ULTA - Earnings call transcript Q3 2018

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Operator

Greetings, and welcome to the Ulta Beauty Third 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. pleasure President. your my Investor Laurel now Vice Relations, is to host, introduce Lefebvre, It you. Thank

may You begin.

Laurel Lefebvre

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

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

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

Mary Dillon

drive Beauty’s comps across Diluted by grew a in per the We which growth comp XX.X%. increased quarter strategic the each growth. Day today, share new information last of news of position I’ll performance driven To shared continued on and gains about some XXXX. our excellent our of begin productivity discussed take members deliver with Loyalty total everyone. We to results. total earnings third and strong of more summarize sales overall share at industry-leading third Ultamate Analyst categories, headlines, all top our sales just major robust grow a Thank of of increase. financial of than year-over-year XX.X% now of store Ulta the you, us X.X% at efforts we loyalty million end sales to imperatives, active in $XX.X XX% the represent lot revenues. acceleration I’ll brands the afternoon, We XX%. $X.XX program third loyalty to delivered e-commerce XX.X% our next member traffic, to and Laurel, month, reflects market to in quarter, level. healthy good the Rewards reiterate our and comp our quarter our the

Platinum tiers likely high to advantage levels continue take benefit than These garnering and from have services We at three than guests over also share more and of be extremely average high engagement our times omni-channel guests, more more are shoppers to combined. these our wallet offering. of from two the our They XX% guests of Diamond than level retention XX%.

our wallet. growing Going personalization on next to and expect member for sales per higher major tool forward, we the share driving increase is of focus

even to they develop to to personalized closer to is Beauty building so a touchpoint guests, vision every and capabilities Our relevant, deeper make Ulta connection and brand. feel guest our tools the loyalty

capabilities bit. expertise, early bolster a building in area. personalization, to We’re we’re topic of in and this through in both internally on acquisitions innings just and More our the this

expanding see credit distribution other for Beauty a this who XX% our to sustained own hold driven in and by the retailers continue Ulta card. business cards credit in guests, the sales as card well our grow grew strong Sales year, quarter, gift of as also We growth our and portfolio stores.

trend. on possibilities being important of beauty great unaided highs These concept a current power and the a loyalty our drive XX% the aided considered milestones with and in Place, are supported is moved brands of long on beauty in significant brand, which understand past garnered articulation of growth inspiring, standards over brand and with important in is now for new to Beauty All exciting, NBCUniversal’s the All Ulta prospective driving the perceptions connection haul. at one able Beautiful”. this attributes beauty and To discussed partnership all-time We Beauty. E! the millions discussion. create fun, brand Things quarter. facilitate with to a by of guests. are Ulta our as “The awareness of point this such and awareness improvements commissioned awareness Possibilities our and we We grow to at NBC, for the continue experts Telemundo, we XX% brought We life impressions Ulta reaching we’ve with for the This inclusive of emotional new of emotional and Beauty, brand. purpose, of One today, believe launch our platform, Last Beauty, true quarter, to platforms, a celebrating to engagement This the of order brand being how and study including support of consumer launch, to create

our millennials, key drive Latinas, more with segments efforts and Z As to consumer connect part Gen of awareness African-Americans, specific we’ve to of efforts closely the each group. launched with

and young relevant Girls XX, of in and confidence with and are For media example, we’re leadership leveraging academic to partners to most influencers partnering partnerships aged consumer with United women’s that to increase ESSENCE these XX potential, groups.

to ago, commercials November and brand focused running few destination with our months Shine equity that Ulta in early we on Brighter, a new both Beauty a In campaign launched grooming holiday began gifting. new theme, as the for addition

merchandise update relevancy to speed exclusivity, an to and now focused differentiation, assortment, market. turn on innovation, on our me Let

skin performance of double-digit Prestige benefited prestige care. in suggesting care, in from fragrance, quarter, and brands comp comp sun During quarter, mass category. boutique we showed improvement third compared largest cosmetics, prior growth modest encouraging the our the cosmetics stabilization to prestige sales

significant brands as each grow the emerging groups of to We’re indie we are classic positioned expressions choice established brands opportunity formats. and Beauty from and in across to partner new to these the in Ulta and spectrum brands of multiple for there believe beauty brands

The often which launched of has to our of we’ve areas recently with developed team order team, customized often not and partnerships an all retail brands are brands. business launches new environment. focused successful smaller these of on to to As emerging brands, emerging processes incubate in identifying brands or digitally-native ensure onboard and accustomed a

November excited start, the We’re carried brands. in-store off – rapid celebrity-driven to SKUs in Cosmetics launched participating with online. were me, a of the be to November is influencer and XX on rise and excuse strong Kylie XX XX assortment

made Morphe. weekend stores, of the expansion an and XX launches Beauty supportive James Place of of with are on social collaboration a have four for personal who followers. have launch. the our with media each Juvia’s by an Fragrances million with the Other Kim in of Kylie XX We exclusive series these is West a also and which influencer only. in Charles, XXX influencer-led Bakerie, been in launched with XX Instagram of and posts introduction launches of one examples followers. Houston we feet Kylie now launched very stores appearance announced holiday, November Morphe in-store Kardashian brands all over of Instagram Both the of presentation Kim, elevated million also brands an

creative Black, products kits; with by early and shopping. we holiday new for many a as Our confident comprehensive Cyber to we’re with gift have holiday Blitz for a offer; Beauty compelling as December position program. new marketing Combined television teams holiday implemented marketing, exclusive Beauty for plan our elevated well the been has the Monday and well a merchandising offerings radio in-store fragrance; plan purchase Ulta executed destination as strong and that

update on sales new of Salon X.X grew in service comp the touching To our roll %, out ticket services chain. model benefiting increases XX.X stores. Now optimization increased our traffic and % program, by business. the of XX% our average in is over driven on now and services from our you

we internal and We our exceptional dedicated focused field training and markets design to built continue talent, menus, our to it This provide to retain well to business early top roll to teams transparent optimization, as and out on as to to services and compensation in The top stylists. additional see education, of simplified stylists pricing, retain X,XXX industry-leading will services. was support continue components trading encouraging program XXXX. attract results technical

sales, skin guest We Kate and XXX bar format as to stores Ulta XXX and stores. have with will out with as the offering for XX Somerville of are Beauty them in now increased We the Early multi-branded continue be Dermalogica, year-end, Kiehl’s. by well have Murad, this services plan product partners, roll satisfaction. results to promising bar skin brand and

use and The We’re a new enhanced all brows now guests and start-ups for technology in faster engagement. groups. booking for We appointments partnership is with booking booking services, skin, makeup. appointment to an salon developed easier tool and including hair, tool tool elevates testing

the to real tool platform and turn to further X,XXX We expect through stores. next XXXX, to booking quarter, me year closed XX with to teed We for quarter up And compared year. ending out in roll three the stores last with now enhancements XX the the let third opened estate.

is years, slightly planned moderate $X with openings stores our in achieving of store of years. a continue to greater sales the on ramping large years new portfolio, open in in the to of model confidence XX of leases U.S. store and increased portfolio growth, target XX This next stores X,XXX renewal next we’ll recently new ahead range XXXX, deliver strength repositioning, plans coming tandem number XXXX the with to to New one our sales of in stores stores we the several and few expectations, year reflect the updated moderation is X,XXX, store fifth-year in we by next of stores to store up for million XXXX. operation. as store the narrowed million and XX With in average with on store in the several $X.X of focus new and

total innovation of revenue. to Moving mobile a efforts growth XX%, nearly with and Total grew sales sales ecosystem. by close on traffic growth. represented recent our contributed to traffic create XXX XX% the points driven Ulta.com total rose basis transaction XX%. of an e-commerce our E-commerce company to comp, up XX.X%, company and

sale or demand buy the We continue now pickup locations. online, for to save store strong we’re in see testing XX and program, in store-to-door

of in and multi-year and that like invested acquisitions. made tap an Valley So to in the helps a will sharing recap innovation a and with for innovations the technology Iterate industry. be gives digital research attracts start-ups it Beauty, as prototyping talents allows into technology And provides curate us best to most partnership opportunities. Silicon our needs. rapid described suited and strategic series Colorado, large November. how solutions as Ulta Iterate trends, well enables partnerships of some Day we’re to workflow building Iterate, us with across platform. access We knowledge I’d in to and in announcements companies we our recently We partnership technology at important a company harness ecosystem Analyst

addition partnership, we’re this In by internal also important accelerating building innovation to capabilities.

experience history, start-ups, For the small the acquisitions made these GlamStreet support company’s digital Ulta develop and welcome and QM in first to their the family. to pipeline. and tech innovation founders teams entrepreneurial our two roadmap We Scientific, we Beauty time of

work as disruptor to and and intelligence an behind reality and startup, and on stock chain workflow technologies leadership, capabilities with Connecting with and to differentiated we talents in were allow including buy Scientific cultural strategic this are as frame these in-house supply makeover way. view artificial Bringing developing We partners, extension language been ecosystem this vision, an search. deliver and with innovation up capabilities and in space. good move future. as our as can on two excited the machine turning our digital partnerships an more of well is augmented for start past visual digital path Their together digital mobile chain greater include intelligence, fit capabilities us to the world-class performance in-house relationships an of experiences, on as experience per update growth, the virtual a efficient try natural these rely recognized in And capabilities and of and to AI to our in our partner computer technology development Strong and the quarter. coupled They guest our graphics has bring highlights to door Scientific artificial an partner team, in of QM Beauty. will operations. bring team image solutions, to now supply processing innovation structure and way recommendations, inventory levels, processing, control Iterate offerings. faster years We’re personalization experience approach team’s learning effects. right in AR, assets capabilities accelerate focus a Beauty Ulta an GlamStreet invest where GlamStreet in virtual the our with app. closely as innovation, Ulta core an unlock a focus, on to QM to much personalization. technology the our Both retail our GlamLab, our capable our that

Our the XX% of now we newest quickly, is years of a its continued to the Phoenix, e-commerce concert working a our see We with reducing orders. newer stores year. B.C. serving in activity In opportunity buildings, Fresno ramping next ahead. center of closure distribution for in improve three XXX capital in in our ramp-up preparation significant are

the of we’re program, growth for part efficiencies rationalization launching optimization As project. SKU cost an

continue as entire drive visibility chain and benefiting model, network better from supply process tools. We’re inventory get end-to-end also a we’ll common improvements. operating well markdown the as on to time, Over

to the of expect turn with XX basis goal next the over years, improvement see inventory a several we result, year a next modest improvement points years. five over each of As

that, So Scott I’ll the for the and of third to to the quarter discuss more and with over full-year. turn quarter it outlook detail drivers fourth our in financials

Scott Settersten

Top our loyalty revenue sales value in breakage, in now income adopted as new credit the store the offset combined XX.X% of points Thanks, from shipment, by I’ll recognized standard e-commerce a afternoon, from upon added the program, Mary. The beginning card Good revenue was of million strong gift growth X.X% line begin and of by productivity. $XX.X driven being comp as recognition of our impact income earnings year with statement. everyone. at program. the the accounting card well

per of not As our growth driven of strengthened average is comp. Traffic The company Total reminder, the X.X%. in majority sales flat. the was accounting salon was balanced Including and X.X% prior a change. by the transaction increased to was selling by Ticket comparable combined traffic increases quarter, retail price, comp between of with revenue salon impacted retail in growth driving and comp retail-only recognition units transactions comp the ticket the compared ticket. with transactions X.X% increased X.X%. the X.X%,

profit. Turning line. standard to the points new XX Margin to basis accounting gross gross revenue was about year-over-year. flat The recognition profit added

So the XX than basis points into a we forecasting of more bit were underlying deleverage were quarter. the going

deleverage, as quarter. center prestige actual sales; investments Some digital driving into factors of opening; mix as freight of and event that and longer Overall, by circulation was our results flat of all XX and deleverage through some our great than first Day. several than by weeks including of costs, us expected, rooms, which and of get the the our by we’ve holiday. the year, of distribution out clean the stores up dynamics supply we inventory of weighed It we on Fresno Analyst to ahead for lower second the the our The business at last the of end in the been increased year-over-year, same offer postcard plan delta year, P&L between higher to the expected marketing. clearance to print third and newspaper as the offset the the quarter took this and catalogs the called deeper driver of our about began weeks this back compared discontinued weeks our four experiencing continued three same were took primary fairly were to XX mix of to lower-margin the launches new sell year, XX% e-commerce our well ready the original all brands; promotions salon markdowns driven offer the chain with basis points at inserts of

pressure shape that in headwinds we’re The offset leverage partially great QX. end the rate by were more expenses. results described marginally clearance occupancy happy margin are with event than for and the did and planned of I planned, While rent

of full-year. QX primarily corporate the XXX sales compensation. in than flat XX as from including slight to impact XX recognition margin campaign, was marketing SG&A. by basis points These We of XX.X%, due grew points leverage revenue This points to spend and from accounting was points percentage equity deleveraged expense. for overhead. The to anticipate due sales last down offset operating XX.X% expected a Moving store of related of deleverage Operating by attributable partly to revenue of basis down remaining pressures the to for deleverage as standard. recognition basis was Diluted brand margin and XX% of new with points, to payroll, basis the accounting to XXX of expansion, were timing year’s advertising a to EPS were basis related rate to lower be $X.XX, change. well $X.XX due the prestige we expense earnings marketing of our as XX about tax with

well were our for of outs, quarter-end. third quarter, XXX,XXX prestige quarter and million processes, roll cash by and remained basis, program weeks with of the the ended million Total to $XXX benefit the sheet of available ran we $XXX chain investments per the inventory on as repurchased expenditures systems, sales in shares the was investments. the at at now growth, second balance million merchandise Turning store third grew XXbX-X $XXX $XXX.X event to few and brand and a as third the and driven authorization cost the end cash. a for quarter. below early during million comparable We flat in stores, improved million that well systems fixtures first supply the flow. inventory and began XX% on We quarter continue quarter. as to new the $XXX clearance as Capital from

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

the billion earnings. of million worth last to year’s and included range in expect last year. of quarter, quarter $X.XXX fourth extra about $X.XX sales fourth $X.XXX billion the that, $XXX.X be an week versus $X.XXX to Recall For we billion

sales We increase versus X% expect last range year. X.X% to the of comparable to X% in

in the of to last be the for period rate Our comparable XX-week Diluted XXrd-week XX $X.XX new preopening $X.XX tax expected remain that be include grow assumptions stores to Operating last any drops QX year. year. XX planned as to accounting roughly the is slightly bonuses in far will revenue range E-commerce lower to impact fourth of and to seen is open related including per difficult this sales which rate, or the is year and XX.X% be in standard We deleverage, to net expected weeks consistent revaluation adjusted year, share basis This rate last year. one-time expected a on last on through last QX basis. the not XXX year, compare on The GAAP for basis, out. impact compared in this the the is forecast. $X.XX to year. or for open same from the percentage quarter, XX a year to comparable versus this to compared so taxes a margin sales accounting, to lower QX deferred compared range, expense of points track XX the compensation impact to does XX.X% sales last to mid-XXs new share-based earnings with related year, expected recognition plan the of XX are rate with tax a so we’ve stores to XX%. tax $X.XX approximately are

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

updated our and for Analyst XX per to we outlook full-year, Day XXX square approximately a and remodel ago. the For new feet. at relocation we sales all month XX,XXX share, We projects. which our plan comparable maintaining complete open We’ll stores, are earnings

Total to in line approximately of last to expected X% impact the the company anticipate XX%. range. to low-teens, grow in including the XXrd-week be We comps expect X% are e-commerce top growth year. We the

at XX%. range grow the rate the percentage we capital expenditures the million, $XXX share for extra to range, of for week to million, the be the million expect diluted year year in approximately shares is is expected in We expect earnings XXXX. forecasted tax the low-XXs approximately including $XXX to the $XXX in per remainder of annual repurchase and anticipate We depreciation

for last provide our to month, growth, to in per for earnings to know, improvement that, share conference targeting our I’ll annual each three QX As do. year. margin X% mid as guidance look for with at comparable high-teens on turn We Q&A. a long-term next modest March provided you the normally over to XXXX Analyst call we plan we it our sales And Day specific call years host X% and

Operator

Thank Great. you.

from We will Ike Our Fargo. now Wells conducting from first ahead. is a session. [Operator question-and-answer Instructions] Please go be question here Boruchow

Lauren Frasch

margins everyone. could help more us Ike. is margin between that quarter margins, well? much. understand play event provide into may Scott, bit maybe think costs, in as the that Lauren gross you a Also, that? Hi, clearance around Thank QX have you QX anything color helps the the This how surprised how merchandise fixed and the you dynamics and for about you very maybe gross

Scott Settersten

know a little Yes. Thanks for reference. is complicated, I the of a couple this question. you so points of give let’s

year, guys have So versus models. may what you for your been or last expecting looking

So year included benefits the lapping hurricanes. versus last

Manhattan XX points upward Analyst some to so our call year new talking mix, year, been lot a transportation of last an been Day, capture about number second the it points investments promote there to said, of of year. basis brand had offset in and a think, call, and stronger we last in Michigan of, I at leverage year the we installed a impact I quarter, all mix salon us. has lapping e-commerce there last course, that occupancy Avenue, sales, of caused pressure we’ve mix and and of the we’ve a versus rent lost We in versus we All that’s right, right? basis comp all year-over-year by so last talking year, year was then so Of year. and again, number about last others XXX over the Versus that the benefits DC, been that’s prestige then our expectations, higher-cost XX bit Fresno were business, for things about. we’re what stores, optimization Those to deleverage

third called sales the and doing in mix quarter. our Marry the side, well mass really fragrance On

market fantastic called gains, house. than again, So the slightly was bigger us we And the versus really was overall those it plan. clearance margins lower the do but surprise two share for out primarily, categories our have event, then

said, go for right But it longer to the store. to and thing had prepared out feel I are like deeper we really to was for good we So us those the move do, and items we holiday. of where

Lauren Frasch

Great. Thank so Scott. the you for much color,

Operator

is Our Please Gutman next question ahead. from from Stanley. go Simeon Morgan

Simeon Gutman

thanks. afternoon. Hey, Good

and So more Scott, would a just you you the I of one of gave did extending can your of couple margin? parts. the time some clearance you question the of I talk out quantify guess, this, quarter extra the presumed feels hurt reconcile to it idea call, much environment, this can second gross a your us I how clearance the the time. mean, or that just you then event. didn’t And have had called just it by this really, if more Sephora posture you promotional to didn’t And But about Thanks. I say all want that, competitive? industry the more if sounds you at like and clearance was

Scott Settersten

Yes.

promotional can So the I start maybe with environment.

it’s So look things. again, year-over-year as we like stable at we feel relatively

to more and has is space overall again, a it this about buzz been to seems has it expected we been there the competitive In be. always a things. So like environment, continue bit tough

overall. to we’re we stable quarter, as ahead pretty looking the now, we’re feel fourth in place So specifically like a

versus quarter. clearance it’s by headed it’s you, tell driver – the thought for where it I goes, the but biggest the event primarily we quantify you far directionally of third for not were we would as the far As surprise

that XX really we a about So, phase. underway and been remodeling here an strategy lot last in accelerated the boutique talk the months have efforts over the

sections biggest updating that the fixturing system our we’re and to, we’ve when So, thought store way kind fragrance aggressive I’d the what and store. in pared got the trying clearance It where built presentation we’ve excess to the we fixtures. our we changes our be back lot in fragrance the point, is of really needed in through and we we as up And of was just overall in the say, had the upgrade sell one there of that been to margins, a did. that’s at stores, those assortment more

store. So to can was the third we in the know put foot our through get playing it way it to – its we it to wanted and out quarter accelerator just on – needed the of

So was were for business. little a was but expensive hoping, right it overall the the more we than again, tactic

Operator

question next Our go Altobello from Joe Raymond from is ahead. James. Please

Joseph Altobello

Thanks. Hey, quarter X%. on it’s the like in the question for quarter. the by period guys, to I you consistent good the what first of points. about curious, easier base afternoon. It kind guess, saw XXX X% is comp sounds of gets fourth guide third I’m basis your

You Kylie this got quarter. the introduction of

acceleration So sequentially a comp why would we quarter-over-quarter? see

Mary Dillon

about holiday what have for just off I that our to quarter. really point. Yes. feel is lined Joe, it’s this our to good the say information we would strong the up at with we – this have. place it’s we’re have really best you they’re our a competitive launch say, and brand in strong the is I a mean, estimate Mary. I really like marketing, holiday, guided that, mentioned we all But gift start, whether best exclusives, with we our I’d purchase, well, be can

Scott Settersten

And I a retail, a the place This forget, would not quarter competitors. with just different add, all us, compete we right? not to the just where fourth for beauty animal is is

sure we the don’t plan get we of recognizing with making and feeling just our where right, ourselves. go too that about think in guidance, for we quarter, a is good ahead prudent into far – So,

Joseph Altobello

guys. Okay. I Thank appreciate you, it.

Operator

Our next question is ahead. from Anthony Chukumba go from Markets. Loop Please Capital

Anthony Chukumba

taking for Good question. afternoon, my and thanks

sense of marketing? – just forward? guess, numbers increase. trend store I is the that terms that? shifts going do both you it expect what continue just awareness I’m to fact some about just bit unaided little mean, awareness your a I your talked at presence is driving aided you’ve Thanks. what’s Is your the your and those I’m wondering where You program? loyalty for me increasing been to made of think that that and Give a in that the do you driving

Mary Dillon

not Anthony, we’ve I’m guess something I’ll add But is is I’ll whole figuratively. measuring multiple and say, literally we’ve been say, is we level even just meaningful is at going this this ask deepen, know believe way about Beauty, add map that Mary. we years, terms let lot Beauty what of… the color. thought brand Ulta a is will that not I people But us, that terms for there of in of this know color about at on next It’s this but launched by what And of more just now creative are Sure, you been tactics stand triggered with a just right, because to people Dave some to anyway, start. in that could Ulta the we’ve it. of understand for. understanding Dave about. factors Mary, opportunity maybe to they just and and I but – the the I do to that’s going And a

David Kimbell

Yes, absolutely.

the Anthony, seen and in increase that’s we’ve motivating have, adjusted more last over make really our a much approach, relevant And three current significant connection it or a really to so, it we’ve as We driven our this dramatically revamped dramatic to way and in awareness. years done marketing that consumers. greater

we’ve helpful into for mentioned been Certainly, some some sure. things. markets. the we’ve other But new stores been that’s new entered marketing, So of opening you and as

to more greater with And gave the drive that one ago, the years market our combine we and to us loyalty Our program, that us connection that word helped four program connection. a opportunity of mouth. about as deeper but that guests, make

Our last years. assortment improved several dramatically the has over

growth with – but – you here? So really and to We’re was we awareness where we asked those had critical we the come about going opportunity, a come. just pleased And have things come see it is a together. it’s critical think what from more

We’re way. her of more in unaided next on retailers, one one the described in effort becoming market now, connect beauty, a the in comments, make think to that path campaign to meaningful of step our in purposeful unaided we awareness to guest more right we’re a a retailer leading where with the Mary the two number the that number is

good with start a that. to And so far, we’re off

Anthony Chukumba

is Our Oppenheimer question from go Company. Parikh Rupesh next Please ahead. from &

Rupesh Parikh

my Thanks questions. Good taking afternoon. for

launch like So a Kylie strong it Cosmetics far to sounds so on – the the is comment off launch, start. the

there’s just versus it’s how your If terms in any your I’m stores? surprises customers bring into of curious expectations. trending the So

David Kimbell

been first, Yes, a just the question. couple results, weeks, It’s our done and in month great early. generated consumers. guests, has excitement. really Yes, guests of but some responded driving have existing also job It younger less it’s – a lot to favorably new say, a in diverse a we’re is than it, of we’d pleased with it’s nice particular, but certainly very

team we’re with effort a Kylie but has it. pleased launch, helping excited fans Kylie their this job So overall. really done the and about nice Cosmetic the really communicate

it. pleased we’re overall, with So

think, we’re on not that’s we’ve assortment, on really happy launched an as but performance the very well kyliecosmetics.com. Ulta relatively as – received a only that’s across been It’s kit, assortment, far with and available narrow the and I strength been seeing exclusive line. just and holiday we

replenish. stores the keep to hard really working are teams Our

quarter. tighter anticipated have the of being through We on of inventory – QX through kind

So continue holiday it’s we’ll we’re and to in move that we assortment cases, evolve hard working possible to as but sell the into going replenish some forward. out

ahead overall well. road a but So pleased, long us of as

Rupesh Parikh

you. thank Great.

Operator

Our ahead. Oliver Please next go Cowen is from Company. Chen question and from

Oliver Chen

Hi, The Scientific and great is good evening. awesome. deal QM

Scientific that within optimized context how AI-powered of the We’re you The thoughts? versus driving your well How across Thank the love we’re as a do you’re in And would with the often, over commerce. lot lot time? retail and robotics, juxtapose has in you. more building with AI, do also customer conversational of that what system likes a terms ecosystem? see you engagement curious and robotics you enthusiast experience about as to manifesting different how that product recommendation and beauty team of an seeing new the see personalized manifesting opportunities QM

David Kimbell

Yes. joined about we’re Oliver, Beauty QM we’ll and what going We us we about – has optimistic brought your great just that excitement Ulta team share question. already forward. too having bringing be and really

in our in say, manage of we’re them. the about the is first them. and connection and I’d You forward our that I’d say, capabilities to leveraging comments, hit mentioned their this things a highlights, to But way to looking Mary with drive better some the understand guest overall, as but foremost personalization, of

be, over really I’d some to getting and that so to that they’re to, I personalization up Day engaged say, or with a as them strengthening connected XXXX. data bringing Analyst are, of across kind they’re over we’ve the it’s last helped a The them foundation doing shared in first we that some can at been that’s of phase our to and capabilities. them our which us of the key and platform, speed business it ad capabilities. assess play fully look onboard, mix getting make role month is our looking as as that they strong foundational forward our be sure elements going and say, our foundational We’ll

mentioned, several that, way that like that have they be doing. further allow we and data we things with a over our is recommendations, area product we the acquisition in get will we’ve them as around been integrate next image tackling faster we as you first in to that Computer vision platform. elements already GlamStreet to dynamic page. connect content, see is think But can have personalized going personalization on try with months move bigger see us also capability recognition, on virtual we’ll a that we’re integrating The that to to our that in

is have The big we great just team are the off a really them. pleased strong those we’re and we’re So we’re to – on. that focused on them with start And areas we’re – really see to board. really

Oliver Chen

follow-up. a just And Okay.

of think and a how innovation? innovation lab digitally you conducting shopping lot use about do ideas, shopping as M&A store you’re should sure you experience? with what incubation innovation you experiential AI that of in we the about the And envision Ulta physical of future, – to the organic look into link the thinks this really versus at With terms making how

Mary Dillon

It’s questions. thinking and the at not talked of Analyst going we’re the our just high direction. we deep early couple notion in Well, a the the the lot level and future, things. ability I’d It’s say say, are in a will Day. bit be needs store I’ll These think the to your technology be for the an really our in able Ulta they we that category, of very We that, meet to guests and beauty underpinning think, to serve going point, do. Beauty an well. do be where critical. But of important experiential of start everything a to I to are. show

friction drive be that the more these in with underpinning. time in store less right see beauty. And future, investments would surprisingly as less again, to in across and imagine having that transaction not these we less all in out would checking companies, So consulting and the a happening there’s more tasking experience time ways lot an touch points, personalized spent and time, a and fun just we

all together. play but we the and the convenience experience emotional store, And physical best discovery play is a So in in about our kind think how to human – just experience. through ease frankly, picture them it’s that – way That’s we with the is and that can future. see working and of we both and place and is together big not

Oliver Chen

holidays. Happy regards. Best you. Thank

Mary Dillon

Oliver. you, Thank

Operator

Instinet. Our Please go is Siegel next question from from Simeon Nomura ahead.

Simeon Siegel

environment? just basically, embedded not external Just the holidays. is go-forward or Thanks. guide if What internal margins are Just your Mary, But And more I labor, you you then, to the Hi, missed speak speak that can in was it. think I’ll around guys you happened? can Thank comfort the it this why the QX afternoon sorry, conversation. gave? planning, it being the it buying necessity? clearance of you start with you. Scott, happy function the gross a good guys, and

Mary Dillon

brands more just in. a remodels I’m we fair So and number expansions and yes, we That lot assuming brands say, would call of never coming that just happened on a the – quarter [indiscernible] happens the periodically. this a it’s it, do, just of of clearance, I that factors about combination make that in new of

– for business we’re we the scale clear at in of the quarter those something made to we this and this it But for holiday. time. at really fourth sure. to set was expect a with not instance, business So think get an It’s thought that the opportunity, bigger just we up inventory out on that repeat that for that right the calls one we quarter,

Scott Settersten

little And as the quarter, of bit of for on there. far as margin color some just the fourth a levers

in in stronger less a the the Fresno, occupancy that building So, and, to Rent fourth so – scale be headwind got up quarter fourth We’ve quarter, lever, the in quarter again, than be the volumes higher third, in quarter. was dozen, had we overall. course, that will and of as I fourth continues third it in of the will a where stores new overall. better XX think, will

stores. We with XXXX stores from will be last again lapping cost we’re in higher those year that

there. is overall, So we’ll benefits earlier, the think promotional I pretty see some stable mentioned nice right environment we now.

in no the to When SG&A so we make unlike we’ll labor, a that’s get that holiday leverage the than the prepared but plan. line, the So get we’re down again, course of the of it’s that’s there of that. see kind there, about competitive although not we now. upward driver environment, with earlier earlier are you more will through and that’s say there mistake is – of rest in major so assumptions I year. march year, so you baked Freight, the that, got been there into for Again, again, all that volumes in some The mix overall. baked there some mentioned help as but surprises year, has a higher today, the there

in So rest are we the about the we plan feel where good year. of for the in have place

Simeon Siegel

Great, And high level just a thanks. for second. then

you as up happened? I happen guess So obviously the that should Did you accelerate – quicker? the ramp – new congrats would getting stores, – productivity curve on store keeps the that I to you open as expect mean, you awareness better.

Scott Settersten

I ago. a weeks Yes. mean, on Analyst up did I Day just model eye that. we’re few – an our mean, update keeping we here at store

as experience of making things, assortment seeing to awareness of part payroll are part it Dave investments we It’s mix there. alluded is it, So the of a in earlier, stronger we’re guest store better productivity it, the are of it. part is

So again, of an break down basis. kind hard individual it on to it’s

Simeon Siegel

luck Great. Thanks holiday. a lot, of for guys. the Best

Mary Dillon

you. Thank

Operator

from all look question next the. Our is at just

go Wissink is ahead. question Jefferies. Steph Please next from from Our

Stephanie Wissink

in on question leverage. follow-up boutique your for – skin you a have if prior that wondering just does the fourth on comments, level that investments deleverage saw to I the of in in the I’m everyone. your you. break those and pressure rate you afternoon, well? volume Good bar Thanks. into wage can payroll imply labor QX skins you It overall. Thank to those sounds as hit that in there quarter, sales bars relative allows a like lever lever boutiques Scott,

Scott Settersten

Yes.

the year, that’s we mean, I to think here. you throughout of we’re picture answer. right, the I know, course fixtures kind that crescendo these as the building big install of a

you much volumes overall. benefit fourth the got sales so when get in you’ve from larger that And maximum quarter

just around people revolves would the we’re guest payroll we’re when our So, again, making lot that experience, about installing it investments largely that we’re is for these a stores. deleverage I in talking remind boutique brands around which

way all exactly, the good should we the long-term think So be playing for thing – it. the we

Operator

is Our question next JPMorgan. go ahead. Christopher from Horvers from Please

Christopher Horvers

quarter, fourth would be Correct grow I’m basis in Thanks. if did would mid-XXs you contribution. on less about me comp the e-commerce that evening. say a in but Good XXX wrong, the points so

around And and do think are? that So talk in you fourth how you that, drivers of to the your quarter? can the about you’re accelerate store thoughts the expecting to

Scott Settersten

I business we’re breakdowns the detailed avoid here, of guess, did. trying to unit by a but yes, comp we Yes.

quarter. third So the in did say I e-commerce can confirm we, mid-XXs for

do the it’s again, again the part as well. So natural math moderation XXrd-week of adjustment that of assume the year you some in to last just when kind as for

are – think We guidance we is like the strong. again, So off about well-positioned. is good feel we business the feel plan We overall. the

we’re right, there’s because period, right? forecasting and this just go bit prudent It’s now the longest start way And to be public long we between Christmas, a what time, finish. at in point to the with want so for to a little

and Thanksgiving days XX between think Christmas. I

So we’re wisely, believe. it just playing we

Christopher Horvers

clean the to questions just questions the margin then gross getting. And up that been front, Understood. we’ve on

there was week, this a coupon. earlier So

clearance? thoughts an sort what of want fourth terms it expecting gross of a it in around you weeks the into XQ I are coupon. sounded thought was then the extra in people to the headwind And few quarter, that. which get Some lasted like XQ, your on margin clearance

Scott Settersten

first, me let be start there Well, to clear.

So that behind now. the us clearance event is

well. that was, We would Mary mentioned call pretty as So extraordinary.

right up we get for and through think accelerated third the I was it So us catch it some in to quarter. that

could So so fourth didn’t back to the struggle clear that it we have out in quarter. the with room, we

of kind table. the off So that’s

Christopher Horvers

Yes.

Scott Settersten

clearance Again, to of through extent floating last not just always quarters. bit margin line that right, a the not there’s what saw we two the but the over

Christopher Horvers

it. Got

Scott Settersten

we the to as to far track is tried try I people their to again, to in coupon trying concerned, as influence not and open e-mail rights, thing. your ping redemption factors lot and rates then earlier those of all times what many a so that box, coupons And do you hard tell the year rates that of you how because this and there’s do kinds individual with hit

So again, I would in pragmatic approach. our just reassure we’re that investors

deliver and overall levels. quarter that includes can best the the for result we best promotion to doing We’re that the

Christopher Horvers

Understood. Thank you.

Operator

Telsey Telsey Advisory Please Our from Dana from question is Group. go next ahead.

Dana Telsey

afternoon, good Hi, everyone.

As Thank points you the levels? you margin lot coming flat about store, how you’re of holiday inventory season? do on gross with you. quarter the Flat inventory see and a discussion up, heading store on this per for into about the levels obviously as per yourself think positioned what fourth

Scott Settersten

feel inventory great our position. we about Well,

the improved here team’s to us So help did the doing. tools just again, tools teams things Mary in about capabilities home in comments office her we that our support our and just in it inventories of alluded to, and we’re manage behind is that the Part overall. improvements for Part and of better merchants centers. process at is distribution investments

network out Bs excess our SKUs, sure that always of supply we’re our that making in lot guests of weeks and chain As are the into us things selling reinvesting a and and in looking best our the taking for. So stock to on supply

inventory managing basis productivity So XX years. guidance and our to again we’re five again, guiding it next the over of overall, long-term points here improvement

and of talking see for you’re and our happy fruits I have this promising about manifest – now starting to about in we So and a what time now,. But labor are where long we of we’re themselves really us. this the is know. we’ve been front

Dana Telsey

you. Thank

Operator

is Altschwager Robert ahead. from from Baird. go Our question Please W. next Mark

Mark Altschwager

in beginning the prestige cosmetic in for QX. acceleration in you the hear Obviously, The back cosmetic the see on to encouraging bit It’s past improvement. picture, coming trends about the Kylie Thanks. your favor Based year think we’re inflection bigger you sequential do pipeline, category some you in growth? outlook you deceleration But have an can in the see – do afternoon. skincare seen talk to cosmetics. category? Good innovation saw of of we’ve

Mary Dillon

an XXXX important prestige, big. – I this – always the side of a of – [indiscernible]. ball about And of is of we’re encouraging as that the the very on Dave part moment, encouraged I crystal that It’s of What sign that’s that right? is well stabilization and business Yes. It’s seeing to XXXXs stellar tale us. XXXX would it with bit that kind of kind different a are struggling sort brands so a and some growth that or like really that are of and others But have matching huge brands growth. that is

our total, in channels there’s Use all be segment. sort the in bit, guess, traditional and the I but – in that measured of And, still So, to cosmetics little brands innovation are channel. of that is aspects color it’s course, healthy muted, a are of there. continuing out aren’t that huge a of

the with of we business double-digit with we said, us. mass about comps – you And as happening So fragrance, with there of skin, growth good for other segments feel and lot are for good. us that to a I innovation feel participate and feel all what’s the cosmetics, prestige

to you if add anything [indiscernible] can that So Dave?

David Kimbell

very reiterate. about the in in we there and very are that our is trends makeup. consumers – we’re makeup But strengthening all a optimistic be skincare. Just engaged continue Yes, feel to positive. Yes, certainly really remained demographic

reason. that’s of One the – of the one

brands been part focused digitally-native of on we’ve expanding So that our portfolio. and

brand brands brands and so growth L’Oreal think of same also Tarte we Juvia’s of Maybeline on that our and Morphe like the and some the a drive So Anastasia a continuing to play a but Kylie, biggest side. ColourPop, time, mass Place, like on At will certainly, number Benefit role. stylish and and

future and we are about of wellround makeup. the So where positive

Mark Altschwager

there call for component transaction holiday a looks to tougher the Thanks. quarter compare. the quarter, the quick did drivers reaccelerate this learnings this even Were there equation follow-up. outs quarter? leverage guess marketing can side any like I the It and just you a And on

David Kimbell

I’d activities throughout – Yes, a made say – marketing really had and marketing, the to our we’re approach. make we sure we the we felt quarter we about from driving traffic as transactions. were some adjustments good

felt we’re quarter mix the campaign and continue I solid making, certainly, into And as our XXXX, is the fourth in all we think, changes But the look growth forward the new aspects place. advertising all that up a driving we and of obviously was think to ended across business. is we so other drive in and to continue traffic doing and strong front center will that critical

Mark Altschwager

Great. Best of luck. Thank you.

Operator

is ahead. Erinn question from Murphy Please Jaffray. from next Piper go Our

Erinn Murphy

math XXXX? into reset you’re And And team the look this you can know go could coming year. down if I now math or major more and you thanks. Great, was is thinking the how are and talk guys I you think opportunities the hoping little I your the then, in emerging brands category a performance that about guess, Good afternoon. more pipeline about you bit the lapping during of about just they as there quarter? Mary, that Thanks. the prestige? kind through, then

Mary Dillon

Go ahead, Dave.

David Kimbell

Yes.

about that doing the brands have the we’re very us. share we get more going to grow math optimistic the to for We’ll future. side, this and really pleased we’re been expand on into, but as we’re results well and So then with year continue

early, Ulta well. them and portfolio. the bigger There’s some there’s we’re see, but brands, collection, including So and established find Beauty positive ahead the our that we We’ll of that’s Maybelline been good innovation also brand and recent make parts still optimistic example opportunity start of mass bigger pipeline about foundational off doing to some future brands and a And have core we in L’Oreal Place to of there but a of space. the that’s because cosmetic is our brands, us. to continue emerging of and Juvia’s launched a

opportunity. year, in huge we feel runway large try we’ve to drive that we and lot a this we us like of ahead to It’s continue So category, got a growth share to space. as as have a much success had of

Mary Dillon

Yes, add, and I would Erinn. just

think and really Board right I the across points, just that brands innovation, that with not across see the that’s we’ll emerging price categories math.

Erinn Murphy

there being just seen which a and just that the And the ticket year-to-date. thought? curious, is just ticket, was I’m part Thanks. than clearance of then for events Okay. any came bit we or we’ve growth in was extended lighter the other slightest puts the little takes

Scott Settersten

probably the primary that’s I’d driver say, there.

clear sales help much So for the that overall again, the of of a wasn’t quarter.

that yes, that would I that, So piece be something that good of as a well. attribute would

Erinn Murphy

happy and holidays. Thanks,

Operator

Our next go question UBS. is from Michael from Please Goldsmith ahead.

Michael Goldsmith

evening. Good looks accelerated. for your e-commerce question. my like your taking e-commerce Thanks your a but lot sales decelerated traffic in mobile sequentially, It

would seeing are So you and improvement an conversion be what Thank in that? driving you. online

David Kimbell

is, – pleased – of we traffic. couple things we’re We be a I’d well, Yes. to say with continue

either that that’s You and business. business we’re mobile of store, with aid desktop, part other there’s in is used often big of a in aspects the you’re strong the maybe part of as is see mobile a to conversion we the – is using a What mobile is use about talked healthy. not on business or bit all desktop. all so traffic the And shop mobile reasons to growing an than pleased little – mobile, in-store less in to around because of

across we that our we think But business way look just aspects to we a And e-commerce pointing there. shifts all traffic, direction all in to when conversion, conversion going a So grow forward. meaningful contributing right the business. little the and continue bit in of

Michael Goldsmith

very Thank much. you

Operator

from question Bank Royal Brian Tunick Please next is of Our ahead. Canada. from go

Brian Tunick

questions. talk curious, look maybe merchandise talk about you’re will around within any think then or I much. One margin mass out coupons XX% merchandise Scott, And of maybe you mix we the using on two Thank shift guess, at forward? returns has prestige just you give your coupons, philosophy expectations, new next you are secondly, afternoon, sense can them that everyone. guests, so, Good some on again, just play or – as versus you those margins still acquire to the changed? maybe Thanks. growing us off year very how on growing seeing maybe going

Mary Dillon

And tools Everything to about the guess, that do, of we that traffic, Sure. actually to it I any drive promotion it’s I’ll of I designed and toolkit, is have not a our start get new tools we sophisticated drive to is share you off that in said existing that question. the to gains, reframe guests a set would on one our just tactic of of really is quarters proud wide and think, variety about I one guest. and of call to do. the several the increase our I past very share and create teams XX% many make happy, excited guests it, much that over I’m years more increasingly, really wallet have fact really new and capabilities that to that as invest just way. loyalty program, more we our ability everything tools about that talked from we have awareness in involve the an to in to investment really personalized these use a

excited and whole make driving for continue sure profitable the journey there’s how gains. you’re that And competitive of you’re market do in to see that. array So a do of it’s we ways that you to all – growth a driving you’ll share guest,

Scott Settersten

mean, newness great on the Every that drive expecting. like share right? that’s more not significant year product? way profitable are gains new and the what degree. SKU? that kind now are gross dynamic stores What’s in got, What’s the as mean, like? online mean, Brian, gains, the we So for a any to we’ve foreseeable our Day. they’ve of far box I just explicitly a and that What’s talked concerned, bit long margins” as Analyst EFG about category. of again, following described, And the a long-term the margins expand and a so market It’s is the have, traffic little we’re out I during come delivering. market we’ve And We I at of a to of story, focused really the we’re “merchandise and guess, over our share we’ve and then been I in in mix hot course excite future. finding looking – and very the our never we products hot look time. us online mean, in I guests products year

we So of that’s the places our other a good like and business, in where a processes find savings if a lever some around for of us, back present again, lot core themselves. they got we’ve those feel headwinds to opportunities to mitigate

to that the deliver So of laid – at again, algorithm Analyst clearly out the the those long-term to balance business all Day. trying elements we

Brian Tunick

Good All the Thanks right. for Super. for color. lucks holiday.

Scott Settersten

Thanks.

Operator

from Binetti Suisse. Michael from is question next Our ahead. Please Credit go

Michael Binetti

for taking thanks here. guys, Hey, question our

given of But – and [indiscernible] Would significant the two assumption the made you that comment excitement comp? it know, on XX make trends. safe wouldn’t the announcements. you are the seen stock we’ve trends I the the an to above quarter-to-date current around guidance normally times, So for be last moves

Mary Dillon

Yes.

We’re the not teams, merchant exceptional the the have to offerings, fourth place our in teams side, a levels. our feel really comment from on product performing are our good marketing, teams store I said put what going earlier, at about quarter. like, distribution I as

in we’re good I’ll but it that. leave think, I So, shape, at a

Michael Binetti

think so e-comm there far then that. there is just fourth rate that Okay. cleanup in Is anything mid-XXs right Is make one growth quarter? and on – the you more

Scott Settersten

the keep comping we rate – it that layout look to last we – minute and look up business of the at to events together. when we’re – make thinking our were Our we to against Mary’s what business. guidance to kind we when That’s we here drive when the we have forecast earlier got point, to at our newness and best we our put sure be

Michael Binetti

think the maybe mid three-year that look be the the the years multi-year ourselves about at you next high-teens start than to at model, guys that of three we algorithm right. and the the assume about Analyst gave right to Is the could mentioned puts range the takes you implying at the us be of think orient linear guidance plan? Fair efficiency Analyst One Day. I low-end that and some you XXXX, at And to way you the you All start detailed enough. the and Day for to rate wouldn’t growth to the of as as EPS plan? initiatives

Scott Settersten

your I to get question, not appreciate into today. Michael, but that we’re going

Analyst still I lay for and So XXXX. lot at we’re our the we’re we’ll there’s the the be to to a that our us process Again, in here long planning and of – way think to explained decisions in of go plan midst going out made. for a Day I

on more So in with that we’ll you share March.

Michael Binetti

Thank Okay. I a very try. you had just much.

Operator

I Thank the any like Great. concludes Mary to closing Dillon floor you. back question-and-answer session. comments. the turn This would for to

Mary Dillon

XX,XXX another quarter, as busy guest by season, website and hard working store’s elevate to experience. all our like DC the ready to Thank holiday just is get you. continuing associates while to for they’re I’d delivering for close strong thanking the the

all So again you with you. and forward I look happy to of holidays. speaking Thank

Operator

This concludes teleconference. today’s

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

Ulta Beauty (ULTA) 7 Dec 182018 Q3 Earnings call transcript