, which replaces the prior authorization implemented in March 2022. Under the new program, as under the previous program, the Company may repurchase outstanding shares of the Company's common stock from time to time through accelerated share repurchases, privately negotiated transactions, or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934. The new program has no expiration date but may be terminated by the Board at any time.
Store Update
Real estate activity in the fourth quarter of fiscal 2023 included 13 new stores located in Anaheim, CA; Brea, CA; Brenham, TX; Dartmouth, MA; Glassboro, NJ; Goldsboro, NC; Hialeah, FL; Jacksonville, FL; Land O'Lakes, FL; Missouri City, TX; Orange, CT; Orlando, FL; and Venice, FL. In addition, the Company relocated two stores, remodeled two stores, and closed two stores. During fiscal 2023, the Company opened 33 new stores, relocated seven stores, remodeled 18 stores, and closed three stores.
At the end of the fourth quarter of fiscal 2023, the Company operated 1,385 stores totaling 14.5 million square feet.
Fiscal 2024 Outlook: See full release at
https://www.ulta.com/investor/news-events/press-releases/detail/180/ulta-beauty-announces-fourth-quarter-fiscal-2023-results
Investor Contact:
Kiley Rawlins, CFA
Vice President, Investor Relations
krawlins@ulta.com
Media Contact:
Crystal Carroll
Senior Director, Public Relations
ccarroll@ulta.com
Source: Ulta Beauty
ULTA BEAUTY, INC. 
