ULTA - Earnings call transcript Q3 2017

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Operator

Greetings and welcome to the Ulta Beauty Third Quarter 2017 Earnings Results Conference Call. At this time, all participants are in a listen-only-mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laurel Lefebvre, Vice President, Investor Relation. proceed. Please

Laurel Lefebvre

Officer; afternoon quarter for our us XXXX Mary Chief Good Ulta us call is thank Chief Dillon, third Settersten, Merchandising Beauty’s conference Executive Officer. Dave and Kimbell, you. Also and joining you for are Financial Chief Thank Officer. Scott Marketing joining and call. Hosting

constitute the may which Harbor Securities statements materially statements of contained to Litigation of in of company’s Reform Before we XXXX. SEC. Act remind statements a to be with described to those The Actual like risks forward-looking such historical future in you of may are conference meaning language. results uncertainties, all Private call the are which the begin, differ I’d the projected not and number facts, company’s of from in due filings Safe within this deemed the

Q&A During as over for only us I’ll it to to allow session, request one as now this ask Mary. of respectfully time to question the hour that turn scheduled please during respond the many have we to call. you to possible you

Mary Dillon

Thank you, everyone. afternoon, Laurel. Good

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we teams up impact to for was the following and back did see XX.X% our Texas the recap fantastic comp. of organization a healthy stores comps impacted share our our The compared corners I financial a quarter. time including the XX.X% quarter top a our on moment little I and disruption were third ticket in job point and growth get this stack field results, by two-year for regions. strength support To in incredibly associates second balanced the It mention third delivered acceleration quarter driven the the XX.X% than and traffic through performance, and on to line to negatively storms, like top from hurricanes, our were and Florida all XXXX, the from take of manage and comps our period. challenging financial an to results the continued personally a of our the more of of hurricanes Comp an prepare Before would running of e-commerce. caring impacted to truly inspiring sales by collaboration to these who grew

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to loyalty member healthy deliver XX% members, XX% well program. captured sales Rewards to per million continues of are purchase are gift we’ve significant and with with update initiatives October, the through savings on our our and efforts of credit incentives first to the frequency Our in sign sales To card program and program out guest’s awareness last the adoption grew rates, you launch, our member, rolled new to on Retention year-over-year. and ticket up $XX.X addition card. offering of benefits launched increase up are year, stable. of drive purchase Ultamate in-store we free average At end which over like active our to

grow and online plan for above capability also who share accounts buy, apply with credit which card. ups a higher customers We sign conversion card Credit to we’re wallet to the garner much to and higher up and launched signed online the of significantly new our continue applications. continuing of drove

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our successful programs. marketing and on Historically, campaign increased color the Now has which channels, channels, platforms excitement offering, all intent influencer lipsticks influencers’ Gorgeous on focused in MAC during we We event success featuring built focused on September. event. the DeGeneres content our Show, skincare million skincare. Way we Beauty raised Beauty month from X promotion In strong trend year $X have activities salon partner another alone advantage corporate. for and basket items a to Cut cosmetics long cure. and mass views to strategic executed highly survivors richer a Cancer We this blending our items. a our inspiring and stores, our performing an message more our results signature with of event, in across Foundation. breast the products a executed a take This BCRF’s The social migrating research of with incorporated primarily To of partnership of Hair of million drove new to garnered with and a Ulta prestige services customers with to turning Gorgeous brands own than current Breast Research our mass Cause like been this the fund media to support of improved October, again XX all year, and sought-after Event distribution to We our with Days strong digital featuring overall campaign in XX,XXX basket, Ellen We cancer for series and partnered projects empowering and quest centers once Give

editors Magazine to We included to as we This continue new beauty a position of program partner also the section features from This a and brand the Festival! in Beauty partnership Beauty. with Editors Shop digital Editor. XX partnership mix picks launched mini iHeart a book destination. Magazine highlighted on content and enhance Allure Like favorite the our to their drive Allure with The the an book Allure curated and Beauty Allure available called e-mails ulta.com. awareness Refinery Ulta at Music

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Next, ensuring shelves. often-exclusive product to must-have our our Beauty initiatives. an a of fantastic Ulta merchandising job update I’d that provide did maximizing on is and partnerships team brand like on The our

to the while rate grew in of share continue in Year-to-date, to Beauty the Beauty According points particular the XX%, all by quarter of with single Board retail in our by third prestige prestige market a only industry Group, strength grew grow NPD total basis tracked prestige Prestige Ulta XXX to added netting beauty digits the segment beauty in prestige rapid drive low NPD and to beauty. overall. of growth across Ulta X%. continue market of our the rapidly and share prestige gains gains fragrance data We accelerated share tracked by makeup, skincare

both continues lever Our to healthy care, broad accessories professional and and and in our product sun and Skincare hair of a categories balanced brands in prestige, care, be mass ability fragrance, care portfolio in personal appliances all a deliver to delivered a experiencing to bit to in average of overall quarter, Similar well although the all cosmetics we discussed across seems be what growth. not color above the industry lull brands. last innovation comps.

continue brands prestige total strong growth contributed Our as the almost high-growth These year. our MAC out were XXX and Clinique, a very to comp benefit four Lancome, this third we boutiques during of featuring quarter. boutiques brands roll

we’ll quarter, partnership new XXX end we delighted the rolled stores year with boutiques and our the approximately have end. XXX with We’re At MAC. by out had of

also out in We five across impulse rolled the pictures chain. Hero skews of our MAC

several Ulta it’s kits in available where quickly in number features assortment become rest. has MAC brand is exclusive a artistry instant Beauty. the Our close one at second of stores XX% the launched only the

we’re brand XX% surveyed either insight over of findings consumer the MAC to to their to brand that MAC new lapsed in with guests a or MAC recruit year. the MAC with consumer has Ulta a helping buyers users roughly haven’t the purchased Our new who our team of demonstrating

cosmetics pace during in and comps. Many and Faced believe mass Friday color last category and the rest well last Tarte this weekend, healthy is bodes very like the and Encouragingly, of strong innovation which of for holiday both exceptional still the were our brands of prestige strong single-digit. but to growth, during Too season. slowing are high Beyond we seen we’ve compared the boutiques, very year’s delivering our double-digit makeup comping category color prestige cosmetics prestige prestige

assortment focused in chain-wide palettes mass in about eyeshadow to the excited favorite rolling media and influencer with year XXX developments on the of out doors also next brushes We’re makeup social ulta.com. Morphe, side added a and an e.l.f on cult the brand

media born brand several Colors, was social in Another is past the available months. which online-only for of Dose

strong success And holiday. for time XX The its pallets stores. eyeshadow popular in introduced ulta.com, several highlight we’ll launches, and teens with SKUs Following Herrera, new fragrance to XXX and during lip and be was in in another colors in Bloom the Gabrielle, base high the adding Dose we’ve Girl. the Carolina comping two recently of Good quarter including Chanel success business Gucci

an We Mario Rose Yes continue and newness and Ballet the Thomas driving From four fragrances on Spade. strength Kate to and mass exclusive from and launch To, above skincare from exceptional Bedescu, MEMEBOX of prestige Skinfood Beauty fragrances skincare; skincare. Dermalogica, in well exclusive line driving growth Both comps with Peter Philosophy NoX, prestige the side mass house and Juice of Roth like

rollout professional driving and care double-digit the in and DevaCurl, like Bumble the Matrix comps in newness rollout Bumble was strong Our XXX – double bolstered hair stores, of than Pureology. new chain-wide more category by brands and Kenra, of Aquage, Drybar

as more assortment, to our offering. can our you to there’s continue more lot access that have as going see, So elevate we in and product a brands on

to in area we’re as additions expansion. care, refill hair make additions year, our the in excited including of major pipeline brand room a new brand skincare for XXXX cosmetics with and planned makeup, next about looking significant well category, for beginning Now the as mass and ahead every to

levers and Beauty, in changing growth gives of adapt and trends quickly multiple positioning Place Our to All One All industry us dynamics. Things drive to

X.X% turn and now sales to in me third XX.X% Let services business. the grew Salon our comps quarter.

well and industry. growth We from in biggest the our costs Florida the continue variation while share services operating two growth Texas, these to rates increased far investing show the that growth While team year, a of we disruptions and saw labor from the increases business slower in hurricane. rate with gain rates markets some our and for rapid services, of regional initiative. profit in The earlier reflecting managed our growth and services in with growth moderation exceed

two higher in We’re encouraged of improved our with in Initial markets of model stages the early satisfaction business testing this by surveys early indicators. we’re engagement guests approach. and and salon new reveal our the significantly

We stylists. the of in in is Beauty, with attention salon a services, team. us a communicate for trendsetter for This and Team, guests, increase Ulta impact getting elevating positioning features growth and Chair. Modern and a already As model the building year, guest-centric the Earlier and clearly stylist big menu Team helping skin Matrix, a are and profile trend reminder from salon salon like in-charge in X,XXX believe and world is we our for to long-term group coverage attract and Salon consistently is to hair gains. Redken, transparent talent approach pricing this training programs and new lot best and the publications share of who the Wella the for extensive of more foundation Pro of our a to this simplified the pricing a innovative launched our model leading salon L’ANZA industry education Pro us stylists. publicity a as of The our Behind making collection

update the take X,XXX Now to store We able our We program. in the stores of ending net Black open new program our in XXXX advantage third traffic Friday our weekend stores holiday on to all were sales. opened in you of XXX stores. before quarter quarter, new XX to with almost

up open off a month, store budget of in strong this XXth Avenue in and our great to hours of team the class the continue IRR we’re before or blowout great first Earlier early to hiring This start salon its is the after store salon its weeks. a XXXX school. hurdles. in accommodate Chicago, store, store Third. in morning opened excellent exceeding an few Manhattan extended salon the stores first with very professionals. to New location to neighborhood we stores in and offers seasoned Similar results Manhattan At in Michigan it seeing work the

the well. report to very are Mall Chicago, America opened our that and stores newly pleased all in Manhattan We’re of high-profile performing

another XXXX to year. track to next on of XXXX, majority open program XXX been has the Looking ahead estate up our we’re and real approved stores

turning driven Ulta.com to and the checkout past and we the in growth. delivery E-commerce the shopping our quarters, mobile we’ve transaction rapid XX%, our total continuing enhanced We sales capabilities. by site traffic growth of Total marketing. our site quarter, X% the company grew by sales improving e-commerce assortment, of XX% Now and guest grew business. several was the for experience were relaunched representing XX.X%, revenue growth nearly as experience the traffic digital in mobile up with redesign investments driven card during experiences. seen

to the improved account of also more and has transaction, application the card number card doubled We ups credit experience, implementing buy credit than ability online. apply the which one sign

products. promotions use to more than and app find Mobile We enable to improved the push during gave for quarter. get search adding GLAMlab, from your rewards the point latest of capability features launches cards increased and the and e-mail the app, a guest mini account balance features XXX% makeover, and to a feature app Beauty about our the exclusive use ability notifications checking voice like easier gift Ulta alerts buy to version try-on like of product traffic also ultimate phone,

Hair Ulta continue assortment exclusive a by brands ulta.com accounted online-only brands Beauty; Simply products; native Barn and first more beauty Crime, build primers. digitally created Sona brands, like Lime addition Palette the offering Milani We to edgy Identity and of one to bath YouTube makeup and with Shoppable of Beauty, Breaks. platinum Instagram delivered makeup our our and hair well of as Persona the in Online-only this purchase Apothecary significant Little influencer for Beauty results color; the Sample Of the limited-time and online-only and Beauty promotions interest and The Ulta.com XX engagement we’re promotions, signature as growth August seeing including portion with quarter. We Perks, Bag growing of in e-commerce our during like platform. also launched Event, Gorgeous Days excellent

to MAC chain and every on increase. have to as loyalty our our development a the we’ve in-store quarter, purchasing stores, store, enabled year retail-only ago, in and you of in-store Morphe. guests channels, initiative to satisfying hot while stores. and such The is available members to represent fairly store-to-door of turning not rolled in continues steadily end shops orders place Guests update proving a of of guest chain the our X.X% capabilities. omni-channel number products shoppers to doubling out the online omni-channel test for it’s in or and she’s small XX spending supply X.X% mentioned compared ulta.com XX.X delivered to useful looking Last third We Now demand, spend are both times this finally, capability more in which our homes. when of now that quarter. operations. than her guests she in at their brands both including our And this quite wide terms still And

We of continue deliver our on distribution to scale exceptional guest to network in experiences, optimization. focusing economies leverage develop capabilities while and cost

network is DC to of business. units almost with Our supporting nearly e-commerce more XX% year units XX% forecasted to XXXX, ship our compared this

XX are E-commerce with while the lead speed-to-guest most of over order orders supply in perspective, in replenishment hours Our a order same savings. placed. reduction within times costs costs team our year-over-year From capabilities X.X% e-commerce operational processed significant retail being supporting the down growth, chain for of period. this XX% XX% the capturing reduction achieved has retail an replenishment improved with are a

implement efforts reduce to to provide supporting continued improve technologies control and visibility, also we’ve and – service also costs. We to greater ongoing

are nearly during continued new our DC holiday Dallas. XXXX network with model season. Our volume the two of DC our and These e-commerce to Greenwood of peak expected process facilities XX% the mature operating has in ramp to

operations for prepare a total we’ve The we maintaining achieving great of in-stock of done comp light sales in of built more of goal, our another our the up and Coast From ensure West DC construction see by of sales chain they add new report distribution fill XXX inventory to teams inventory projections. underway back levels also will we and goals. we’re the to Fresno, well safety and is track speaking X.X%, As to nearly DC significantly complete also our next solid through we’ll per been in anticipate feet quarter provide e-commerce on demand progress our summer. new strategic the of hiring time has remain the of Coast of a many management and our perspective, in support partnership square increase merchandising our spike to orders our volume out execution achievement our fourth and with DC on to service operating to job a platform above building XX,XXX DC of the category high well center XX.X% turn my new stock completes quarter, the an open model. customers. prepare teams Fresno significant really the go reduce during That season. team holiday our among team and productivity The is that levels also implement technologies imperatives. while to And the brand day. for Fresno inventory below reflows. of Inventory e-com on and West I’m new door live additional capacity proud continue the we’ve summer, we per seamless XXX,XXX stores in grew focused to supply Fresno will launches to next transit third in-store

holiday fourth to and forward friends Looking our quarter, ahead families loyal as work million season. teams their to our guests to the we’re exciting and inspire to themselves an together the year, treat this rest XX of looking

Bring with and newness Our executing marketing radio. exclusives, and including around to television merchants of new plan great for assortment have compelling our creative XXX-degree Beauty Theme, is lots and team a our planned

leading And events, quarter financial current our to Scott execution in-stock it and we stores third our are Our with to of the and with ulta.com great outlook I’ll that, improved we’re detail turn inventory our supply quarter. system teams over guest for higher give results and ready. chain planning, levels, ensuring investing store discuss are and hours teams the planograms in labor supporting more in strong and are to on the service

Scott Settersten

afternoon, guidance. quarter $XX the new and in Starting sales $X.XX statement. Good the strong everyone. store with for due Adjusting above to Mary. productivity. sales Florida, Sales for would comparable XX.X% comp Thanks, total contributing XX.X% transaction million sales roughly income hurricanes the rose our The by growth X% comp total points. to in XX.X% have of by billion, lost composed basis Texas growth. We our about of the been company third and driven was high-end to healthy, average in rate basis estimate points growth impacted September ticket the growth hurricanes sales XXX the of and that E-commerce very comp. total X.X% overall remained XXX

XX.X% So XX%. guidance comparable range of growth sales of X% the the a adjusted was to high-end above of our

primarily for wins. to drivers. and the the and brand margin brand most Increased due occupancy salon more and on of basis sales reflecting locations was a significant decreased program average was slightly and comp dynamics gross with head portfolio versus units discussed DC and prestige year balance transaction retail split and salon per Our primarily slightly. driven efficiencies e-commerce primarily in points, cost investments by our stores channel, relating the was of a the by resulting mix the ticket as sales network Product retail growth. rent despite driven while several XXX Greenwood growth. business we evenly engagement past profit X.X%. rate was selling margins flat loyalty chain between an increase merchandise declined margins. in also in maturation mix price, as Rent were high Ticket ticket was expense X.X%, in more as pressured higher X.X%, quarters The the year-over-year. sales opening boutique Gross and average traffic deleverage comped we in from in slightly. combined expected, growth leveraged up Supply Dallas to The last category A year-over-year of DCs. systems rate new comp our

makeup category coinciding gains Days yielded hurricanes of a exacerbated weighed softness share variety XX to in we during desired Beauty, into of rate drive the offers. quarter. our our share compelling than market in the signature going margin addition, gains we with by through the light more third These actions In gross outcome Of elected significant of event, their on the but anticipated quarter, relative

brand strong delivered additional related in excellent the by of also a was points costs, labor investments of basis prestige well as of variable related light sales. improvement, service by in-store and hours, execute expenses performance The in-store our to corporate and We XX rollout and to investments Advertising strategy store hurricanes. of percentage overall. expense reflows, control leverage SG&A improvement as boutique offset driven as a to strengthen overhead guests flat was

the As advertising the a you benefited we the first fourth third may from of of recall, shifting and into quarter, some timing quarters. expenses in planned

impacted the new tax lost of of to XX.X% We $X.XX. standard had of part negatively hurricanes stock how rate the quarter last due costs per about were equity in with the lower and puts takes the A Earnings options a few third $X.XX to accounting employee per grew report awards. Turning cover share and that tax in and effects third from year, here. September. to to in investing share related $X.XX EPS. benefit sales associated changes by compared one-time to Earnings companies to quarter exercises a

quarter by benefited to continue to lower we $X.XX share strategic program. due permanent about count return the more In third year-over-year. Earnings terms shareholders our repurchase of excess through share cash share per impacts, and the in to

and were anticipated X.X% rate a the growth Inventories brand by per with solid the ended performance high $XXX to to for short-term store basis, the holiday of Moving of increased brands fixtures robust for significant on levels expansions. and and stores, sheet. quarter, DC $XXX million and driven balance Capital the inventory well cash the boutiques, new in comp the given for new system investments in the in-stock ramping on investments. expenditures the this support million Dallas comp season. quarter We below

view plan in within price. In activity our to more share in we terms repurchase of active buybacks, XXbXX continue pullback of with the be share our

$XXX.X a During the we our third approximately cost at XXX,XXX million. shares quarter, repurchased of of stock

As announced of share October under million the program remain approximately available repurchase March XXX XXXX, million XX, XXXX. $XXX in

fourth for quarter to now full-year guidance the and Turning XXXX.

For billion last expect the the fourth be sales $X.XXX versus year. quarter, $X.XXX of in billion to $X.XXX to billion range we

the expect comparable range E-commerce of XX plan in to XX% range. quarter approximately the to to new year. XX% X% increase We fourth sales to to are versus the in stores open sales last XX year. We expected grow compared in XX.X% last

We’re in QX expected open as XXXX, flattish per XXXX. planning the modest expected. deleverage expected margin timing to range to is with to Diluted operating of QX share sales. QX rate last $X.XX be $X.XX the compared to a stores earnings versus expense more And be pre-open of impacts, combining are to year, $X.XX in

expectation, compared year. earlier occupancy a more moderate be expect comp costs to now gross We rent and in the profit to flattish, as are retail we forecasting less on leverage on

the up full labor Our category in of driven current deleverage also margin current expense will as higher we dynamics. for prudent the planning costs SG&A are full-year we to short-term, X,XXX payroll Rolling marketing share XX additional estimated the million. in well related QX. by of for merchandise with expense we’ll out fully is impact moved of end prestige the expect of the the roll boutiques on of year as guidance, corporate assumptions XX.X%, and $XX.X stores We leverage seven puts to The that forecast light that includes costs at from be accounting new is excluding our diluted expected payments be share-based overhead rate major count any for factors relocations. QX, will and to the of partly complete for remodels tax expenses. and leverage as slightly anticipate year timing were that These by for offset that the standard line pressure advertising

business We e-commerce to our to XX% expect grow approximately XX%.

total comps investments is FX XXX expected stores, relocations now our for expansions We approximately million, which the includes $XXX be to maintaining prestige within company of new range. approximately $XXX XX% to brand in remodels, our to are expectations and view XX% systems. million, compared previous

improvement, XX% lap growth and last earnings efficient benefits of a range. infrastructure expected tax from end described. modestly gain distribution enabled XXXX leverage, the also Operating of of primarily now and XXXX. have for third high that to and the increase low share I us pre-tax for range our XXXX is significant hurricanes to rate sales the $XXX million the about of points capture overhead we guidance to in and of in rent come plan and build remain albeit than reach the earnings. we in centers investments rate our up deliver estimated the the initiatives. includes and be by is XXrd execute percentage goal growth systems basis full-year range range our the includes to impact our planned in improvement margin $XXX of which are per and We to due about to assume corporate in initial points. XX rate XX share margin actions in the to This savings to percentage maintaining view It supply flat Updating XX the assumes investments chain long-term week, we XX just our strategies the This less of a in to impact to buybacks to and earnings basis and expected as still P&L to of market XXs is took efficiencies margin anticipate and the more the margin margin per million operating years We quarter occupancy to third $XX XX.X%. growth And for QX expansion the plan share million confident our represent the in we of of to in in several share quarter continue initially over range. year the bit elements be

I’ll over Now, the host to turn it moderate call Q&A the to session. conference

Operator

question. Thank your you. Instructions] time, question a At question-and-answer Our of Boruchow be Ike with comes Wells will session. proceed conducting Please from Fargo. first this [Operator we

Ike Boruchow

takes much can through merchandise versus this. is you flattish, out I missed you parse then deleverage Hi, I cost good fixed also us versus you margin the for margin for Scott, everyone. guided walk in decline if afternoon, And fixed puts on margin question my I was if could line. merch apologize gross margin? margin gross QX I QX, – guess, that on But the of how you gross costs? for the and

Scott Settersten

but described to the you going little remarks. not more on I’ll a basis parse I’m color Well, what we prepared points, out Ike. bit give our Sure, in

basis So I actually as far for in flattish, say we the line. down the of in again, would XQ assumption points XXX as is going gross quarter was concerned, kind profit the after are

of of So was again, and unexpected. it was part expected, part it

the were quarter with creates in guess, line. prestige or overall in say, on gross we E-commerce Similar on do with e-commerce the the indexes we quarter. on I e-commerce. a a on little goes, typically quite was bit part, our the that would Again, well now for put I XX% with rate. extremely a through the going more downward through right, bigger Again, see very where usually sometime. performed brands happy year-over-year profit, a so profit about some headwind boutiques story about we there, the some so those of connectivity the XX% ended digital the pressure Again So up there activity of over little brands retail whether almost the But sale we’re percentage during overall, that just those e-commerce the there. growth gross over expected fleet network, the for promotional line, pie with it’s on pressure results. created that talked assumption EBIT agnostic that rate in

cosmetics concerned, in thinking. some the forecast of together our we course, and Back as right, far put in spring the to when than continue was hurricanes, As on had softer other significant little we August than late color again, seen then, us more a be retailers. were a you’ve with unexpected we maybe piece way much

think, stores or of we more of two Again, was was peak the us. in it in for of across had a and U.S. to just one that not impacted lot them raining right, tough hard events of in partial some either markets. determine high effect I foreclosures a CNN for our the the a than closures. signature store parts the X,XXX stores key stuff lot what very those So markets lot impacted, days year, of volume At of

the in reacted a we’ve do We trends softness that to appropriately. lot So quarter. we of luckily we Ulta, got in some reacted that we’ve saw the can levers sales call.

forces we internal to of lot recapture a lower able at albeit here the mobilized so somewhat are we And and those sales margin rate.

the little the So comps on very because retail of overall. rates not of were we we that not we year. chain the leverage right, we year a back better we better they bit than thought, healthy it much expecting going softer. course, last going kind quarter, thinking little although comps leverage of a we but saw there as flattish, a retail And fixed store Supply little in. costs, consistent kind last did were generated thinking did the was be there were the into will as with Again, of

the at margins overall. back in profit we’re the well the for so gross working the are XQ, things of XQ quarter thinking merchandise Pivoting then, flattish Again, modestly ahead quarter. we’re house. of and for kind down flattish So looking to thinking

not the circumstances quarter. kind again, the apparent in So of fourth same

already we and it’s refer tailwinds We’ve under the the period, build pressure rates of got nature so overall talked right, that. like just gives So from there. of card, to a margin with already things are credit environment a us which lot basket promotional the things

gift we’ve doing signing year-over-year. implemented people got thing rates other with up there and really that a job growth we’re So great healthy with cards there

cost pre-holiday expect much as years right, store margin few what of leverage in in right, been the as distribution get post-holiday So right. can in where hold large, centers, are these redemptions this ramping those is last the course, we we’ve a we leverage, little again, margin we’re there quite the kind in the and rate up fourth of saw maybe than bit rates last story overall. environment is year a to on fourth Of the year the which not we’re we’ve quarter, that different chain, we probably bit seen Supply optimistic some retail a healthier get going I comp to and fourth quarter. new by flattish fourth quarter quarter, a in Fixed healthier, see when

are great So buildings Those online. story. a again,

them gross the overall driving optimizing and efficiencies on they’re leverage and us We’re profit for line.

Ike Boruchow

Scott. Thanks, Got it. Very helpful.

Operator

question ISI. proceed next with Evercore Omar from Please Our Saad comes your of question.

Omar Saad

Is thanks It makeup little was makeup, dynamic business taking business if question. that the Is marketplace. should could shifts you lot as down wondering a as and is we like coming softens. on for How I seeing of a well. Yes, dynamic? care sounds it in about Do the to replenishment? think my innovation skincare an strengthen online bit that relative continues purchases? expand skin see – you color it category upon to you’re the the of the type

that about like our think us from might help side? it and Just look what transition that Thanks.

Mary Dillon

Yes. the Things Beauty would of one participate the we in that Well, is is the All say first I that One of great Beauty, things all, line Ulta business All model about that Place real.

category and growth participate So cycles. share gains gives in major a categories, across of we with lot beauty drive flux us which all to ability the

cycles view come minute. I beauty to guests take I So One and there’s in many there of as big that, back I’ll a that engaged in just sense, in categories as say would the ever all, just kind within first happen. category really thing of But a long-term the is are we are say, skincare macro makeup.

followers Instagram, you that on YouTube, we future trends over particularly demographics, enthusiast Latinas, look at of all the Millennials, beauty segment in see or if makeup. happening look channel, And teens. what’s own across index if or you at in the so the just our

and So innovation really years. involvement last confident the some performances current about we engagement over couple a somewhat lapping big fairly, of trend. the softer it’s of platforms not long-term that in feel makeup It’s innovation, is and kinds

is So great. makeup

saw strong not us strong share really makeup. We continue for growth, in gains only but also

So that’s good.

cool you that as categories. the we’ve said Now, seen some what’s is some acceleration of of in kind

it fragrance in from life innovation add interesting call, driven efficacious Skincare, growth and has ingredients terms Korea. accelerated in gain, what by in lot of particular, been in it’s So But to our that do and to we really color can funner faster, Dave both a innovation, more think I well. long-term more skincare, of like share to interesting some and skincare or this. masks as ways

And to mass. we so strong that’s to profitable be It think that’s has prestige interesting, no not continue and reason and good.

we pike, into look across we a down all innovation I’d quarter XXXX. coming out say, categories of fourth So the for see lot as us

Omar Saad

Thank That’s you, really helpful. Mary.

Operator

proceed James. Raymond question. question your ] comes Please Our next with from Altobello Joe of

Joseph Altobello

of in mentioned of Good And business your grows that’s X,XXX determined be by over the next some afternoon. target to you’ve Thanks, few your the and our obviously outpacing, about to that know store want I guys. X,XXX past, I both I quickly will your expectations. talk been doors e-commerce that think, how and years.

Would about or low that number in, pace end given rapid range years five So we the how towards should expect we think so? be the of growth? to that ultimate call e-commerce it, of

Mary Dillon

we’re it all, but perspective, it we very e-commerce about as line fact actually relates is engagement. as agnostic picking would the love we’re to growth I first our think profit customer really said, a that up. say, well, Well, I positive of Scott bottom about And it from

spending on somebody of the of far that our folks multi-channel terms in loyalty of shopping amount guests like right more the almost also our even who’s best now So in-store before. channel, are are but she times X% the shopping by members in that store, than only is three

we an It’s talked it’s a share So shift. not It’s not us so a a about this lot. that’s per wallet, shift, channel of getting all more expansion actually great.

about that rigorous build we’re in physical course, very we’re of always disciplined about. that’s and something Now, thinking and footprint our out

don’t than because better to a target change now. is think fleet point to me thing range right continues in Yes, that perform a it’s store to our best But time. There’s one a the there’s reason before. every I that reason, range no any for year year have We

and we of and ahead see XXXX continue historically budget to IRR target is strengthen. So it

when it it, to I actually guess, know they way also other. think is, not grows that with best stores, the business about stealing the we So build e-commerce from complimentary so actually each are we

would where But And that real keep very we change. decisions. have dynamic right we so of range we about that disciplined to estate targeted now. our it’s And no course, reason think are will

Scott Settersten

of SLE XX% to would retailers built I at line. these top I little days, typical numbers remind bit just plus that And a kind Ulta generate are the are mid is of on struggling right?. these than low stores Again, different to lot significant mean comp folks. single-digit a

at we while there’s us would radical our kind this point. to closely, suggest there be range to store So adjustment again, to productivity monitor target of any that nothing long today very needs

Joseph Altobello

That’s helpful.

quarter? Just there the impacts from last hurricanes in the any Is fourth one one. lingering

Scott Settersten

a – there sizable mean, it’s I pretty to No, absorb. charge had we

as and So to the much year. fiscal we’re working back get that prepared trying in as there’s can insurance claims of we on being

Joseph Altobello

Thank you, great. guys. Okay,

Operator

Our your next of with Wissink proceed Steph question. comes from Please Jefferies. question

Stephanie Wissink

recasting Hi, on little everyone. your Mary, that around mass XXXX you comments your some just talk good then about innovation into question just initiatives a and a business. around afternoon, the your bit pipeline makeup of enthusiasm? some newness more of Thank Can you.

Mary Dillon

Yes.

Dave? it. take you since Dave let the closest As this I’ll to is know, he

David Kimbell

this looking in and exception, things that the we’ve that always we’re have. year. category to makeup the importance of to I innovate of yes, some mean, about. excited we Yes, every given we’re course no particularly continue is seen And

and have to with Tarte and in and year and continue make biggest in mass in. all prestige. mass been that partnering innovation and a the have NYX and big sides Too to assets program possible. we’re I’d house other newness been IT continued successful important some Cosmetics brands, that we’ve to apply in excited the that as have Urban pipelines our from brands of that as coming in both the quite does our strong wide variety of us loyalty like will kind this classify And Faced drivers for have of got ways both we’re we on One three like of them prestige So to and leverage them about past brands is that

positive a of doors limited that out are look we also out roll today into we about of announcing and mentioned there as to of specifics element important XXXX brands that store. number brands, and while of what and continue in of our we’re in talked MAC, through the new business business very as a feel we’re seeing more e.l.f., of number are guests them stores launching XXXX. will allow brands bring not we in We’ll well. like all So Mary to we’ll entire mass shop driver see see that reset the XXXX. to Mary and existing in growth ultimately And yet, as be expansion through the about brands new our

we’ve of coming the sides both new in So exciting store some well. as got brands

set of rounded in hair well the innovation a whole stores. and across be it’ll makeup So in skincare the and applies care, same

and optimistic seeing. by So what positive we’re we’re

Mary Dillon

of And media with influencer I’ll just add lot that hot. a too actively that, there’s brands social participating are we’re also

we through Dose Morphe, Crime, digital these merging about guest this many of the the media. as But but talked benefit were born so, understand little of and and of of guest well. And social most also for for brands our a are their that more is sort bit, physical Colors, Lime these important that brands

we’re And seeing those with too. some so brands, growth nice

Operator

Thank you.

Yih question next Research. Adrienne of your with Please from Our comes proceed Wolfe question.

Adrienne Yih

much. you Thank very

still X and consecutive down think maximizing environment we is market have share Scott, are in either Can quarters. the promotional first we two then your of discuss your for profit factors strategic to we you Mary, you or the for choose should So pressure back-half very what that question look guess, Thank response my been sway And how past the When expand and dollars the op margins you. much? an and to XXXX, year? decision? in increasingly again I competitive then QX you that that

Mary Dillon

you, Adrienne. Thank

is with share more the more driving per your the believe that beauty the for really I also stepping guess, wallet. it’s about playing long really, game our the beauty are future. of capturing this enthusiast most Ulta Beauty proposition and And I long-term first mean, now loyalty start programs really question. us, I’ll here. we gaining has for into So relevant into And back guest enthusiast more

loyalty long-term we’re our but looking is quarter little each to within different. not So bit really gains, drive long-term But engagement share a just platform.

to the momentum. quarter. members And loyalty the not want we million so to gained this continue opportunity this on quarter new – was an did $X.X example to of, miss We

consider So by long-term short-term promotion a plan. that a just I not a play

on have business loyalty continue I we to we was to drive the needed that some because the strategically category. of us, drive momentum But do program, is, for traffic, which and long-term flywheel and get drive some about we how our how the think bigger to the there really that’s an even some with in is disruption softness long-term. we Now guess, for the kind hurricanes

Adrienne Yih

very that’s Yes, helpful.

Scott Settersten

our again, margin, investor Yes, know that’s so operating the on hot button with ahead right. we group, looking

unforeseen And that there happen. so some was circumstances

action in can. thought of there as for we color best to cosmetics area, the us. through our that of course kind that. softness best react way the had We we’re hurricane, navigating to was So The we

So quarters, what good going were not we last commitments that’s able of the we our right. XXXX, But on is, the news into we’re news. to delivered expected right, good we to respond couple and so the investors, financial our

data far sense But as the So, that. year, today we’re next probably points, goes thinking I’m you to we of we’re not couple I be on. prepared people to on able at as give right, like a just the give really that quarter sequencing as can detail here’s to process want you a XXXX, mean, going that

with cosmetic into and with pressure assortment the Beauty to some the vendor marketing can that being hard can facing we year. thought overall we continue what space, So recently. out, right, how next right, that that teams do the existing merchant we both we’ve merchandise figuring with again, next Dave margin of color be been energize bring partners And year, great the been mitigate talk right our working innovator folks Ulta to newness so have our new for the year, next we right will do folks here

We one. the margin for drivers long-term. think operating number for that’s about So other

it, for versus and in that let’s take like below – call is but next will had year, view, XXXX. So now, preliminary the $XXX one a we million, thing below we’re guiding CapEx significantly preliminary $XXX for next next not down our CapEx step Right year, right, the million year. $XXX looks again view million significant

heard some of So what’s you talk some that. of us driving about have

the on in cycle we’ve remodel across activities fleet we’re the been outs keep through boutique of these peak of fleet kind of so store that couple So flowing the depreciation through right, fresh. there the right, accelerated years part a the large last roll to lot related to looking an taken a our has P&Ls of

mode, we’re kind of of now. we’ve with house of more of I’d the investments, past some of view we’re So so few those and a value made taking about kinds shifting of years. and forecasting making planning say, of of to replenishment the master getting the years. more made last and kind back we’re moderate in investments that right, sure significant those couple you’ve last things. And And we’ve now the data us an investments space out heard optimization all we’re talk the

store So what of kind cost there. that’s to I’m leverage. referring Fixed

go of higher this profile locations rent not right not This right? line put avoiding that, estate had time, in a There’s but we’ve straight They kind we’re margin were again, So it’s no – decisions some higher for online. they on at point right? year, us real pressure the rate.

Adrienne Yih

Yes.

Scott Settersten

would rent going store our So call as next to out a I looking kind we’re what more plan, roll be year, at of it’s normalized structure.

more So power center location. the our, of of historical kind vanilla

then a opportunity plan we’ll as focused there’s more live in inefficiencies been boots get in XXXX, some ground. again, over Mary and our plenty you’ve this the so, over benefit And put built going with that’s cost for on last scale the up optimization primarily leverage reduce of finally, go headwinds year. or place store that there’s the to formal year We this heard talk naturally I we’ve to growth. on years about cycling being believe again, and So costs of fixed the

So we well. think there’s great as there opportunity

us base help you we XXXX that margin when fourth specific So leverage details beyond, our with we’ll in quarter talk to and to understand operating we being share action our on and on want investor call. all drive more just that taken

Adrienne Yih

and you, Thank luck. very of very, helpful. best That’s

Scott Settersten

you. Thank

Operator

Please from with Oppenheimer Our question. Rupesh and proceed question Parikh comes your Company. next of

Erica Eiler

is actually Eiler our Erica for Rupesh. taking This on afternoon. Thanks questions. Good

So wanted promotional first, touch to on just also the environment. I

you has starts move this to versus of expecting you’re innovation that the promotional years? we holiday the promotional to And that that promotional past share recent roll about should how some thinking holiday, through environment need environment? Are progressed thoughts can be potential curious that year about Just any then perhaps the as how you abate?

Mary Dillon

that would but your with the Yes, I’m a second maybe and too. we’ve Dave I piece, I’ll proud levers flexibility. that to business that the But part the add can of has really say, then start lot a be on model fact holiday got redundant, of not about question, and you frankly,

that so lot few today. reliance a to over do big us past mix couple now participate One, have driving sophisticated worked years broad-based, right a mean, awareness, marketing really deal. brand really kind is the brand it’s have a awareness much to we really broad to it, And a that instrument, more our of we’ve are actually in just more hard reduce I they I blunt scale to the of XX% things. on allowed unaided gas things lever, call

right? still more a allowing really and brands the broad-based That with awareness, in that things a in fashion all kind Program mix to driving we’ve about and be participate shifting all that we creation us, reasonable to and discounting been and into point the great as spend then and of together smart and maintain of demand journey happening conjunction for assortment is running people pull so in marketing comes back the can. targeted social where exciting by able more allows to overall are and that is So think, right, Food efficient. targeted as World And whole advance to I be beauty the do on us channels, that

targeted more there’s invest investing flex in would what others, – less of as the discounting part that promotions aggressively and about to even be more get to levers in intention price in are our and time have do. we signs So we be ability personalized to and we more than it over about everything

get know discounting, increase That provides will benefit, the not notion really but that to at So target people with a exciting time we’re what over only tools time. on that because to long-term offers we relevant program. are just them that’s exciting relying our ability into of offers royalty really using

So, a bias goal the flexibility, leverage, your that’s that’s targeted question, also to personalization. long to Dave? Holiday, have kind have answer more of continue but but towards to

David Kimbell

Yes.

is earlier, that a of very heaviest a think, to been don’t has always I Scott in we’re and week As far change the the course, past as promotional holiday about part period the mean, this the said year. into holiday, holiday I we It’s only period. expect of –

it’s rest changes We carefully. how to or say promotional modest out only intensity it will So exactly – to of watching perhaps – period. maybe the the hard we’ve what strategy seen but and far, shake so we’ll for be

those store great rest is all to to advertising, all marketing the experience things, loyalty to the drive continue plan it’s holiday do necessary Mary drive period. rest this where products, things the the with our the of through But continuing Our said, promotion and holiday of deal as program, through have period. we planned to

Erica Eiler

just And the that’s if you with what helpful. tax you reform the plans quickly, excess proposed with any benefit potential us do plan passed. Okay, tax that then to can is share

Just curious to flow we helpful? should bottom you any expect that would be through reinvest to line? Just tax potential that benefit it? you on the share to planning Are thoughts can

Scott Settersten

Yes.

I you cash mean, It future. the the accelerate business. of on right? like comprehensive little core on we’d best been very do lots to optimize of the to to roadmap a tell things tax – I savings be start seems we things then other about with what sure to that. like long-term. in that that that how international quicker growth it’d levers be little just everyone’s a that we have overall here thinking course, There’s deploy we things potential structure about question could Board premature would for get and subject perhaps potentially capital we Another our drive may making that our to we’ve discussion speculate any there’s But on with would that mind, it on

Erica Eiler

so Wonderful. you much. Thank

Operator

comes question Advisory. Telsey, Dana your from question. line next Telsey Telsey proceed live. is with Our of your Please

with question next Our comes with Guggenheim Forbes Please question. from Securities. proceed your Steven

Steven Forbes

afternoon. Good

touch offering, how that on expect to recent Beauty of quarter customer year-to-date? maybe of skews collection how the to number so kind focus product really how maybe collection of relates a proposition? skews, do just just part to it as fits overall during over still And want I time then discuss think and that on most So of Ulta you what assortment evolve lastly, performed you maybe same the as into brand your you the the the for about topic. the to you can you kind on the of it category stand value Can exposure want

David Kimbell

Yes, yes.

it, our communicate key presence the overall is larger Collection invested an It’s Beauty gearing how of pretty, of XXXX. so. year we’re ULTA a part and business our we actually a up we pretty that very revamped in packaging, have early last even proud our of that aggressively So for strategy. of it, part or over formulations, the we’re in our how We’ve market

and but also Ulta – collection So, we’re makeup, is our very has assortment expanded time holiday result. the in big season strong the pleased for It its for Beauty holidays. is that holiday just a designed a skin, overall of presence in then course, with bath with an

optimistic drive Having in invest said, and that store. as and XXXX an I those So still make to have it’s total in we’re even continuing in And business. plans that relatively said business. to all the a small of our positive things part bigger that,

continue going add not into business and nice, to exclusive it’s invest and future. our the a of obviously, in that So But to part major going margin we’re higher one drive be to assortment. it’s that one can the

Steven Forbes

that of in And on or any SKUs selection that, year-to-date just on commentary of the performance either the quarter?

David Kimbell

individual just – performance. I historically any – don’t we Yes, about haven’t talk we brand

by the and say I’d but and future. where that proud history the pleased So optimistic brand overall, of going it’s again with into we’re

Steven Forbes

you. Thank

Operator

over have to now remarks. turn we gentlemen, I our and Ladies the end for reached to Dillon call session. Mary back like would the of closing question-and-answer

Mary Dillon

our XX,XXX to very and all you delivering we commitment just to Thank speaking Beauty I And interest and Ulta of forward their time for of you your a operational the busy soon. for all associates to incredible like excellence guests year. our in serving at thank you. with look thank

Operator

This conference. concludes today’s

You have may for time. day. at you a your your this participation, lines wonderful Thank disconnect and

Ulta Beauty (ULTA) 30 Nov 172017 Q3 Earnings call transcript