ULTA - Earnings call transcript Q1 2018

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Operator

Greetings and welcome to the Ulta Beauty First Quarter 2018 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, Ms. Investor President, Vice Lefebvre, Relation. Laurel Please proceed.

Laurel Lefebvre

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

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

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

Mary Dillon

productivity, share balanced of quarter, comps major as imperatives. our in $X.XX sales, XX% a up XX.X and with delivered program our continued business. to is year-over-year. add grow mass on The boasted store CRM and [ph] I categories even remained loyalty market newer XXXX brand continues of all differentiated reset reflect earnings end our store starting across To growth. quarter to fragrance while progress quarter earnings accomplishments retail highly model the grew rapidly some benefits and XX.X%. the skin engaged highly relevant our capabilities gains exceed growth, loyalty and our and the everyone. strong continues Rewards first it on XXXX. our expected teams healthy results well prestige with sales update assortment expectations. to reflecting was was our members, Ulta business steady our share first afternoon, to the program Good Elite including Ultamate drive loyalty as the XX.X% financial Diluted program, Tier new Diamond we our awareness. of will first as from and key program recap off active in strategic the and Laurel. boutique team of converting new strength card our growth personalized, At These you, and of guests cosmetics XX.X% successful of our elements into you million on and of X.X% results, of same-store growth, Comp to members. our better This start credit driven transaction Results brands. focused continued more top outperformance Thank the performance enhance than e-commerce make program, ticket loyalty continued Beauty sales by on continued topline the care, excellent per that

margin cards incremental distributions partners. our through our strong growth dollars. of by to sales we third-party significant continued expect are XX% In demonstrates XXXX, growth including an increased of about sales by third-party distribution. Our in more gift first This card rapid sales XX,XXX channels, in card area through all and the sales continues analysis be because emphasis gift quarter, gift for driven doors in as we add us that driving

Beauty first-to-market and Spring execute collection, partnerships and Beauty included and and Newness, Cosmo partnering with social shoppable RefineryXX, Ulta marketing series editor, a our To with streaming the as team our Of our digital promotion. Carly quarter, as leveraged XX celebrate collection with Pandora. Days Cardellino with signature posts. During video elevate Bustle, new Facebook we the on Spring and well contemporary with on This position to focus Beauty partnerships as a digital brand. Spotify support POPSUGAR, Newness, Cosmopolitan the and PR trend-right focused Ulta to to and increased audio We programs and

Beauty, with navigation Of Waze, the Days crowdsourcing via partnership XX and drove the we to For a navigations takeovers. app and pins launched store branded

views. X.X Bustle’s with million partnered Instagram Series, also Story We driving

Another Days shoppable Steals is through paired promote innovation spend Overall, enthusiasts' with media shifting our and more videos gifs and lifestyle. Daily streaming with digital, to incorporate with products. influencer was content XX to audio into television tutorials align streaming beauty digital-first the to Of Beauty shoppable

in XX% unaided and brand compared year Days to these of X to a quarter compared month XX% to levels XX% our jumped for for Of points are year. and Now XX% marketing Beauty. awareness of year. These with the ago, comprehensive last concert programs April respectively we awareness plan the marketing awareness the levels first XX%, high supporting to achieved XX% at Aided around was rose last XX

categories retail at half the of in Morphe cosmetics, in reflow plan cosmetics smaller turning growth. stores brands, also our further bath, boutique strength all and as to quarter, skincare, quarter a several in later doors step Now but accelerated its Mass rate We environment major expand are fourth year. completed about up and the from I fragrance significant and prestige direct-to-consumer merchandising. first Beauty. highlights currently. earlier brands, mass the to a This reflow to such new quarter, reflecting this including in mentioned the in of Ulta robust available Morphe brands, only suncare growth after which delivered categories in a ColourPop, prestige

to continued expand additional in throughout have best-selling year. brands We opportunity other stores the

XXX benefited while and our the added products in MAC, with result. Clinique, year. more out include Tape far a about and overall of brands new success newness of with some steal guest so benefit launches; which the We've contributing a NARS, the Tarte, on drive during XX their Beauty and We very are built brands and classic those our interest which from planned muted highest prestige which Benefit the bit The which events. significant strong Shape top volume featuring performers growth still Estée with roll Anastasia, and cosmetics performance launch during boutique third beauty Line and Lauder over excluding continue new of comp. prestige quarter. category, doors had continue the to this Of boutiques a to the Lancome, of from others strong mixed growth into Days brands, a their four performing, boutique additional is foundation XXX The

pleased most year the stores. that brands of so Chanel number brand is are Beaute, compared to We which in we the now the exciting the early One first is expectation. few terrific to results initial our and off are of to stores new a this the with start accelerate planning

stands is Chief Ulta first brand be Another addition Flesh brand. shades Revlon's diversity Beauty of a XX launch this the assortment brand quarter exclusively cosmetics cosmetics and Allure Founder Former the for to coming Flesh. Linda Magazine. will newest and of new later Offering into beauty inclusivity. Editor-in-Chief and by Revlon brand prestige foray and this developed color to foundation, Officer called of Creative Wells, prestige is is This our a

as business In well. fragrance newness, to that vibrant wide strength benefit new also were Mother's media Driving house the Both Dermalogica, that comp continues from this Day Prestige fragrance to addition shade Badescu color First as significant offers pops skincare successful stellar a Gift continued from Purchase the encourage buzz line propel skincare growth as business. Beauty to Juice range, of from well Mario men's self-expression. and and the in campaign. fragrances, and Aid with as Beauty, social above newness

Bumble haircare assortment April continue wide conditioning an rolled in We online and an Keracolor chain is and also cleanser. which our color-infusing to XXX in out launched and doors, and innovative Bumble enhance

comps like to guests. in Drybar, Bumble continue have and to products [Squash] our DevaCurl are to brands and high salon add continue like evolve and brands gains brands encouraged healthy share opportunities market our brand Pravana, partners new Bumble, Overall, delight Joico, the we category. the we and combined and to our and by assortment with haircare New support with growth

on ticket increases. Services average driven to business. our and comped moving Salon by Now X.X% sales increased XX.X%

satisfaction we our the transform services development, as to education During rolled quarter, our optimization our Services our ever growing, updates and guest to menu, than This central for and out career before. model attracting, models, better salon is additional initiative talent well teams. as to support compensation delivering pricing, and our region. and by designed retaining high-quality includes business This

team within categories. events American the the to pro multiple and stylists secured We at destination and turnover. industry gain nominations XXXX. inspiring to salon in rates, hair nationwide. industry, commitment stylist April, These also complete Also, position in the leading us to sales, Hairstyling additional events Salon celebrate The talent in and new increases top see at industry talent, salon. the our entered North credibility. satisfaction, and to the and the guest help entire and service awards prestigious Beauty continue the and and in participate the and meaningful in The help Awards to to salon improved associate additional plans These top for events rebooking salon reduced Beauty, for retail. community participated hiring and XXXX biggest demonstrates Ulta brand the in chain satisfaction, are very year attract the attract awareness, which This to industry is this motivating the hair to our and continued our model introduce one Show artistry regions America's X,XXX in August us as trends team beauty nine rollout great of We plan finals

Beauty in meet quicker Turning to Bar latest Skin called new This we XX busy the our skin out and it's model the to guests’ at Ulta demands lifestyle. designed stores. service services, services offers skincare our model of rolled

provide personalized skin skincare spends by up space therapists a XX-feet licensed diagnosis incremental at Bar recommendations routine. brands for home and for retail of proper Our the skincare to Skin skin The space. also a with guests

the can continue or first We X,XXX a stores opened closed stores. stores. ending our Bars And assortment. in moving year to plan we and store in remodeled quarter to one Skin refresh XX new a with up the quarter evolve and product rollout we this So to on expansion, now XXX

brand price as the well Constant remain new from benefiting to positive rolling brands we stores like last quarter. XX older opened and continues the six And significant day stores out as reflecting on the New store are very stores. to for new be selection prestige stores. you're productivity note healthy, quarter, more calculating presence that productivity excellent store newer of boutiques in as if of MAC mature these Clinique of stores the refresh many

XX offers continued Of to Breaks naturals. Days and each a like our such on to Now growth Total Beauty oils our weekly comp business, our than was update favorite XX% driven online contributed E-commerce on our each which points skincare month, by transaction and company strong masks, growth. key XXX mobile response you Crush, newest Better expected company event, sales. Saturation, as site Beauty of Ulta.com like XX%, sales and Ulta.com maintaining trend grew of came total e-commerce spotlighting traffic up and XX%. strong momentum program, of representing Fragrance Skin focuses only our success while from fragrance XX% of grows traffic basis month, total programs

are our of in door well store in that We in brands or distribution customers as to initiative online stores Too online and online growing as to brands stores, from as only delivered Cosmetics. influencer Formula and only, addition Sugarbearhair our Frederick brands while Dominique use brands Vitamins, allows from significant also that like Cool Benjamin In purchase continue to be For items TPSY, of Cosmetics like available shopping see Korean IPKN, to Sol, Men's Storybook limited Touch home. including to as School, growth include in e-commerce Lines their Recent Wish well Fatboy,

as factor. try-on I'll And year enhance to app improved teams test try launch operations. to and on This closely guests Glam form for lastly, in find also of quickly continue later products our and finally, Lab buy up guests Our chain to and chain a online, supply store and working to we are color, sort and easy capability purchase by filter on very we IT store And pick make omni-channel capabilities. touch our our helps to it this easily. supply brand, finish e-commerce

operations Our performance remains that overall the chain continue supply recent investments our of growth experience. to very as strong our guest and leverage and we enhance support capabilities

door late tools and recently levels from to were quarter such per systems network. within brand to our product supporting comp down inventory the end-to-end launches, well X%, items inventory strong seasonal able the in and as to as maintaining planograms. through as capture we've While invested and Inventory we growth, support expansions transitioning in-stock to was and management we Swift, related improvements efficiencies inventory or the reflecting in event clearance implemented sell new

Distribution Coast the facility receive optimization outbound Phoenix announced delivering e-commerce West is distribution the on for next and our the business inbound are chain our for any supply Last care start mentioned evolution needs part or to shipments. to summer, Fresno drivers quarter people. never to supply we as easy improve is This well guests business. days to impacts that and all thing our our more retail store quarter do guests year-end. operational overall with of Center serve valued more less this construction plan of entails our proceeding XXXX chain drive our our multiyear of started to rest our year. base other turn stores in recently second the have investments, This We've for with meet expansion newest goal initiatives, we of XX% the an of to us will to help our e-commerce Our among that shipping closing completed sales is and but the financials Scott three the we for our needs of and our the track. are than of our network. in with ways detail to continue first activities which Closing of achieve quarter, closure great better orders efficiencies, in supply e-commerce increase was by and chain and decision, our the we find the spring. right step accelerating among outlook improvements, associates growing of rapid that, I'll the discuss and as over We And our as to

Scott Settersten

was deducted revenue of Mary. store you, the XX.X% about with income income everyone. The comp of Thank driven of new represents gift made strong statement, These increase. Good accounting the retail in recognition average based and value price was retail-only impact of afternoon, $XX the This traffic now comparable percentage by flat. for transactions credit previous increase points comp from up earned e-commerce X.X%. breakage, X.X%, to comp was gain revenue three well up as recognized by partly and Including company X.X% program by versus comp our in combined now delivery merchandise selling loyalty to salon Traffic revenue from The of number with revenue. the accounting remained ticket of card our a the a added new million are salon a sales. ticket. on revenue shipment X.X% method was driven as moving strong the Note X.X% units in change. was average being revenue recognition line Starting with of sales whereby card X.X% productivity. topline and Ticket our by X.X% the upon growth that guest. items was the ticket and impacted retail total and our program of offset the not

inventories. by very points gross investments the year-over-year one prestige modest business, leveraged underlying points year to clean new the ramp and the deleverage sales to Retail-only we a higher offer about margin margin smaller leverage supply to a event of Turning of added as with exit of brand two rent clearance compared higher expenses. sales, XX quarter of points. profit to mix Fresno, of quarter relative gross The a roughly ran up boutiques XX roughly offset attributed profit mass occupancy revenue we to ran accounting categories, recognition last XX the so our mix at e-commerce in was rate margins. combination basis salon as and flat to end basis from higher GAAP we and was cosmetics chain deleverage and line, this events postcard of basis

compensation. by which higher corporate last with remaining XX impact was points by share-based the prestige from to revenue management expected lower XX.X% earnings Operating were rate XX.X% The of the recognition shareholders XX.X% This offset SG&A. deleveraged margin due year-over-year with of basis growth and as accounting tax tax lower boutique to from demonstrates due down overhead it of account points increased XX to EPS the The expense revenue deleverage QX pushed from basis we points was lower solid as rate initiatives tax attributed leverage. performance This year. of points the through of tax marketing to contributed on and store expense, as rate per payroll expense share XX% for return sales recognition about accounting. the to to program. year's for as points basis QX than the new from and the investments result later a well about income $X.XX in expected planned the in to from coming were We dollars the three related accounting effective basis primarily of result repurchase growth of XX change. points was XX share. Diluted XX some Moving were our value expansion, XX that XX.X%

number than Excluding better about high more bit tax than modest be favorability guidance, benefit share-based such recoveries The hurricane later $X.XX from new smaller from losses. and than and of insurance both of expenses usual share expected some combination the earnings year's remainder last stores comparable is from planned compensation, our higher related a a items, rate a from in $X.XX a sales, line from came the to due stores. can than expected per of the half to lower quarters into about end attributed as shifting

down grew a the balance per sales growth. Moving cash X.X%, was inventory Total on store sheet and X% basis but onto comparable below flow. well

merchandise With of growth of we in door to live expect inventory door step new but in couple the chain. $XX DC per our per in in quarters well driven full-year. fixtures, our to expenditures be investments. quarter for new opening the the with in inventory and we below million as ramp program, the supply cash expect up short-term DC and before prestige quarter, by $XXX.X for the next growth investments opening store the were the goes August, boutiques, see Capital Fresno, comp it million We ended up in systems, we

to repurchase end. XXbX-X shares buying of first continue at We during program, quarter. as of XXX,XXX our million $XXX available on a quarter the through $XXX million remained back authorization $XXX million the cost shares

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

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

margin not rate any The include compensation for be is compared accounting versus rate range as last XX.X% which you to forecast. similar the in and tax impact X% flat in This We revenue expected in is quarter increase XX%. rate XX is a recognition $X.XX to about assumptions QX new last approximately expected be including last XX to XX expected $X.XX relatively basis to plan QX to the are to expected to to to saw the for deleverage, open X% operating Diluted of to points grow stores of in in the the sales first what to of be expense year. of second share year. share-based earnings tax does sales the is range new comparable expect in from E-commerce accounting, quarter. planned per pre-opening QX We a difficult the range. of versus sales. year, are $X.XX XX% to

share million. at diluted fully count XX.X Our is estimated

foot our the In a but of performance to XXXX same, EPS prototypes. new terms for plan through are guidance our XXX modestly quarter. expected the we are open flow approximately full-year, most XX,XXX outlook in are a elements stores. better to square raising than per of portion full-year We share of the first the remain of All earnings full-year

will projects. XX and remodel We relocation complete

We X% mid with expect are week Total per expenditures topline in million. anticipate in XXrd We earnings basis, modestly retail last We XX%. now guidance in low-teens, the low-XXs week X% expect to to comp expected the of prior including the of the of up a and impact at e-commerce range to single-digits. approximately the on the XX%. XXXX, forecasted grow capital growth grow in million. approximately anticipate We comps Depreciation from to the the $XXX company percentage year. range share is including approximately extra $XXX approximately be GAAP

XXX annual I'll be the Q&A. in to range year million remainder our with is for the the rate expect the call shares host year it tax to And over that, for expected We for repurchase XX%. the and of to conference turn

Operator

Thank you.

now [Operator question. be comes a Oppenheimer your with question proceed of line will & Parikh Our We conducting from from Company. Rupesh the first Instructions] session. question-and-answer Please

Rupesh Parikh

for evening. Good Thanks taking my question.

So comments Mary, I on to of more touch cosmetics was prestige the on on some your category. hoping

on If to whether your expect what newness a from and perspective brands you year, you thoughts called Thank guys quarter? seeing just the that you. improvements get any on during balance you the the underperforming look out you're at of the wanted

Mary Dillon

we in. of results we that just participate that were we a the kind you, a first category coming. business that of this I'll despite a where all, to example cosmetics, a our I since key is the things deliver very and all was within quarter strength our the is which model, Rupesh. prestige in of our significant team able of exciting brands tell described just lull Thank good think is a tag Dave, say model with this the all the of much you, fact I to categories other team I’m closer to Okay. and few going across would strength he lot that business there

it. our to cosmetics is a important driving of – business, large very large focused percentage and on so very prestige us a So obviously we're

of I'll more on just Dave thoughts ask rest to the year. some So the add

David Kimbell

sure of comprehensively rest look to confident year. angles. on pushing make the were across the we're that our We Yes. all portfolio about really We

starts look have we’re really Mary that Anastasia, with with few biggest – other think I and those to couple Tarte, struggling. it our we continue well, a newness. great brands and as of some But of we those quite brands, a been mentioned working there's them being have expect been some the and find they exclusive Ulta confident at including their as about be about into more year, the and excited details over of newness bringing products lines the of only get we'll are the year. we at you'll rest in, later sharing some that those

be prestige We Estée and on our door expanding Mary Lancome, of Chanel talked MAC, will also also but count brands, the of key boutique a brands in well. about, as Lauder increase that Clinique, number NARS, doors small

So Double important within We've that Beauty, brands play that Tarte Exclusive the and had excited about you over with the an us had a big a that we'll has we'll impact. do exclusivity year innovation like talked brands portfolio success of that rest already Duty see see amount we're for we've of about to year. contributing. already the role this an few

we're having prestige Beauty We being expect continue throughout later and quarter, to that. is that now. year. which a kind out as started Cosmetics, of the a and and only expanding small mentioned finally, -- then look Mary dynamics of that brands from pricing across also line by we're definitely of smaller I'd We Dominique brand launching Then landscape, brands online which kind the independent a and the those this portfolio. there's rapidly big new we're Ulta. spans one changing see that exclusive we standpoint. like rest POPSUGAR, Morphe, between and new the our with Flesh, face is of prestige And of that engagement Brands as brand from a of lot And rolling the competitors in to say mass like right Dose those across a success Colors Storybook, some

of all changes portfolio year. taking and we're holistic impact the of of rest collective a the So push throughout the aspects about are optimistic the across those

Rupesh Parikh

color. for you Thank the great. Okay, all

Operator

the Goldman line with comes question Fassler from of from your proceed Please next Our Matt question. Sachs.

Matthew Fassler

to about so economics and of those much know one introducing restrict about everybody. exclusives product ads. a of mass an mass ads. to talk mass products, as exclusive, talked but your some relates stores. you no you'd exclusive the about you that my My typical your with have and the that it's of seen and profile relates I to Thanks versus question, product we've want margin you good versus new some and Can about afternoon you prestige Morphe I question of guess prestige the boutique the margin the associated to spoke also talk in for there’s example, the it this that cost of

So what Thanks. impact you in do as these business? of expect profitability them have to the grow presumably, the

Mary Dillon

products really the a I it's Hey, mixture. you're any a of mean brands doesn't margin of I every like we plenty think general, we specific of total bring when some we right to higher profitability strong Matt, think that well -- example out break box as on – about in that tend There’s very that like some at category. across boutique focused have have it. the and I'll just kind brands prestige say, an Morphe a as the a associated of margin. with But of on exceptions somewhat feel to we are don't we

So there's business. think all the a of profitability, profitability going to the we but mixture to be of adding

is that. But as growth exclusivity the driving well. is color great innovation than and said that can't across us really newness for of aspects as and so great with industry give beauty the many Dave more thing So participating,

Matthew Fassler

Thank you. Understood.

Operator

question Edge comes David of the Our Schick next Consumer Research. from from your question. line Please with proceed

David Schick

quickly. Very Hi.

outlook in there over Is anything the with certain more markets seeing we're understand next changing of growth. years? to in a wanted couple outlook wage Just the wage there little your

Mary Dillon

of we it would I see the headwind some expect coast would Yes, we does to and a urban on larger modest sort areas, forward. like everybody I and be mean pressures certainly going wage say,

we we're this factor taken closely. look some more business a as competitive. We've out but benefits investments around play to out, So of We bit make it tax model little planned. competitive, to and very the reform expect look our from and we wages at our that into the

Operator

of from comes Please line Suisse. Binetti question next from your question. Michael Our Credit with the proceed

Michael Binetti

understand taking Hey margin for sure guys. I make question the kind gross first Thanks the of here. the Quickly, quarter. dynamics in

maybe, gross just got I forward guess that the did context think impact quarter but you sale event less have to through impacting I flat, of that I sure was the margin and one any to if you year. margin make last want how retail compared And the can don't said gross the year. dynamics I right I in go know just you was? as put big then we that

you the being and where an rollouts we Are the to inflection go the headwinds. in through pointed dynamics year? think there the those – are the there's as horizon those forward points on or prestige on leverage I brand present e-com inflection

Scott Settersten

kind step picture bigger Yes. the just Michael. Thanks question Maybe here. for the and we'll at of back look

full-year. what between we points think the and So a for gross of lot flex If I SG&A the margin totality kind again, things target mean guided to we're back down on profit there's recognition forth and and of XX there. XX like expect piece operating for feel the revenue I in we we basis about the year, points line with in with basis right

we the think was sales QX, the basis then further I back had points Again, pointed we trends pushed to net year, got remarks. expenses we stronger last planned we in and of year. versus in little better the expected. that then than our planned slightly So some down XX That had we a

better slightly there result a again, we So expected. than

in second probably rest point quarter. the quarter. with the the for as to Not second deleverage out quite I slightly in sales bullish look would of you say planned we year, the the feeling As could higher

I overall. Days is It event. Beauty signature think XX our was Of fantastic

expect quarter. second don't one perform DC to the to ahead. again, So those as quarter, we ramp going here Fresno another in in events up as of have continue to second we the the although we We're well the have look

don't So turn expense speak into going a to see actually but to August, until the load you're it quarter. there, third full so falls we which on

second as quarter the well. as more we'll those then of the a these So mobilized. ramp become the up teams headwind be more tax And span of savings, in that'll see

for half second think starts look the year, probably I'd would moderate. the I And then So we say deleverage quarter as at us. the toughest the to of the back is

into spoke coming the Dave that the So confident. us XX of year that we're prestige, back back range to basis the that half newness for points XX points the gets to full-year. in basis

We will as the quarter will hit leverage fourth well. in expenses then as on well. course And moderate Fresno starts impact some servicing sales of get should it we those stores.

some to the event to was out, the just through the this something that So we we in move said off that and first inventory opportunistically That mix be of gross to try to quarter. end better of looked We there's at a profit and things line going always the manner. the clearance pointed long-term we a of at we're ran in quarter-to-quarter. discipline on in

Michael Binetti

detail. Thanks for the

Scott Settersten

You are welcome.

Operator

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

Steven Forbes

Good afternoon.

then kind that that you touch especially whether over your on, greater from time. that relationship so these you right, and evolving, competition, membership data with base, So you start to maybe the about look on XXXX. as of strengthening retailer cosmetic base, better vendor, into Ultamate mentioned you Is Rewards cycle as your are your think more that just to and the kind on early capitalize something relationships membership prestige on how these to exclusive we're evolving? some of you out brands it lines foresee as vendors are of facing of And XXXX how access translating a

David Kimbell

we new and take I think the a I healthy, brands years, that grow we think to relationships provide them our and Yes. call reach business. When built very proud grow as partnerships continues I everyday for great strengthening opportunity seriously, and to our to consumers over business of we're we their would very and

So and data we that's something insights that something that even hard getting on providing that developing we're you mentioned feel better work that's at and we and very and help. both insights like

help meeting also understand of our opportunities, consumers evolve dynamics but growth Space our the and to assortment brand identify sure environment, make to needs our us areas White evolving we're new partners the Our of guests. within

there. accomplished There's understanding we be that data in think lot like while hard doing can a we've feel more insights, So working is we something we a on and we're lot.

an part. access As to important the had that. quite of we've only It's far as bit It's a exclusivity, not part.

some new competitors, come We at to discover that our and growth is customers for have our reason sold it importantly from drive exclusivity what's in a but only of are it – one with Ulta. of our brands but motivating real us. a for in about at does important and success because that them it's lot expect us, customers get They excited

more of I quite over few my us would I so minutes those a the a brand few those of few, few see environment be our contribution over So last account customer and we've getting just strong more time had our a that growth grows to ago and years. comments we a as anticipate mentioned coming. in plenty of to continues our evolves, and

Steven Forbes

you. Thank

Operator

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

Joseph Altobello

Good Hey, guys. afternoon. Thanks.

And into guess this just of a So throughout more cadence I the year. you would the X% try I some we quarter the the want quarter. despite the of maybe X% you're see toughest for guidance outperformance activity, this year, easier first was little to still acceleration to expectation the Obviously quarter comp cetera. and coming the to comp for the understand, for because because compares, that think in up merchandising full-year, et bit was of this the year that better,

take going second the you something in we saw then you a to kind a acceleration it's curious, May second the to and half quarter? are for step back in see So of why that I'm caused the and second that quarter just an deceleration guys in

Mary Dillon

first we're a all because into it. X% Hey the a are quarter. prudent Joe. Mary. which take I It's of guiding in said, quarter We have as is I'd visibility to we some we here, of I’ll to say, start give try and guess you X% sales that, view

best really be we prudent just expect we can. guide what we about and the to So try

we that pipeline strength course, the first described But by prestige the brands, see, to in still somewhat continue of just prestige of persistent that fragrance, offset skin, in is prestige cosmetics. newness. the boutique by We quarter challenges cited and in mass

my is we start before until key some wait – get inflection in let's we to and stance brands feel see more I prestige So aggressive.

we'll that comparison we that's appropriate. easier we the half, also but get more have right You're think aggressive in if second

Joseph Altobello

Okay.

there So to a May that the get in you caused was little nothing bit about more comp? nervous

Mary Dillon

No.

Joseph Altobello

Thank guys. Okay, great. you,

Mary Dillon

you. Thank

Operator

comes of question. Wissink Please question next with proceed Jefferies. from from Our line the Stephanie your

Stephanie Wissink

Thank you.

question chain is regarding Our the and Mary supply progression. Scott

mentioned Mary, strong. advances think you I that are

a per in how progress little about you that Once inventory can of is you. improvement but can towards the network? leverage little on a closer bit interest a Fresno over door, point the online, some seen that you margin and we talk warehouse You’ve gap the logistics bit contribution to of Thank also about couple e-com, talk then leverage? closing And years? on comes next

Scott Settersten

start Well, question. I guess the we chain with supply can

think I supply shared that sophisticated you there's chain multi-year a by our again, So we've very with that's been roadmap built team. historically

rate market, future. in mean important a California So expect program. that our grow end customers multiple at get market driven outcome helps the Fresno planning. closer we pronged some to continue to it’s a to us. a which a us Phoenix I the foreseeable lot of to recent that being for higher business very of for is a

still what facilities we're So number that what a that's element of a running. call we're legacy of There's planning. older key I’d

platforms So those to different we're running two in buildings. execute IT

and we're So over and optimize the that long-term that goes part the how the network that's we all and the footprint and long-term. all parcel what with thinking about of

being remind gap this we've I near And a consistently the then challenge So profitability. folks, the talked talked and Again, as to wanted business. in have with plan, this far on by of – clearly. I people that. that the would investments as we're close on I the the profit negative about up last rate made overall SG&A our communicated business know it a that say headwind. closing in the impacted we lot but significant Yes, e-commerce about e-commerce that place few geography there leveraging guess does way, over is contribution with with good finished nowhere a is It to and that. make get we've the some years. Gross the technology we e-commerce a in We've that line business we right

So customer, building helps and good and between cost, on overall. gap retail thing by folks to So that getting transportation basis a are e-commerce an incremental for margin in a example largely helps remind a that it's net a right? for Fresno, it's e-commerce our big the end sales not of dollars, those sale. And sale closer sales the model business

going time continue over that to we're to the confident close gap we're there. So

Stephanie Wissink

Thank you.

Operator

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

Oliver Chen

thank Hi, you.

you'd to engaging innovate sense of with customers and thoughts are can really in customers. brand look Regarding ultimate and the and on four terms to you to cosmetics, on bill and how between the personalize product think the categories, continue promotions lot for you've creative? on on of What skincare really the you really future makes a future that use see to the promotions health the your with terms and five data in creative thoughts application like continue that hair and running connectivity your are of mix what been to a to and diversified interesting are and I as model rewards, of

Mary Dillon

idea. you as there's capabilities and to it investing our ability our relevant guests of I right. get have, it's about sales, our feel scope, and size pleased all very about. insights Hey absolutely be Oliver, program quite said that's kind are good what agree. mean, that we're rewards the much being in the the all very do to done driving it's about. we ultimate with how can and be much I and is more as growth, like way Having possible that that to many that sounds that relates continue to sure building And we're of efficient demand about good AI on leverage relevant, engagement levels, more the that's really we going in and a a understand personalization to I as personalized it’s in right, that all data to that, team's and all how make as that's advanced drive terms what as in we as personalized, as

of to the terms customer always of take guess we I categories, In where see like us. kind will

we're in in, is be So The you core hair, always right. I mean today, things skincare, model the I that of believe our mentioned will all beauty beauty. cosmetics, categories

innovation care even guests about bath that of that are suncare categories guess are share profitability We're categories to categories. I examples the driving are and smaller growth. and like We and

mix the terms probably sort I'd generally I of midst underneath the is of the the exclusives the evolve. So at if in general want products, say of think to that that the right way that same, and but master going to brands to and innovation it. be guests will evolve look continue The that, you say to continues somewhat prestige and

model So many that's to the for we would come. years envision how

Oliver Chen

it Is is Should more on the relative can itself or table that is the Ulta interesting priorities you your the private and of to you brands? you own opportunities emotional right not do of terms acquire to and and it in the have functional. brand what make priorities terms in necessarily there label

Mary Dillon

or second the third Right, I’ll consider question.

really Ulta that Beauty proud and about yes, question, absolutely you're So right.

with we for mean We right think focus distribution the innovators, us we I and continue is buy to I – brand how we wants we with sure. liked with everything drive haven't companies the brand, partnering large small brand. elevate now and us Can performing. could, around that it's to there's and to about that work

So focus. our that's for now

Oliver Chen

you. Best regards. Thank

Operator

Our Please Bank. from proceed question. Mike comes your from Deutsche next Baker question with

Michael Baker

Thanks. cards, card the redeem I people presume accounting, but necessarily even gift all in that. come until the under gift Hi. into old with increase sales, don't The you accounting, recognize

sales gift year as the come a So leading going can in gift for are be indicator thought sales growth those big later the card of people cards? redeem to in as that

David Kimbell

our but redemption the typically. that months store. is think yes, business we pretty card only talked going gift gift not aspect and one next continue Mary the expansion than card, we card itself, to our about the more we And of of her come distribution great saw that's just to value we do – when the couple spend her in typically of see we grow. the quickly see within Yes, the that see

it translate sales card tends do only her the not get gift is more goes. that sales, many customer those gift introducing to translate So Beauty – new it sales to And Ulta into where today in on dependent engaged. today a cases a future

of a positivity on So that. lot

into a seeing going But of results holiday of coming positive that really pleased year. out expanded our and anticipate topline the performance that we're quite we with strong being saw and are period. holiday sustain driver a balance bit We a this of that continue throughout gift that and sales the

Michael Baker

that is natural part guess the up question, guidance? described follow-up, pick I already in you And same of that included just your

Scott Settersten

Yes.

Michael Baker

you. Thank Okay.

Operator

Astrachan Stifel. with question. your Our comes from Mark proceed next Please from question

Mark Astrachan

like you historically Yes. there and levels ask forward seems been just of base. it the I curious across Thanks particularly going promotions, relative on broadly just think the current they've afternoon, to good increasing promotions sort everyone. guess category been about I just where in wanted of prestige. perhaps promotion, to as how hasn't much

about related of the pieces of that, sort you that helpful? would how just is flow be would given think there fit how And modest you those the component two together comp to comment on down transaction sort if of could

Scott Settersten

question. the for Thanks Yes.

the So record. let on want make this we because I me start that sure with get this to one

operating and right. by operating profit margins, clear gross specifically, margin deleverage margins here want but about first not just the talking be for product we're So quarter that's driven being I that to

year-over-year only have right, consider business, that that margins that's enterprise and a through big flat Keeping light event and but time on best our offers number a thing to We we quarter in read the business, we dynamics believe to the in attempting to store attention our in that that is track department do in very trying of way out, see for that impacts called one clearance in gross box the primarily overall. promotional we factor, scheme tool of it for of a postcard, much the I overall The very contributing there's the of one view place huge probably was And of we off things. the the a win that one being color profit. XX% was invested of right. prestige the again, the and lot to small promotional the each going on retail So too matter it plus mind. long-term. on mean, sector fact XX% and what's to pointed product being flat in into our being that weight the in keep reports of and limited business quite right of now often roughly year-over-year we the so element

around right, other account of we into the parcel discount of guys, circulators things part you of all of kind loyalty some we mitigate of the merchandising the thing. do everyday our our discounts So right. program, that things another nobody's offers, business, That's that and are and and promotional to use, part in equation course taking that the

balanced view. we always ability unique way. financially our makes is very to important we're In tools that timely in of the and variety a in So in a into an be have what retail part very going deploy of disciplined a our at manner very this with those Ulta and and disposal flexible

making view about, So us to personalized looking sure as CRM long-term look and on and more we offers ahead, for the we've targeted focus and is that more ahead. it's talked loyalty

Operator

question your line from Please Our question. the with of Michael proceed comes next from UBS. Goldsmith

Michael Goldsmith

rethinking question. my taking for lot of department retailers a stores [Teams renovating from beauty their Thanks evening. have] Good department. players mass are the number and the in

anything differentiator, to experience capabilities do of for the a in in buy how app store omni-channel store the with digital? you either you test have called retailer? in there stand such in terms number an a else Glam missing? unique a what you're you anything customer's of year? later customer pickup You as Is You Is as out think in online, that the in looking feel Lab there a

Mary Dillon

is say the would one, I Yes, pretty a absolutely speaking, beauty – is that right right. competitive category broadly there you're

robust there Place, compete price model, makeup sophisticated a our of players, the as does – categories by and All e-commerce platform continued use differentiated, services loyalty use in of of lot So what is ways because point. All in and and evolve well. we skincare, other fact call it’s increasingly store, all of The Beauty, it's that and this program. supported we Things nobody our we We do. brows, of ways, I with digital, really some social distinct right, data to And media really marketing variety so that our in One it and our think services way campaigns at really

– think large focus So has future. And that and not complacent, of perfect is beauty. really is, segment shop reason which the the that is got it's We on demographics not the of that on we but segment for teenager, that model. feel really like offer, experiences we we relevant, around excitement experience. exactly future way a growing Hispanic. And lot out the to and what and in shopper and she shopping we focused and newness that at And relevancy millennial, we're of as we're look serve relevant is a it the we've of of a we segment we shopper enthusiasts, beauty and lots and a call growing shopper growth

the to the as U.S. segment in growing over fast enthusiasts. So population index beauty

And because that's XX our evolve innovate, believe our really today, and what is shopping the to more about years so like continue them, right, to than now that we to experience ever is for about good that. from relevant job continue to look we model versus actually to really and going needs feel think

Michael Goldsmith

Thank you.

Operator

question. proceed from Our next from question Boruchow your Ike Please Wells with comes Fargo.

Nancy Hilliker

everyone. is for Ike. on Nancy This Hi

by you quick place any from share us? quick that is of? question, the taking also Or then skincare there prioritizing items? think And are New and store XX question, your you York prestige with that there learnings something mentioned I Is a that’s expanding Is City a Just feet. that would you're mass? other that just early

Mary Dillon

nicely, Well, anytime really the that have we pleased there, in New of store there. store it’s that with store night if day just City that. I'll York I'm in of thrilled performance you the go we're the traffic lots say or foot

express So of was Dave we free we're take those small into bar ask really I'm a referencing that's us. space my that extra a I in instances move a going stores it and will up. in think year was to next skincare, smart putting skin this prepared number to remarks, it. The where for

David Kimbell

space just new the right. Skin from that of space product. for free comes does And more that up a That’s layout Bar

space but of as what and question, are it’s offering by we that doors today, the Mary are Bar. just replacing? results but an it still is really And store our believe a limited we your So of a in skin that excited actually more encouraged of said, really It's are it’s use in experience elevated about. we in services, we number Skin the efficient

expand start. then extra So us Proactiv. business. that a all smaller number several to few But brands launched Shiseido, Beckham this our like Origin, years, skincare of great added last continue brands off are also David allows new year, some space and to brands, We’ve over we House prestige by to the XX those big earlier

new mix result far. the and So big so of brands encouraged positive both a that we fill brands and are to space and about established

Nancy Hilliker

Thank you.

Operator

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

Erinn Murphy

is the competitive question My afternoon. Good environment. Thanks. Great. following upon just

stores baked thus recapture there you you stores these speak on your share the with that to liquidation, later Bon-Ton is in far guidance the then you’ve once And what close have On into potential noticed for that anything can year? co-locate Bon-Ton? the

David Kimbell

Yes.

do quite closely. watching with that a certainly the overlap have We’re closing. stores that of area few are trade We

some so cases, reaching we traffic out looking do in So and is, in will a store other In In some cases, that and yes, there best so seeing closing store maybe of brand. we’ve for of exploring many we some What of closing anticipating that an to noticed a actually some new in new markets but the sure we’re reach we alternatively different actually immediate we’re really aggressively that, to and some adjust opportunity some alternative. we see flood only there, opportunity but in that there we’re these dynamics those not ways has for department markets, destination make customers. the consumer the beauty opportunity. we’re is anticipate are changed

there do any We reflected yes, would going would guidance forward. see that say be we upside So opportunity. in our

Scott Settersten

from was prestige that e-commerce impact include versus business, we’re versus brand does part of other business the that but the the the excludes the Yes, some of of about, the shifts boutique. mass see the talking of mix we Part of prestige flat. some that

So the assumption merchandise longer-term. think long-term over can that over again in our margins past manage We’ve we the the flattish in about the in we plans. talked

We’re not expecting to there. see significant gains

of to its we in to a continued that, over So to leverage lot of lot private to label kinds things. performance of benefit a the mitigate saw help there that We've got got like [indiscernible] try long-term. we the drive are first so quarter effect. speak improvements headwinds It’s with just inventory,

think that us tools we mitigate of we have So to a some we of have. help lot challenges nice those

Erinn Murphy

guided And it e-com was all it the including change? along or business to that excluding was geography you the margins when e-com merch flat

Scott Settersten

It includes it primarily.

We’re looking at the business overall.

all of baked margin, that’s the to long-term So in definitely. we’re talking merch

Erinn Murphy

Thank you.

Operator

Our from Christopher your Please with proceed next question Horvers with comes JPMorgan. question.

Christopher Horvers

Thanks. Good evening.

that balanced that expense and you upside the So quarter? does two quick that out and between of in other expense Is the shift up wasn’t sales ones, the called the show second relatively $X.XX by the other items items that beat. of half most the driven

Scott Settersten

it’s think about It’s I fair XX/XX. a say. statement to

We So $X.XX half it said called call that performance that $X.XX. sales with let’s $X.XX.

be mix some of The to that the come in other deferred benefits in half quarter first unusual just through saw spending. and the we

of is So be the and like one of I’d that marketing reserve necessary, innovation is whole The it right. the trying we in place where purposely timing deferred XX/XX and vague, so mean say some And things. that I when fair. we’re on spending we’re use allocating the to that, that’s

best. to later we not going it’s as if in the we’re line, see take year but use is bottom the if it So it we into

Christopher Horvers

some you're the retail and of the the you up year, such. coupon the expand anniversary back half product just you back follow-up at as And and on expect in Do product Understood. retail promotions then still into going can margins, stepped to margins that look those half?

Scott Settersten

are is the big I the and Yes, overall we color I counting which on again then prudent, it is little, let's mean that. rates being what we always a mean, some business piece we're to pie other here not sell. being has and we're a of better Mary's earlier, just prestige see, of the that prestige, we're point margin categories

marked any some see there, So we we aggressive get more improvement improvement before guidance. to want some with our

Christopher Horvers

Thanks Understood. very much.

Operator

with comes question proceed with from Nomura Please next question. Siegel Our your Simeon Instinet.

Julie Kim

is Thank the Kim in Hi, momentum has on Can for weather any in also saw on the shift Thank saw from quarter? impact color you our and Simeon. Julie this into for question. the you quarter the calendar QX, taking you if or give you. comp if you continued progression

Mary Dillon

had balanced we and certainly quarter. transaction increased some weather I that. events as would and for shifts movement in results other things like cadence say Of and see XX Beauty really no was a around impact – impacts from We the saw Days traffic ticket on minimal calendars you or like the tickets

pretty I into So well. as guess quarter I'd coming say throughout balanced and quarter the this consistent

Scott Settersten

We don't share normally anything about that quarter in. we're the current

Mary Dillon

Yes.

Scott Settersten

to detail on provide any be Won’t able that. more

Julie Kim

follow-up we calendar the in the of on of anything from the rest mind just could looking shift QX, year should of I in keep if terms for apart course? And

Scott Settersten

folks, for one weeks right guess we one through XX, to right? comparing with last this I year. XX could We're No, year, clarify

out on clear to of of of part kind XX-week so just it. the So that be equation, the is

significant roll – for again holiday's our There's way aware the into be roll off. events calendar. nothing really and the there's So to nothing our us

Julie Kim

Thank of End great. you. Okay, Q&A

Operator

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

Mary Dillon

all look We our in Thank the have you. and just and And thanking Thank to I strongly. strategies soon. growth XXXX confidence to in of our delivered by quarter drive associates. is And I want XXXX with to our very execute team's off you. a profitable forward start speaking you ability and I close XX,XXX strong beyond. full

Operator

This concludes today's teleconference.

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

Ulta Beauty (ULTA) 31 May 182018 Q1 Earnings call transcript