On Thursday after the bell, the largest beauty retailer in America and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products and salon services, Ulta Beauty (NASDAQ: ULTA), reported outstanding Q1 results of $1.45 EPS which beat consensus estimates of $1.29, and revenue of $1.07B (+23.3% Year to Year) that beat analysts’ expectations of $967M. Ulta is looking to open at a new 52-week high by tomorrow morning.
Highlights of Q1
- Comparable sales increased 15.2% year to year. The 15.2% same store sales increase was driven by 11.0% growth in traffic and 4.2% growth in average ticket.
- Retail comparable sales increased 13.9%, including salon comparable sales growth of 7.7%;
- Salon sales increased 14.7% year to year.
- E-commerce sales grew 38.8% year to year.
- Gross profit increased 150 basis points to 36.4%, due to leverage in fixed store costs and increased merchandise margins.
- Selling, general and administrative expense as a percentage of net sales increased 20 basis points to 22.4%.
- Pre-opening expenses were $2.5 million, compared to $3.1 million in the Q1 of fiscal 2015. Real estate activity in the first quarter of fiscal 2016 included 13 new stores compared to 24 new stores and one relocation in Q1 of 2015;
- Operating income increased 36.8% to $147.2 million, or 13.7% of net sales
- Tax rate decreased to 37.6% compared to 38.0% of Q1 2015.
- Net income increased 37.4% year to year.
Share Repurchase Program
In March, the Company repurchased 157,765 shares of its own stock at a cost of $26.7 million under its 10b5-1 plan during Q1, and the Company entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. to repurchase $200.0 million of its common stock. Under the agreement, the Company paid $200.0 million and received initial delivery of 851,653 shares in Q1, which represents 80% of the total shares the Company expects to receive based on the market price at the time of the initial delivery. The final number of shares delivered upon settlement of the agreement will be determined with reference to the average price of the Company’s common stock over the term of the agreement. As of April 30, 2016, approximately $219 million remained available under the $425 million share repurchase program announced in March.
During Q1 2016, the Company established 13 stores located in Dover, DE; Eldersburg, MD; Morgantown, WV; Muskogee, OK; Orlando, FL; San Clemente, CA; Sarasota, FL; Suffolk, VA; Tucson, AZ; Warren, MI; Washington, D.C.; Waxahachie, TX and Wooster, OH. In addition, the Company closed one store. The Company ended the first quarter with 886 stores and square footage of 9,348,577 which represents an 11% increase in square footage compared to Q1 2015.
Ulta Beauty currently expects net sales in the range of $1,041 million to $1,058 million, compared to actual net sales of $877.0 million in the second quarter of fiscal 2015. Comparable sales for the second quarter of 2016, including e-commerce sales, are expected to increase 11% to 13%. The Company reported a comparable sales increase of 10.1% in the second quarter of 2015.
Consensus EPS estimate of $1.32 to $1.37 for their next quarter. This is compared to the company's previous second quarter of fiscal 2015 of $1.15.
The Company is raising its previously announced fiscal 2016 sales and earnings per share guidance. The Company plans to:
- achieve comparable sales growth of approximately 10% to 12%, including the impact of the e-commerce business, compared to previous guidance of 8% to 10%;
- increase total sales in the high teens percentage range, compared to previous guidance of mid to high teens percentage range;
- grow e-commerce sales in the 40% range;
- expand square footage by approximately 11% with the opening of 100 net new stores;
- remodel 12 locations;
- deliver earnings per share growth in the low twenties percentage range, compared to previous guidance of 18% to 20%, including the impact of the new Dallas distribution center, the accelerated rollout of prestige brand boutiques, the accelerated share repurchase program, and continued open market share repurchases; and
- Incur capital expenditures in the $390 million range in fiscal 2016, compared to $299 million in fiscal 2015. The planned increase in capital expenditures includes approximately $80 million to fund an accelerated rollout of prestige brand boutiques and enhancements to the Ulta Beauty Collection and fragrance fixtures in hundreds of stores.
“We are off to a phenomenal start to the year, delivering excellent top and bottom line growth in the first quarter,” said Mary Dillon, Chief Executive Officer. “Several positive factors are coming together to drive the momentum in our business, exemplified by the best comparable sales growth in our history as a public company. These include healthy consumer demand in the beauty category, our unique format and offering which are supporting sustained share gains, and effective collaboration across the enterprise to ensure strong execution of our growth strategies.”
Shares of ULTA up over $15 (+7%) after the bell during AH.