ULTA - Earnings call transcript Q4 2017

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Operator

Greetings and welcome to the Ulta Beauty Fourth 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 hand over – to introduce your host, Ms. Investor President, Vice Lefebvre, Relation. Laurel Please proceed.

Laurel Lefebvre

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

historical deemed we I’d materially like conference Company’s constitute The language. Harbor in within begin, from during growth in and of to tax bonuses. this the with non-GAAP Company’s those the be number of may Before the Litigation filings reform earnings statements statements which Actual call of facts, forward-looking this statements a not Private sales differ are SEC. Safe one-time and results in future to of to Reform uncertainties, make We remind XXrd call you the may projected XXXX. contained the meaning of risks the Act week, and to references in which such XXXX due all are for adjusted described Securities

questions one Q&A ask request you respond as possible to it this for of we session, GAAP respectfully hour please our call. to EPS the only time scheduled that turn during $X.XX. we gotten to expect a of many approximately I’ll allow few you we’ve Also and to of as the have to clarify, guidance over XXXX the During about us With to question XXXX EPS just to EPS XX% grow XXXX Mary. Thanks. that

Mary Dillon

to delivered or per XXXX, earnings reform. and an comp excellent and per of in GAAP related good afternoon, XXXX tax in items share XX% Great. share the The with top everyone. Beauty Laurel, growth primarily for earnings Thank team XX.X% Ulta adjusted XX% you, comp XX% on results

earned. with I’ll off the growth and offers and significant continued we top-line The exclusive gain discussion in our successful new $XXXX growth pressures than higher earnings conversion of XX.X% year-over-year provide awareness. by active well in than as strategic full spend who market quarter its one-time goal highlights share cost complexity sales strong of the to XXXX. per per forming loyalty Ultamate our grew The Starting a to But make $X.XX, share quarter wallet sales in quarter grew highlights a fourth ago year a our various with Rewards program great desire rate membership impacts view and of of moderation up and by great made a the the even top our fourth our or the nonetheless, brand quarter XX% X.X% on quarter momentum driving view expected. XX.X% bonuses it’s of with launched than our XX% adjusted in benefits positive The January usual rate top the fourth to Comp achieved the efforts. more in fourth e-commerce. and team’s of category, best for including and members the the tax guests and months comp our our million traffic bit launched driven loyalty up tier compelling for of offers on diamond and tax to program the two program the XX.X the earnings grew lower customers. more store our driven makeup with largest We of a planned week. benefits new start. the associates, program strong ticket a for deployment We year. reform XXXX progress of XX.X% hourly challenging while share compared our continuing imperatives. tax XXrd on in growth, rate, as Adjusted for of points more benefits be in were for continued of the to briefer prior fourth However,

Our and a new higher at with for ongoing perform conversion accounts we credit wallet who above garner the plan that card well evidence share guests to from card. program continues sign-up of

our We in in up rapid Hawk driven growth drove sales, strong XX% gift in performance partnership fourth part national by other retailers. quarter and supermarkets also card the about in Black of expanded

to ago awareness points to reached unaided grew all-time awareness and to rose from XX% metrics brand compared We XX% XX% year Our awareness aided highs. year. XX% six a last

brand Ulta beauty in We are XXXX. to learn was that most the Googled also proud

Moving merchandizing. on to

coveted strengthen and our our continued our of all to partnerships brands brands categories. with and We across launched new

XXX plans than boutiques in rollout year While ramping the up plan new boutique XXXX, performance the the stores brands faster we period the new XXX MAC, the was Clinique, and about with boutiques in boutiques. was to MAC strong, these stores. expected compared we initially a with of of remainder XXXX the our very the Black more coming holiday in existing The performance We Friday, in to best openings anticipated. than in strong Cyber to XXX this softer than January. Reflecting are growth and stand monthly in best prestige new rate for bill rollout quarter add to drove bit now This XXX stores portfolio. more growth out the the includes Monday Benefit with period Lancome, of weighted

advantage new strength adding which fragrance driven of and take Mamonde, is which care, that grooming in and well also by we cosmetics Skin XX top-line to skin to the is men’s Ulta the mass Erase, to was including brand prestige care House Our all Crepe company, skin care very double-digit Beauty. David prestige of better skin health comps. continues perform Beckham delivered skin are exclusive in brands trend several by growing the and

Morphe. Ulta see significant Makeup introduction a brick the partner. quarter offering Beauty making entailed like just to Wet brands pleased driven is further like mass exclusive of major differentiate in Wild. mortar like our cosmetics new category. We’ve by This brands the reflow, this popular a and are and acceleration cosmetics of brand’s in Morphe, success enhancements completed meaningful new We expansion the a Revolution n and this to Milani, brands Flower of in major E.L.F, fourth

color and Ulta a a color also in doors late beauty cold top favorite and brand is products We and Beauty. fast cosmetics, cosmetics, This right true select launched exclusive online is featuring in trend February. to affordable

we Turning saw the its category XXXX. stellar to in slowed prestige third so XXXX much quarter cosmetics, growth this from and in

multiyear comp While of brands very significant certain increases. over strong, others struggled the makeup were

the encouraging growth we We pipeline. are accelerate category can optimistic in that with in this newness

updating including exclusive launch another million the by inspired Beauty assortment POPSUGAR. prestige network And this are our POPSUGAR’s of cosmetics beauty XXX is by currently of We Ulta Beauty enthusiasts.

Lauder, with and assortment small COVER its Estée out stores dozen hundred an like social brands from growth high adding several rolling FX media current darling share. doors expanded more to are doors NARS to of We colors

brands, Westport, with number stores, hundreds this We iconic exclusive significant first the assortment our and Chanel introduce in be Chanel an Beaute few year are recent in to products – positioned much Chanel offering a mass following added that Bye in their and just station fragrances Cosmetics’ Beaute to of branded weeks. two particularly efforts for to better Foundation. offering and prestige doors across cosmetics longstanding the a partnership all our categories also And Chanel follows year. finally XXXX. excited are ramping our around makeup in prestige will Chanel up Bye of Connecticut we opening of thrilled foundation on about honored best planning are Shape certainly selling we Tarte launches, and small featuring our we in concealers a Ulta our which of and the for with Beauty Ulta XXXX, newness make-up efforts store Tape It Tarte’s Foundation is This our announce a With are have focused

sales Let X.X% me XX.X% business. or now comped fourth and services the to turn quarter. Salon extra week the X.X% our in excluding grew

and the the We model simplifies country model new are better markets pleased training to approach entire districts of our hair’s of business of the in region the additional process rolling offers salon increased the results including conservative, out of this planned improved convert test styles the summer. are more the are markets provides in Guests encouraged for stylists. the new of the two which and by unlike and in central with menu transparency with very to early

model. will model We to a also area expert and full-time called skin investing a at retail skilled model new in for Skin for number the add skin skin service improve of new is which we responsibility feature offering stores are space XXXX, and designed to also all Bar our a both our with to Beauty XXX compared Ulta previous services services the The prestige sales. This stores. new in will and sales retail skin will pass remodels in

to We space expect to skin this also model dedicated the higher of drive care. productivity

to new XX Moving quarter in from in XXXX, to of on expansion. cost efficiencies for stores XXXX slightly store as we lower store We net year a expected ending The merchandise XXXX expected This is cost continue with $X.X fixtures new as in in million open stores. increase was the the up slightly to to light opened in gain about store XXXX, the in boutiques. construction. fourth be

the we’ve with track the accrued far. very XXX that to open pleased stores in so and are on XXXX We we of are quality stores

respond to guest rising We for continue store evolve format experiential expectations to environment. to our an

model, level the hair In features the impulse XX upgrades new addition with elevated walls, pictures Skin Beauty Bar enhanced the and just mentioned, latest prestige our to pictures. collection I store Ulta

be of We of to the to class XXXX expect slightly store rents average the for lower XXXX. stores class compared

maintaining extra by the Now comps rose XX.X% XX.X% basis contributed to basis points traffic business. XX%, of site strong or company’s traffic sales. grew XX%. was while E-commerce growth. fourth the up comp a of Ulta.com momentum mobile company XX.X% our our driven total total growth e-commerce let week turn on Total me representing XXX quarter in including transaction and its

strong Our like recently Ofra, Lime update online-only Crime, in omni-channel brands in on chain door And that rising is operation. not supply new every MAC for as like finally well Cosmetics, our rolled as Morphe are yet and expected store. out than you satisfying demand Storybook store to faster to available like additions and brands capabilities

times selling higher nearly chain in delivery last performed periods. of operating holiday high XX% volume XX% year. sales Our while holidays. cost teams distribution order to capacity quarter during an exceed our representing the during continued during speeds With reducing the this levels processing very per total to volumes, supply for e-commerce in-home well compared support the our of able quarter, goals peak extended and to by about while period e-commerce was In supply maintaining the for order support in-stock at their chain

above inventory XX% strong the From to deliver in-stock planned. and at in maintained investments daily Our allows end the last team and new perspective, throughput network the during order high performance term improving on the exceeding year. the model levels our the holiday operating of an for inventory year’s goals season record through capacity quarter the

Our sales. post-holiday post-holiday allowing plan the well and quickly holiday selling season executed strong inventory to was recover capture us from

up the wraps my I’d time and to are future. discussing the like that of how about So recap some spend quarter fourth thinking now we

to not began but impact will recognized XXXX, original long-range well to modifications we plan As we’ve several years year, just assumptions. that factors planning the and as allow subsequent this our significant

growth the to accelerate associates, our opportunity a the in First and us reform. benefits changes with operating us also impact investments of and any impacts the a certain more drive game unique invest reinvestment and innovation. our These tax obviously But enables portion clear to will rates. us to our make margin competitive. business. provides to deliver This benefits It deploy to of

standard margin expected revenue We also year. have to the but impact path in, by is accounting roughly basis boost negatively points we that new operating for XXX recognition are adopt the this to

higher than clear mix will previously anticipated. sales is that our Next a have e-commerce business of

sales The in omni-channel margin for rate While share put represent made largely news of significant since providing additional our and sales P&L is The of of experience reached of margin plan, capabilities below news enhance penetration our investments us ahead gains. and for we great from years this and that e-com our position is gross fulfillment brick growing we’ve Ulta.com that business. exceptional to number modest to perspective digital dollars while good guests. pressure mortar a e-commerce, it’s e-commerce incremental our XX% and that target the does are that two capture on

that rates various in rising most two increased the labor, challenges, we to most our wage importantly, We are – that with And finally, freight competitive we prestige including persisted a workers not are country aggressive also at boutiques are are in Beauty has healthcare. dedicated retailers with immune marketplace we of today many cosmetics rollout for highly the cost more that growth highly wages brand of slowdown hourly expected. and significant these the cost Labor face trained and And and doing centers. for operating of staffing. longer ongoing is rate distribution pressures coupled markets of Ulta the facing competition and the than across our

that later very unlock category in gain These and a a optimization savings part the our optimistic cost by continue in on to market, to XXXX pressure formalized to share remain expected we beyond. in While are these model and differentiated offset competitive be near-term. fragmented dynamics likely margins headwinds will in will program

major scale four call, to work areas estate merchandize of operational margin believe to on and inefficiencies improvements. last plenty quarter’s indirect drive costs the leverage we’ve in efficiency, procurements, real mentioned benefits we streams and opportunities there is identified As reduce our of we end-to-end to

these business the taking drive to will clear areas into the to target set over target toward the attain it under sustainable robust longer long-term factors for we managing would And growth. the We investment operating the several health long-term. that all margin to that So on believe expect the margin ago. in it’s makes drive require still we consideration, timetable of that operating business, XX% expand no long-term years sense

however, in of small a anticipate order we XX the For a XXXX taking XX step-back basis to points. magnitude

precise to operating on will timeline, our and target share how very create healthy guiding than focus or we stakeholders we rather forward, margin ask through Going instead earnings per value dollar a to growth. margin

a designed to to of rate portion differentiated roughly planning are enhance in million positioning variety a our benefit further experience. elevate invest $XXX We guest of the overall in tax our projects and expected XXXX

our of and enhancements people critical in position will employee improve retention. the benefit that labor we competitive First, are investments making our market increased including

accelerate In of focus physical growth of will customer-facing initiatives drive multiple where new series our addition, points the will that we’ve across position. competitive in be on a to area our journey strengthen easy every data compelling, planned to touch invest we’ll be innovation human and our where experience one-to-one and also more and program experience in and store innovating offers delivering we our aspects digital the investment personalization of AI We’ll are capabilities and exciting for for members. accelerate loyalty a trip. drive in since our guests to One

through will we well our enhance guest addition drive investments new also that enhancements of with and will of e-commerce engagement in experience increase to business. model. advantage incubate to addition, rollout both accelerate drive new digital and take salon education, our innovation strategy continued and skin new of changing capabilities designed In services evolve and identify as our the as and our the increased to We’ll full brand brand further model opportunities the we’ll landscape the of assortment the services sales

as capabilities. well network around enable as sell anywhere, optimization, systems anywhere buy to Finally, activities from chain we’ll accelerate infrastructure investments chain standpoint, that an supply supply

investments confident us and competitive growth deliver a guest will to us and sustainable exceptional earnings to growth success. that platforms share to experience more while allow us and to in these making We invest industry-leading allowing continue drive improving employer, are differentiation, sales long-term market gains the

products. used Before of has turn the lawsuits topic that I’d to recent alleging it resold Ulta Beauty like I the over Scott, address

continue lawsuits and to We and vigorously Ulta in are action our to have integrity products defending confidence Beauty’s quality taking packaging. the ensure and against these highest of guests the

It for compromise be we would the or integrity me clear, actions used, any has products expired we damaged tolerance of the sell zero sell. do products. Let not that

products. the associate of re-communicating with we handling procedures confident that our policies are returns. processing To our reinforcing country We and following the returned are associates every policy, across fortify this regarding are the for proper

and take seen brand has maintain ensure protect brand, the have we the impacted traffic remain our financial and but no in will indications allegations to ready action trust We way, the any vigilant results our or that loyal our to guests. publicities surrounding necessary our we of negatively any store discernible

fourth and cover Scott first outlook drivers financials the quarter year more for in XXXX. our our Now, fiscal and of quarter detail will the

Scott Settersten

XX more composed price, Thank were X.X%. units year. margins sales of e-commerce our of was was benefit business selling by by driven increase and sales, promotional Starting mix in in more rate of total company X.X% growth X.X%, growth growth. QX salon week. SG&A some XXrd driven average productivity Preopening as store the a the significant The the and points primarily year-over-year. ticket related XX mix timing slightly QX on be was to higher was including year the expense number Good investments E-commerce of most ticket with The of in XX XX the Ticket including XX transaction of point continued with to openings basis traffic largely SG&A points. new the hourly driven this strong Distribution was and basis of slightly hourly in tends comped X.X% the the costs. and deleveraged e-commerce in to per in dynamics was face X.X% retail-only about of income promotional X.X% basis XX last XX Product points X.X% comp and ticket afternoon, with quarter X.X% about by in and while profit XX up points, associate channel. for everyone. store channel, salon openings with contributed most sales the growth. remaining billion driver. the points due growth growing to an comps. leveraged XX merchandise deleverage which basis category you, in average the brand by transaction the a remained from comparable sales negative. basis expense XXX business points, versus headwinds part were basis rate and basis the by We fixed growth, expenses points bonuses. basis QX significant year-over-year, just to mix Gross in total are average Mary. leverage about The one-time statement. bonuses The of basis to strong increase decreased contributor store deleveraging $X.XX Store labor for to sales attributed associates. one-time flat XX from pressure offset margins remaining modest points

As prestige holiday more deliver the shopping season to well basis as we strong during boutiques, to optimal overhead an expense continue as points Corporate deleveraged peak experience from about slightly. benefiting controls. Advertising in days. hours in XX invest guest during leveraged expense

we basis. As XXXX in quarters. shifts some of in planned points a some margin the basis of a GAAP third of reminder, saw came expenses and fourth sales, the Operating on the timing XX.X% first into XXX the was upside of quarter from the advertising down of

Excluding bonuses XX.X% of associates, to XX impact the sales. points decreased hourly the operating one-time basis for of adjusted margins

the in profit week our was to about rose The impact XXrd of million the sales and tax remeasurement third million. from in SG&A pay share benefitted to by EBIT. Turning totaling EPS, the and XX.X% XX.X% by $X.XX. bonuses and made About adjusted both about new per associates gross one-time worth to decision $XXX The and $XX tax of grew total effective million We quarter to $XX.X the in reform impacted the deferred $X.XX. hourly the EPS X, $X.XX starting to two-thirds GAAP $X.XX. tax rate expense earnings and one-time January impact lower EPS reduced impacted a

of light on program, throughout by investments. management. systems new prestige comparable demonstrates the the drive capabilities, volatility for sheet of million cash ended boutiques were and the million opening primarily new lower are performance planning fixtures. positive and is in holiday than inventories quarter expenditures basis, the driven below store in investments our per inventory in This to improvements driven flow, boutiques. X.X% $XXX expected sales year, inventory $XXX were season. with brands digital well on and up the short-term to We in sales particularly and and Moving This sales merchandize trends that working a our merchandize cash store balance new Capital by for

a XXbX-X added during of terms shares of of In buybacks, per $XX program, count the earnings resulting share our our stock through $X.XX to repurchased we’ve lower approximately share The fourth share. million QX quarter. cost at XXX,XXX

remained the the As back March under announced available of repurchase approved approximately of Board new in program this amount million. the share February $XXX X, million week, XXX XXXX. XXXX, repurchase share $XX Earlier in a of million Directors authorization

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

sales expect drivers as in in with plan comparable on deliver earnings execute single-digit projects. new Our share and XX% we Mary have and per to relocation growth in XXXX initial open the and some our described, XXX the keeping outlook range. evolved, just XXXX With XX is remodel of high net stores to

Our low-teens recognition. QX e-commerce standard range. in of new fiscal in implementing impact top-line business is growth expected to we’ll the accounting the Beginning of for including XX% revenue a this the grow XXXX. planned year, is week Total in XXrd in the be

such accounting comp $XX As engagement see margin up SG&A. impact expected to and card a is from standard significant have expect some which of from we in classified a by in more than Total retail by this mid reduce recognition basis increase partially company a operating with by about income now Ulta comps other range impact million previously of the expected single-digits. reserves the X% in be in the revenue will Adoption the Beauty are and sales. has to of X% the about being sales points. XX retailers. breakage, change program, to the be sales growing into loyalty to credit customer loyalty high were a result, Since we benefit our This gift program grossed offset to card rapidly

newness comparisons in for throughout as to strengthen We our improves. ease are planning offering merchandize comps year the and

base. We the in approximately basis a on grow expect including per share GAAP earnings the to XXXX extra week XX% the in

remodeled expansions, $XX in for adjusted of the million. growth $XXX for for expenditures the Earnings million This expected growth double-digit extra store anticipate breaks of capital and is million. maintenance tax impact We equate approximately lower be other. down EPS boutique stores, and for million IT, XXs. $XX lower merchandizing to is growth. the and $XX forecasted would new $XXX to approximately million rate low the $XXX chain for Depreciation and million EPS Excluding at the week, supply

We social in expect allegation. reputation include to is repurchase for comments million recent tax protect shares any note like rate the our Ulta Mary’s One $XXX to the guests year the not This to and range and related the does media be the guidance add confidence to continue actions about XX%. expected to we Beauty. may annual have brand that highest take our ensure to in to I’d

that year expect Analyst we to in share we fall, per still further modest last host to the XX% to XXXX, and guidance expect next long-term Analyst for at to for we the the Day in grow longer-term As our our range Day in out gave which and our plan look outlook XXXX, We expansions. time. at earnings late share plan margin

to million Turning the expect million $X,XXX for be to the of $X,XXX guidance year. sales specific more we versus of XXXX, to last $X,XXX in million range first quarter

sales quarter a sales. new the for $X.XX in of understanding to last We the from X% sales and today year year. rate $X.XX of accounting are had count than to as XX% our E-commerce last range of investors beneficial is versus QX as in turn the over it XX.X% detailed range in that for the compensation, expect plan the compared of tax comparable to X% share the that timing $XX open have in The more to diluted We resulting earnings from is rate year’s complexity stores to last earnings herein the Recall year. XX be QX benefits back range. equity is that that, deleverage. shift versus of in XX grow to $X.XX a per increase to bit has and first to slightly quarter, operating been rate And are expense estimated press usual. to in the at share be in upside quarter, of with comments preopening to and margins We half fully expected in at expected QX Diluted a XX% to planned outlook expected well in we our to first million. with XXXX. hope deleverage tax Mary. back release meaningful change expenses expected I’ll

Mary Dillon

and just our you, awareness. prepared And on our wrap significantly and and shoppers. members supply store we stellar our overall Thank significant winning Scott. new imperatives on who percentage I’d growth progress delivered new the accomplishments with out XXXX driving in engaged grow omni-channel and We passionate, up customers millions that’s sustainable some We made give We importantly culture. to of reflections like comments plans throughout adding in performance. the attracted associates increased X.X our year. beyond. added our to in infrastructure and achieved prestige workforce the I dozens am capabilities. and to brands new impressive of highs loyalty really drove chain confidence market executing million net a all-time brand sales of brand assortment, tremendous boutiques rolled us productivity. e-commerce across create continue gained leading revamped growth highly We share and develop XXXX and most XXX we We profitable all our categories, offering. services All sustain We our successfully perhaps, improved in these strategic

gains make set us business relevant industry to support and us continue strong share years for Our in and differentiated investments market many will apart, making the are remains beauty and we the model to come.

host Q&A. So for our conference turn over now, to I’ll call it

Operator

from your first Please comes from proceed Morgan. Our question with Christopher J.P. [Operator line the of Instructions] Horvers question.

Christopher Horvers

Thanks, good evening everybody.

to ask So, your plans promotional about I promotional and promotional posture. wanted – your the

you at quarters you big sales like to you the like looks I past where end incremental think drive are it question trying over looks to the added to the a guided is promotional catch-up two which had street.

in how thinking are So, light of works private Rewards differently, have run Ultamate those Do would the around And the you think in especially those? as a about you you about think retrospect? are you program? of you how company, some doing do XXXX

Mary Dillon

Chris. Thank you,

which to stepping demand great me going have one many share gains really Let and drive striving are context deliver profitable just providing by different back our always start value and to guests and we that’s we growth. and drivers some to is that, equation

So are very are and less easy target, consumer those to because lot maybe track demand see right. others are drivers so, and a are of of folks on they some targeted

here, that competitive dynamics. those a I would what can do tactics is flex we say, So, and it’s as category the thing given timing great needed

I over out, guess, increased targeted discounting you and price four to program. our context loyalty our said, years more reliance as offerings through set ago we broad So, really on reduce

We price spending tactics the because done into out business I of we’ve and brand that, is, say significantly of much building that. promotion and also tactics healthier shifted would awareness

doing the loyalty the So, confident appreciate are our partners, brand what levers. the program are right they in and I and that am we insights these with data the

drove approach. and to to point, share at an But actually gains, the off said, quarter, fourth margin your the the have and take at incremental end So the of we we rate. the slight traffic of I a levers XX% very had holistic many postcard, headwind we end quarter, did as

other less So, on in cover fact, tactics will promotional visible. that less we are

overall So to more is slight net-net, in driven that e-commerce quarter the promotional. really was mix by promotions increase in be of only which tends higher there largely a and the

is I’d about – more and say, goal and getting this how personalized constant- we one-to-one your question the more know do for us. that – to So, over more and save is looking we time forward,

Our program to do that. allows loyalty us

share growth But an the investments the the drive talked business. gains we’ll well. of tactics of in of levers I long-term to use to array to and about Some as continue

Scott Settersten

And and we just I hot weekly to button a add, know front. move course like every the investors that all analyst is because the for this reports tracking would I on of read our promotional are

Christopher Horvers

Yes.

Scott Settersten

stores, other – our postcard fact the one helps drove it a add is, to mitigate it’s business, other to particular, So, like traffic I’d which of right. gross potential in lot risk to not this margin at

in still holiday of products, residual move through helps us stores. in that’s helps through the that some case, us So, it clearance move the this products

are sending vendor, a have the you case at so, end write that where it the or at it cost back worst vendor profit quarter. sell rather shrinkage to off And to potential of with right, labor support than and having to you able the use a

are both outcomes. So those worst

thoughtful try we how about we we execute. the be to and again, make decisions very So,

Christopher Horvers

I one quarter. want a share mentioned and as to just to make used to sure cosmetics out react range X the stories in market maybe more of also you pulling there the guided these narrow you defending throw to of to foreshadowing, those X to are in, the potentially you new And potentially seems first about having out some

So interpret just trying to that. Thank you.

Operator

comes question the line next Our from of…

Mary Dillon

so. wasn’t we follow-on Chris, if So, I question a stay I was that that? not a on pulling, am sorry, Could tracking what or out, just question if

Laurel Lefebvre

repeat can is Chris gone. you he question? your Okay,

Mary Dillon

I am happy to wasn’t answer, but clear I about.

Laurel Lefebvre

let’s going. Okay, keep

Operator

The sorry. comes of line I’m next question from the

Mary Dillon

That’s okay.

Operator

Nomura proceed Instinet. your with Siegel from question. Simeon Please

Simeon Siegel

Congrats on year thanks. Great, a strong guys.

am these And there mentioned are openings Thanks. continues So, any how Mary, profile? You I maybe stronger did ramp? gain awareness, sales maturity a you new you brand going? seeing just just about as is change your wondering the can to are talk to store faster the new productivity. store

Mary Dillon

Yes, very strong be markets to stores overall that’s very as are so right, of I continues comp. up mean, our are going I continuing penetration. with maturity Productivity each comp the build on stores, a where our to more ramp in to have the better. year it But we am we continues to new of get ramp and The of seeing that are based we continue overall gains If we are flex to stronger. markets, allows store is share we enter that new we class very and adding encouraged function already as in even market share drive right. stores, to overall what to openings encouraging continues market us store the and

strong. it’s quite So

Simeon Siegel

Okay, then, thanks. great. And

going you sorry Just forward? I quickly, if gross margins Did quantify can you Scott, what missed to it. shift expect did mix do you, quantify or to you

Scott Settersten

expect it. as right, that’s tell you inherent now process. flattish, We time, to long-term would thought merchants what’s for manage been that in to I didn’t quite merch said in some we our general we quantify

the we but over is believe there opportunities long-term. So,

pretty again, obvious. So e-commerce is

are to we and continue us. has to headwind recent are It looking quarters that’s going in for been planning things. will so a and So and we be be at

getting our will be couple over our to the We as newness have have of DC last course Inventory well. limits smarter new productivity offering a as place in and just and by merchandize of in the ways years, private-label we’ve analytical better tools mitigate that our well. of we split about assortment we gains, way, that our future, it decisions think put making both might tools use

closer better we on thoughtful are and there. are better make optimized we that decisions capabilities, sure overall are our where to there with we performance these Fresno, place So making end-customers to

So, over long-term. again, with helping the transportation cost

Simeon Siegel

best Thanks, of luck the All year. right. for

Scott Settersten

you. Thank

Mary Dillon

you. Thank

Operator

of Morgan with Please next comes from line Stanley. question Our the Simeon question. your Gutman from proceed

Simeon Gutman

afternoon. your of to Good think that we has now, been make some better Question you us a still while robust. growth sounds time where, of investments like, a Mary. I are it than off making investments Thanks. peers. for And at are lot think needing some was Ulta relatively would

to I mentioned revisit investments the XX down And some outside you caught it I and is can XX, nd the mix extra know think margin so, e-commerce I margin of of that the changes don’t know, headwind reasons of I but how adjusted accounting the much within face? and we outside to labor shift freight down you if and why guidance, A the of that. you’ve it, some the

Mary Dillon

we in Simeon. first with you, I’d got a and all making feel in Okay, back great guess say, we I progress return year I start investments question against we really investments, make smart great. five that we’ve a why need really strong that Thank communicated about And think the track had significant I’ll to XXXX. fact, of of we’ve earn plan the record

is on have I share performance, changing maybe and ago. and – four and thought though would well not. gains say so ahead we years are measure comp We more from would I what sales rapidly guess, you that, dimension every profits, really retail might

very feel I invested opportunities So, simply tester good the us to accelerated about that frankly with is an the now, to investments format up pace. This and we’ve have opportunity the size forged made.

talked I really strength. And dimensions a about, position investing some am of I from the of

business very us are at doing potential, growth our and continuing pace but I to of on adapt model and increased allows the confident our to maybe think about pace are retail. invest passing an in to change We accelerated guest expectations

opportunity solved think So, the for margin, I us. we not if would of that’s ahead we maximize

we of guest-facing it’s of more it’s as more friction future So, physical a really, both think about as a intersection investments, and commerce. this on about and that’s people, on discovery, imagining of initiatives the personalization what well digital on experiences let’s you when focused think and might those of world what and

in we continues for we it’s way about you allow the believe us that are that it a to and do be really pace to be. us, beauty continue leader So, how and just do to in that

simple So, as second it’s to question? want just the Do you take that.

Scott Settersten

by for accounting labor, remaining guided to to primarily one-time a to kind say accounting for Sure, year XX The so, basis going XX a the got from connected labor, of you for would the boutique change the XX and transactions. on points which that’s retail for I to loyalty down to, the is Simeon, the you item guess, XX big store driven driver the basis XX think method strategy. that that method cost is I changing the the we of mentioned, I points

past implications So, there. a lot talked cost in the about we

in historically. more had the going So, notion XXXX, into stores comp in we that’s back accelerated this than talked are boutiques into we’ve in a through of us past. expensive Historically, of which new that they because an base has are the the been depreciation been for more going proposition about better position

from are earlier. and of half as we the tax that is thought SG&A in rest of store the the piece as would have really that we boutiques the payroll this is with So, most the biggest about reinvestment SG&A then of up does labor, what And well, ends I which in we accelerating say line. the benefit year in say, back largely,

Simeon Gutman

Okay, thanks.

Operator

line question. comes question Crago next Research with Kelly from from Please Our Group. of your Buckingham proceed the

Kelly Crago

mentioned of talk And be did taking prestige able And to Hi, that outsize question. appropriate grew you my some your then, to in feel of Mary, lapse could piggy participate do haven’t level growth? outlook? been to hear about for you further, first, just cosmetics thanks the that category then, thoughts category, the an little are it assumptions introductions, XQ? begin how a what in backing the your just we brand great driving on celebrity in. you which successes what as of growth would And that, necessarily of some recent normalized you on the

seeing you. So, a be you get involved this if And to in Thank so, trend? are to you any bigger expect do a opportunities sustainable way?

Mary Dillon

Dave, Great, in me we that you. are so you I to say, the right. and to let guess, our we categories all reiterate, about the thank am it all I share channels start continued in I gain going in, – I’ll pass to think would we’ve

a is And we last for growth. So, in XX%. so that year participate lot being lot us, categories our different the there And have to quarter. prestige, was we comped I’ve of ago, – around a we drive different past XX% a in of in items that

we was but rollout. strong continued still it before, to So, not growth, have was bit, were our – brands that great prestige that as had it a brands as as beauty year great really little some strong,

in lot of I to growth strong be a going more confident that very new We of talk partners segment about can have previous coming really and brands some we in that innovation other to mass work and a didn’t ways. the well our year. prestige which But feel that strong innovation had both as see as very we different and that’s continue brand in

your all are those. across many to of that are one a of and brands we point brands, about that’s participating out that in So, just there celebrity levers of creation terms

So, I that would not move out.

ways get lot to a we think, innovation there of that for us is I are.

So, on a attend color and more little Dave, don’t you that? why give

David Kimbell

said our Yes. while by total to mass unique for prestige on makeup holistic Beauty, strategy over and but business, move business, important business. really because that’s Ulta into On just part prestige, talk as cosmetic our building we mass approach about at get obviously them to into yes, our an question what want add and our introduce I’d makeup really time of our and so, prestige, I take business guests into a and help your see about was – then – we the Mary both

But growth and very just – areas continuing very in success our the how we integrated of work few our makeup a in they So business. to call build – way. assortment building or I’d core thinking and about a out are

our continued brand talked with success foremost, in mass. and and about that it about our we that and also some performance in partners, comps with the drove that, Mary strengthening of seeing the prestige brands biggest First are is established

as forefront So, that and Cosmetics Beauty Maybelline forward L'Oréal the prestige brands Faced side. the growth It of Too mass at collection driving as well on TARTAN, going our on Ulta Seche, Paris side, like the

XXX adding stores. new mentioned rolling boutiques we’ve on are Lancôme, NARS, We prestige we’ve partners the E.L.F to brand but all establishing We mass been on Clinique, Lauder, new key the in across couple largely a out, that rolling stores, times also at said of also, side, stores, side. more Estée benefit MAC,

success are of We then seeing launched last on them say, I’d ColourPop, brands Sleek, continuing and the Flower. brands has revolution are expand are exclusive Key growth relevant, is lot late socially doors success For socially-driven these exclusive lot we mass the brands, that, on T a that Tarte year. brand side, Double been Beauty are a already been Ulta are And Milani, smaller side, many seeing launched expanding ULTA exclusive of partnership. in out. have big that subset successful with. we a big of to Duty Morphe and seeing we success just great mass to brands of an in lot and makeup of a part So, Brushes driving a and of

Ulta. created is an the by which Beauty Cosmetics, an prestige of by brand. On Storybook which side, exclusive mentioned online Dose POPSUGAR, Mary Colors, is line

have impact and are several few last last seeing marketplace. six brands So the the months over got having just we a launched major we’ve influencer these that the many over weeks. that led in brought We

on then about we the is as thing last of we’ll all see I’d and a the And we very the growth makeup and to but the we rolling addition So, reflective of is, view cosmetic there. example of us confident of growth are business that aspects holistic reinforce see excited that into that small of the very another dimensions a Beaute doors, all about business. number Chanel in are driving just

Kelly Crago

thank you. Great,

Operator

Our Baird. next of with from your question. question Please Altschwager comes W. Mark Robert from the proceed line

Mark Altschwager

question. afternoon. Great. Good Thanks for taking the

So, out early relatively years. years your comps stronger lower comps the the prior in long range plan called in for

for to in are X% So I of of growth is guess, the sustain question is, would how longer-term your without rates to the great about to Thanks. to you a these much, Just, accelerate range longer would time? and personalization algorithm. comp the period at you hear allow some it it previewing Day be you investments you as store in least Analyst expect growth comp the thinking experience? reaccelerate too X% something Or fall this would

Mary Dillon

really that held you, I would little have, need any evolve be expect preview. to like is to business can’t I we would now I of Mark. but, which thank is again, that Wait, think about we it’s don’t to do which that helped a that, there sustaining the us. retail – the and right going and comps it Okay, I not am would out for all

as just sustain are So, are about. strong it’s to that when be kind the and we investments, we we really these comps to of talking think about continue as

come So, that. on more to

Mark Altschwager

Thank you.

Operator

from the of your comes from question. Piper Please question Erinn Jaffray. line proceed next Murphy with Our

Erinn Murphy

you anticipate customers? how X do customer question was I membership. at I next pretty the million loyalty acquisition for the million continue then, Mary, strong thanks. the of XXXX? growth XXXX to you that the if following of was Good about that The million my XX.X you are guess, thinking into growth get said first, you to you how Thanks. think year, And regarding the guess, in cost I Great, XX up afternoon. end

Mary Dillon

had, really we’ve a loyalty and there associates members in some are the more at is still, I’ll XX Yes, have start to that Dave But, just we fantastic that out as beauty million with kind said, program. this. of add growth drove our is lot which there and that almost we not are

grow anticipate So We know drive to continue be strong growth at growth. we’ve to able it. albeit pace to to continue really we moderate had we’ll over time, a

well, like So, to you answer? do

David Kimbell

increased and far a do Yes, then in take her not efficient plan and unaided store. our I’d into as to drive cost both prepared our guests total dramatic we and new we more are which of we mentioned drive aided say, comprehensive remarks Mary acquisition, awareness, marketing seeing and to approach as the a finding really done are change got store talked to their do contributes both a at our non-members many that our very the and to are our know very supporting marketing have anticipating about stores that we good total new job improving through converting plan we of then We’ve continue I’ve well strong items into and XXXX. effectiveness growth. they members as brand will ways

a our So efficiency we program. are into not in expecting our new of real change members attracting

Erinn Murphy

That’s just has more, Okay. still the or If Thank card, that sneak that neutralized on one is now? credit gross you. a on can helpful. I in margin drag

David Kimbell

context to drag. no, put the into am I trying Yes,

overall, has mean. spectacular I the So, real card business the for been success and tailwind been a a it’s credit

Erinn Murphy

offer XX% the came The [Indiscernible] that with

David Kimbell

clear. and Yes, that’s yes, through come so loud case The XX% offering moderated. didn’t that

are ground that impact got margin last had So really with of really rates the margin in overall when half subsided recent hasn’t program purchase the been quarters. year, talking off the initial we headwind initial once about the sign-up here, it rate second we an

Scott Settersten

very impact positive. Net is

David Kimbell

Absolutely.

Erinn Murphy

Thank you.

Operator

Group. comes Advisory from with Our from proceed your Dana Telsey Please Telsey question line of the next question.

Dana Telsey

everyone. evening Good

to? thinking and future that versus e-commerce the on any with and do any you. performance, the do base, how makeup are makeup be that build? changes the we of Thank looking should the see expected rates about you’re this And store what in you you see than stronger As then prestige, category saying going with given skin to potential the on just forward changes base growth care you store

Mary Dillon

are that that the of with real Great, we are estate productivity with thank situations, I that very I’ll We in the advantage retail. you, have, continue obviously base. opportunities, closely us the to thrilled and And think ability the look to Dana. take at right start for store

So, and the because it’s the to we right. business, love e-commerce growth incremental so

that we more don’t online and guest continues shifting guest. closely of omni-channel a to not in at it’s and So happening – you know. analytically, purchases best the she look as store buy even here and We have becomes

closely XXX and the stores right that we and won’t feel we to the just to spots make year. base So, are But as this picking are very store that. build it as say, keep that I at out sure look going continue we open we encouraged, we watching

We off in are we place. very to already we the strong right and think start a are

On the why don’t all take category Dave? you that stuff,

David Kimbell

seeing within – that down yes, of we some portfolio prestige. and are specifically, on both category They the about and both we signs XXXX I growth. makeup talked the the but confident items earlier, strong are Sure, slowed on in mass through our about of

and makeup will trends improve that our that So seeing anticipate the we we model within are optimistic at business least and across market. our

skin Roth, recently several of the we we that expansion I’m growth we Peter XX by far Mary highlighted last with and on incremental you then skin also are Origins, our we think pleased because, mass As on the accelerating mentioned new care prestige Proactiv, as And drive with care, of results skin continued strong Beckham. like men’s care has very but been David launched, seen actually and Clarins. Thomas we’ll skin about, week are brands Again, both glad side. Mario brands asked that Badescu, also performance with some just the excited House business, that business. we’ve

of certainly and So, lot we category way skin in we that the see as well. think, we and gaining leading share a marketplace are , in growth the across

Dana Telsey

you. Thank

Operator

the Markets. comes line Gere proceed Capital Jason Our from question next from of Please KeyBanc question. your with

Jason Gere

might and again. go Mary, ball good you that need into thanks, Okay, I afternoon. to crystal

program, Scott, wouldn’t some some optimization the runrate? a cost guess, get of the use projects, I mean, XX the I points, I you but to restructuring, bit because color level on about this I to could guys that down when Did through, when call ball I that margin we optimization of really going and guess, that think of will contribute wondering that you forward What detail? you the of of how just how, the half be question, would to XX is get gone details, be you help this lot the then, answers. if outside going this haven’t of gets on in how year? year? is want next year? little program, offset year will reinvested think – year, this now. consultants much And the full of then, second I this cost can it – And basis about Just the much much but So How was hope of some you crystal into

Mary Dillon

Thank are dedicated am a doing position internal also strength. start a of formalized program in couple a we One of working you, on and process we leaders from with that thrilled really things. Jason. and we that is, I I in place a formal are are it saying by

do to more identify business, way for time years how and do think I to think smarter the and come. our about it’s for business So in opportunities growth drive efficiencies to the to right many we us scale take

way good we So, the of path we opportunities. like I the identifying on start are But but too when, about what to going look and getting making. specific buckets to early really progress that’s are feel fairly about of forward

Scott Settersten

the just I of this think good have spot our would we operations. might are what I historically I a you team committed on to this be mean, executive working through. here that, seeing seen curve guess, is other I maturity ahead in add in in to

a good going and hard about are plan multiyear are targets this really it going the there to this stage. lot XXXX we Actually, share to of in but we not is be program. a is at specifics, So

Jason Gere

have the to out look there, gone Is kind when follow-up cost-cutting it beginning, at of the of department it they near some of you I the advantage, tail-end of, efforts think this the we I at years? through guess, past that here competitive mean, of puts in other about just competitors of programs you fair whether as say, the those couple to type kind aren’t a next in stores

Mary Dillon

Well, it will.

changing long-term investment ability I invest the kind it the of a in to environment. the for and is it, us shareholders mean, right the of returns short-term to ahead are that need expecting, in to business drive think is really continuing while many, that growth the So, retail continue to that for many our years and time idea about of has

less it bit So, frankly, I little cost-cutting. think about of

it the now I And more think time invest do that. as about efficiencies, driving growth. right in us it’s for to

Jason Gere

great. you. Okay, Thank

Operator

proceed from RBC question from next Capital line your of comes Our Brian question. Please Tunick with the Markets.

Unidentified Analyst

Thanks on question. for Brian. for This [Indiscernible] taking my is

think sales I mid slow Just ticket do wanted years about a here. might is And so to from here? product you different the then, think that been ask growth, about single-digits be starting little around the reasonable is to maybe for say you channel aware of that still maybe opportunities or it’s XX run Is events How should like to a lower it to different over we the three and grow contribution there the believe every but, XX% of? assume last of the that comp ticket from ticket or have planned growth promotions, you that year? anything participation off-coupon, I kinds the this, average secondly, mix days mix, the from missed almost vendor do

Scott Settersten

maybe deconsolidation. I with so start can the comp Yes,

it’s over couple with traffic of a way think especially mean, us ticket business. on always of balance we contribution. we outperform plan traffic you’ve years, side of the versus I things. when That’s the seen healthy business, the and that, our about the So, a last

materially ahead at moved there balance, way of nothing anything wouldn’t we we us the say, that would a expect stage that it’s think again, we the we – this would is than different game. about, So, of

David Kimbell

marketplace – and our are continue they with item as closely our to deliver our to in far very supporters say, we are the individual into each Yes, of other promotional experience we close and work do best get than and about I guest efforts partner brand as that. key we’ll very our to just support they’ll specific of active activity, details the guess, – to brands

Unidentified Analyst

Okay, thanks much. very

Operator

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

Adrienne Yih

timing the impressive could on SKUs stores, first congrats many Good afternoon a Very, how land bit very if about to Chanel all, you Beaute. don’t Mary, everybody. how categories. of and talk with along many care them. of in that? Why and And of the little cosmetics, of relative then two care Ulta then, those skin Thank size size your penetration market you. that, the prestige within – prestige skin to

Mary Dillon

Beaute well. Chanel But I to of a all in not Dave. we out small I’ll pretty a we with start. you, much thrilled as Yes, tag with are am number stores break It will that detail. team sure Thank be this so –

brand. the starting Connecticut beautiful Westport in weeks, of assortment, next at couple are additive We

and continue which that So, help will partnership. to deepen

David Kimbell

COCO And most the skin are assortment items. Iconic the about ROUGE Mary items care Foundation, we excited as their Screen in-store, feature will and iconic said, LIPGLOSS Blush, highlighted will be the a highlighting Lipstick, presentation really real assortment, it but

think their we into our a brand nice of be presentation really a addition portfolio. nice it and will so, And

Adrienne Yih

Thank QX, reverse clarification, can having margin, on the in much. margin are we that think Should pressure, pressure in – gross or then, itself Fantastic. or XX.X then is against year-over-year. itself then just you think QX, more and stores us about a little because I relieve And the And you operating opening year-over-year GAAP with more bit help a very QX? the that you the for XX.X? Scott,

Scott Settersten

Yes, guide so is, operating is versus it information. to the so margin the GAAP guidance

Adrienne Yih

Okay.

Scott Settersten

toughest that. certify a we glad for is QX, And To this probably the you because year, question, people, QX then, right. of asked compare few I is our stated interesting important times, it am did

into pushed some a We the quarter of of back last first out some had comp XXXX. So, half expenses – we XX we year. had

So that helped us as well.

mid-year say open that up Fresno to mind So, there in in supply DC next a keep the that’s things other is would new we California, I year. chain to deleverage got going

store in the right early part So, the of in and with some the then the there year year half deleverage then improving of the are you program. slight and back on

ago. higher stores up online, the right, in XXXX Manhattan than call carrying year. quarter we are the that last I estate, those early are the first cost most So what would lot forward, real kinds against more put notable year during part still that half of a a of of being Plus, we year. up of some opening second we

leverage, half So, year, in the of the improving on. again, first but fixed tougher as year store the goes cost

Adrienne Yih

forward Thank Okay, be great. the for detail. to Westport. We’ll looking you

Operator

of Cowen with last from Please your Our Chen and the Oliver question from proceed comes line Company. question.

Oliver Chen

thank Hi, Mary, you. Scott. Dave, Hi

thinking pure the and Amazon the you how What’s experience of evolution Our in shifting just play what you do engagement? sure you terms are the a experience, question on have needs is in consumer and your about how mind driving the you are and and competitors. customer along and competitive other advantage value the of of store value context make of of prioritizing to state personalization can the

Mary Dillon

category that are I question But I in to digital, leader say, we be both for try the does this the category experience that. both. I would all the come, stuff. else on enthusiasts so, as The many as services and consumer well as really in-store both nobody discover physical online buying do loves we we as to positioned well really a it’s offer above the a great focus who well continue conveniences a and to this and and will get to really what us, in Oliver. really and beauty believe the to is space years mean, on and we

the of that and in-store keep I’d as we experience loyalty categories So program better, our needs online experience platform price the to content, guest build all great- we great e-commerce continue to across control us and it right. Services, that is getting product points, experience, about just e-commerce say, our assortment at platform, gives way our over out think data. great a the pricing just the a

ten to as and years the So, future we now that digital intersection believe imagining guest about think experience what that’s five and that well wants and physical world, the think job as is have physical to are want positioned we we of continue We But our we model. do. in to still from the well. like

but it. we we So, think competitive It’s that’s playing how win. are about to space, we think a

will. we So,

Oliver Chen

ensuring job the what also to as journey, slip follow-up, are a about a inventory you’ve stocks do well capital chain them and speed you about of where the the are the customer-facing, What supply you terms to and and of inventory. omni-channel as the steps accuracy. in both system service thinking next lastly, curious And turns stores, in want Planograms as well really the regarding levels managing good quick just and want and in be the on as as done in the for inventory

Scott Settersten

respect innings early still inventory Yes, we with are to optimization. in say, I’d the

have mean, know at or shelf time the shipped to ending you interested Whether right door. it’s the right in place, as store a never is it’s her products, ready on what our I right well purchasing. to to she So, at quest, centers the in front it’s right distribution

planning been over a how in try space you and slip to get purchasing things last of to into better to capabilities and the kinds last lot better So more number better quicker for us tools, that stores. one making we’ve and of of analytical mentioned will our continue. is folks. evergreen improved the of couple be with efficiently ship again to three quest behavior years will four significant the over a insights we I our mean, the That in investments That’s course years. tools have

So, there we lot when as be about future. think to look of, us of I we a inventory still there guess, inventory kinds productivity a lot and I made of turns to say for is progress would the things

Oliver Chen

it. Thanks for you. Thank the all details. Appreciate

Operator

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

Mary Dillon

by close associates to you. provide guest for speaking I want for you commitment a in exceptional experience and of XX,XXX thanking their with our look delivering financial soon. results XXXX. forward I to Thank all to

Operator

teleconference. today’s concludes This

you You may time. for at your this Thank disconnect participation. lines your

Ulta Beauty (ULTA) 16 Mar 182017 Q4 Earnings call transcript