ULTA - Earnings call transcript Q2 2021

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Operator

Good afternoon and welcome to Ulta Beauty's Conference Call to discuss results for the Second Quarter of fiscal 2021. At this time, all participants are in a listen-only mode. A brief Q&A - question and answers session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. pleasure Ms. my now is to introduce It Kiley President of investor relations. Rawlins, Vice Ms. please Rawlins, proceed.

Kiley Rawlins

Good our session. we section Chief available everyone. is Dave you, will afternoon, financial in Thank Investor Relations released Q&A our results Quarter website. Paul. the for Second release Hosting the This Steelman, Operating Executive and the join us XXXX. Kecia fiscal Kimbell, Officer, press afternoon, call of Scott Officer, of Settersten, Financial Chief Officer, Chief are A our for copy of the today

projected within safe the from speak of uncertainties, remind -- statements differ Before Securities Private reliance with filings only described this those statements language. I'd constitute to may forward-looking historical today, XXth, conference are not you Act the as on and like Reform we be Litigation statements XXXX. which in in results are risks which these number begin, August you XXXX. meaning which all place statements, to of contained of may to a Actual his SEC. the future caution such Company's to undue facts, harbor We Company's of the call the of not not of materially are due deemed The forward-looking in

to reflect financial XX A to charges and us and afternoon with fiscal XXXX permanent been reconciliation presented non-GAAP do adjusting certain of this have from to so. We adjusted forward-looking our GAAP and for statements, earnings remarks begin comments, costs revise closure can not the expect We'll will ongoing diluted found measures corresponding impairment and view Dave the measures operations be in including release. obligation store our or discuss adjusted by prepared of these associated have except Scott. with stores. our of results no which law, operating our In update should to as required EPS, you by measures, we income today's

comments, us requeue. the we'll you prepared many a please question. for follow-up To call call, allow possible our during time limit scheduled please open X we that hour to questions. this as question, or accommodate as second Following To ask to for the your up questions ask

be any always, the call. As for questions follow-up available after I'll

Now, Dave. the call over turn I will Dave? to

Dave Kimbell

Thank their Kiley. afternoon, Beauty results. appreciation And team by expressing excellent want Ulta Ulta start quarter, good again outstanding delivered and drive you, to this to The everyone. efforts these our associates all to for sincere Beauty my of results I

parts continue traveled country I've our all to As Company, the each for our their and commitment across the business, feel I around inspired guests, teams of by other. for visiting with and our passion

the we future. our the business We strengthen year we've and the are faster The are and last are than about investments recovering we excited are in our expected, beauty the over leadership momentum made our adapt to optimistic and to is disruption delivering category results. seeing about market position

and and landscape, Our is in growth. are market value share, we beauty lead strong, new the profitable evolving innovating capture drive proposition to and more

billion. strong Operating to $X.XX and a increased discretionary ongoing efforts our $X.XX and their adapt we guests, as bonus sales of These awarded reflect diluted to one-time we this guests especially their efforts recognition was and store our exceeded associates. to environment. results, dedication our quarter, For to and margin results continue appreciation eligible EPS these to expectations the to the changing share. to quarter, internal DC XX.X% sales In net strong deliver second our to XX.X% serve increased of per

For our the strong quarter, in sales comp increased driven growth by channel. XX.X%, brick-and-mortar

but seeing more members Traffic from stores continues XXXX remained increase, shop trends we're in to first return to levels. stores to quarter the in comfort and optimism, confidence, consumer our improved lower stores. of than As physical

to increased to strong stores XXXX, in ticket driven this sales average comp by quarter growth. compared However,

continue We to hours back levels. that share are hours retail operating to operating and nearly pleased XXXX our I'm to optimize

made were compared expected, online of the Guest levels. utilization to in As the ticket order, ready and was that as in the quarter sales increased in as e-commerce increase quarter. reopening transactions, enhance the in second was phased driven experience, more the declined operational doubled within The sales number totaling we than decrease pick our up e-commerce business last second decline the remained in-store the of speed. strong. XX% for more accuracy, but the than to hours. by fulfillment last X pickup average of stores. of And second e-commerce orders of XX% the remains buy in we Recall XXXX year, To year XXX% high, improvements quarter, quarter

their increased first have the that same sales we the as XX-week traffic also of available up. member stores engagement year. the omnichannel categories Beauty end drive in even e-commerce and guests, same and major Compared prestige number opportunities curbside dedicated with to last based strong, transactions XXst, average, From parking on spend. ramps we engagement locations. the look period they store to for digital even are quarter, of platforms to increased for We July at incremental Reinforcing overall as channel of increased compared in-store remained on to maintained our greater category Ulta Customer continue spaces, a market XXXX, online all beauty pickup transactions. across our help transactions the time share dollar non-traditional the in number perspective, and make

bath, XXXX, categories sales slightly phased of anniversaries to last of our saw comp hair double-digit second reopening we skincare, and year's delivered and double-digit of all robust, major only XXXX. across all as also the strong comps, quarter Compared care fiscal strength categories. the newness. to Makeup mass more major than XXXX, delivered Compared growth. was introduced process fiscal quarter We second fragrance, lower all

squaring prestige eye in continued healthy. an with to makeup the and increase categories engagement category and mass trend. building. growth makeup helped mass with sales requirements drive strong first is the from wearing to comp combined improving positive both in be not face in compared quarter lip, are momentum While occasions yet Reductions in while XXXX, With

between Moisturizers, and quarter. compared During the quarter, Bobbi cleansers are artist, self-care, sales drove strong improved Clinique, even Skincare another brands maintaining product and continue Reflecting a the guests makeup brand, purchases. increase growth. double-digit brands, their drive to UNDONE beauty the new as skincare from elf, to and in founded serums, sales performance wide of quarter strong a These range NYX, growth connection prestige new makeup delivered combined makeup and regimens with XXXX. they influencer category a launched we brands, new and MAC, launches well-known Brown, Brazilian BEAUTY. by Maybelline, X including of Elaluz,

We also self-tanning activities. reengaged with as saw travel robust growth in sun vacation protection and and consumers

is reach. with digital year, and quarter We strategically semiannual, invested shop Shop engage Ulta guest services. continued Beauty, Hair Gorgeous exclusive new who social in well with tan, events. the engagement drove and double-digit or New products newness marketing brands, our engagement. Good including which designed and currently guest as, and from we hair-care event began to our tent-pole care An event. the TULA, with our to streamlined Shiseido, Hair salon solid category the members as by Roche-Posay, fresh, offers to Creme This to do b. driven expand our strong growth, CeraVe, Molecules, strategic dedicated campaigns deliver La and convert not

new stronger event expected quarter event, and us. the attracted As We and sizes. ended members sales event than Jumbo a to with on larger profitability. a the Love product basket-building delivered category the result, focused

sales to stronger These profitability. and We our simplify improvements resulted continued in presentation to narrow guests. brand participation and

the In addition contributed to launched also Kristin brands the black-owned of strong hair Verb, this including well-established Ess, brands Curls, Curls, health. as strategic launched category throughout we a to growth number strong and events, brand. quarter, These new care maintaining Briogeo, and quarter on hair consumers a building Rizos focused with recently and new combined rack

growth strong Finally, as Day fragrance and and Fragrance as Day Father's Mother's well sales, bath driven events. by delivered Crush our exceptionally

fragrance continued brands Body Jacobs & like drove Tree business favorites as sales well Carolina and like growth. in Hut from market guests' commitment continued to growth, and as from Gabbana with to share Newness drive reflecting Scrubs Dolce base and self-care. Marc truly meaningful and outstanding Chanel, moisturizers from the engagement Herrera,

At Tarte, platform Good certified Dance, among a and the new quarter, X like in fresh, more and XXXX, Conscious To were Happy XXX guests. brands of X discovery this now Cosmetics, quarter, continues pillars. kit, Molecules Beauty of Beekman least Conscious brands and hero guest's trial end offer Kinship, others. at will TULA. Kylie the to than expand which sampler includes second Our in resonate include Conscious with Beauty promote guests the we And Beauty

search pandemic, have work their wellness easier guests Beauty of capabilities will reflect help Shop lines on their on and in personal Reflecting mobile personal the from to and products truly, research, consumer app further, between for beauty Conscious are refresh ulta.com this enhancing that guests on in we enthusiasts the Through certified make our select our stores Dermalogica, we quarter we health XX% to it scale in proprietary app our to adding to beauty wellness. Based know that and significantly products blurred. We journey. to find Inc. launched values. stores Sunday the is the these navigate Florence, we connected on Riley, ulta.com our beauty believe and also insights, as Wellness

of spirit, products needs rituals the of easy-to-navigate mind, Wellness presentation. on X wellness across sleep key at focused supplements daily category adjustable, segments, shop a the accessible, guest selection to and Shop addresses body, features and the With relaxation an and the curated From home. self-care spur in regimens, including a variety and for

to continue expand responding over -- offering of will explain well platform Our increase are the presence time. guests and awareness the and its to

than CDC and important brow business Our am increasing to limitations through that that dermaplaning, to our member retail from micro-channeling, role specific authorities, XXXX. concerns as especially will And HydraFacials new state takeovers. I due Z services as an in that stores. and we anti-aging, acne select test hair We bar from relaunch the cater in gaining target our also to and skin we guests. salon and stores plan XX% services as we hydration, guest momentum. in increased to facials are services frequency, Services engagement share compared mandates the services Gen Sales in more such quarter. spend. back capacity Third to well and engagement, plan offer loyalty, driving select play Despite to and attachment, local driving is excited

XXXX. The our and members the faster talented XXXX in stores, happens last active increased, Turning growth record initially store average our both majority higher seeing program, loyalty are above also members, to recovery in ended continue a rates million than percent XXXX. of at and now higher year, than new in convert active XXXX expected. levels. X% and above we a surpassing X% with tickets associates We second quarter member driven new Spend-per-member XXXX member acquisition to by XX.X

improving also are reflecting customer online, We the we've our improvements made conversion in rates journey. online

to are channel perspective, members to growth increasing from of quarter, as and our we in analytics XX% first of we From reactivation and imply In members a accelerating the lapsed XX% existing addition members, capabilities. quarter. and continue retention members in this data increasing new rates in-store-only totaled advance the

to the As of members on members from Quarter well total XX% of remained expected, but mix moderated channel XXXX levels. the the above First

digital omnichannel to across both and their members channels. Importantly, spending continue increase store

beauty critical digital the As continue a in new we levels. part but the increases moderate ways a progress and to and penetration products, physical new the rest trends, expect trial is new shopping we of year, XXXX discover of will in-store guests and variety of Discovery of applications. the we above offer omnichannel to remain as experience, through the

in allows product app launched scanning content we mobile that and functionality and our while select guests greater quarter, to virtual in stores. This try-on reviews, access loyalty for shopping information, new

reintroduced we of and testers supplies. with addition, expanded stores testing In sanitation stations in

and our to build to guests. with continue deliver hyper-relevant We discovery drive connections content stronger

focused with and class, quarter, we focused master skin tutorials. MegaWatt of founder live tools classes, long-wear makeup product we in for NYX Jamie school beauty this experiential, an Glow beauty July, From partnership XXX% In to boasted demonstrations, content a virtual hyper-relevant, on National beauty. And through partnership look. beauty. ideal and great, Super great is videos live-stream super on community products. Lipstick artist to care partnered introduced showcasing O'Banion Z-centric, lip we a pro editorial a is exclusive immersive professional -- Master live BeautyBio an with platform launches, Day, a honor app-based, drops, and shoppable viewers a Gen walk brand This launched hosted that

results While we in live pilot, we've early ahead seen are of tracking our platforms. already with encouraging other engagement

depth, #UltaSkinTok, our products authority post million The to awareness and our their of than Beauty's focus more and category of forward our views our to skincare category, we asked As the Beauty. To Company, to Ulta multi-branded most X audiences favorite TikTok reinforce holistic want increased this videos at the Beauty efforts efforts Challenge. amassed first of hashtag breadth to part to-love drive in be a most the billion of to date marketing destination Building launched from with Ulta fiscal we the on beauty beauty further We has and X.X of our Hashtag as beginning announced created. we champion to inclusive. the diversity diversity number a year Ulta inclusion. skincare commitments

Camille to quarter date black-owned year. Homebody, total double Ulta black-founded, on the track pledge, assortment this and in to our our XX% black-lead X And of black-owned are family, we XX% welcomed brands This Beauty of the committing year, have Rose, including brands we we joined dedicated To brands. number this to Mented. the to assortment the black-owned, and new

As into to salons. do, teams approach and that part enable launched in more all of our experiences better to for integrate inclusive our training all diversity series stylists cross-functional textured inclusion our hair we a

positive action women mean Beauty and to improving mandatory work. and live and diversity, a training foundation Ulta Beauty. We where to difference communities we launched families. and inclusion to understand also stores what We charitable on strive of the Ulta The inclusion in focuses the lives in equity, make

to This in generosity guests, million the raised our of and for support $X Save mothers children more quarter, with our need. the Children teams than

the single-use design Reinvent for LinkedIn highlighting providing launched women a recovery. campaign, environment, economic And functions with to and as pandemic's #BackToWork ongoing aims waste also impact to bag. Retail multi-year new our the the the and serve to minimize of solutions part implement the hashtag across on aid Bag, innovative and that retail that partnered of on reduce the impact We we plastic to test, resources today's recently identify, efforts retail collaboration Consortium sectors our

with Finally, very in I Ulta Beauty by online, end Target launched to about of XX excited quarter. open plans share the to has that am and stores at XXX the stores

way and last teams unique Over to to create Ulta months, collaborated a and for the closely beauty, come have life. to excited the Beauty see Target we're to guests X it experience

space Clinique, mix Pattern, Ultimate And seamless assortment Madison and same-day possible, Urban Guests TULA, and -- guests brands, than a discovery Morphe, services. app the on the and a From a XX limited-edition shopping a for items Ulta square Beauty Circle. shop with The of as pop designed As and Target's at Ulta from and in-store celebrate to be The fulfillment selection create both Beauty, the the well as everything designed that both Each including X,XXX Beauty Target, welcomed premium all as guests online. that offers and benefit store, come is the look. Reed, Ulta Target, product foot for new and assortment. at enjoy the unique within Beauty an bold vivid inspiring target.com collaborations Rewards existing Decay, orders the as and beauty and and was into Target with orange across free compelling We're of modern that they will the brands experience MAC, of to trial. qualifying future and will thoughtfully fixtures co-design was space lighting cap and to rewards zones, aspect With beauty shipping into Ulta collection. minis unique make Target unmistakable drive feel Target making shop Ulta canopies the experience compelling target guests. emerging will and more the curated discovery of graphics best-selling Beauty prestige displays Ordinary, to weave authentic

both been the it's and thrilled points was excitement While about We're experiences loyalty how we change open, partnership in retailers beauty. the earn has together only overwhelmingly days X been the first enthusiasm their together to of positive shop the programs. about XX since favorite can ability guest about with way world response this the coming and

Scott, the on evolving how Ulta Beauty how announce position we strategic we to I I call to and Day in to deliver plan continue profitable sustainable, XX host want will an our to share that are Analysts growth. Chicago to turn October to here over Before priorities

Delta the Given the planning ongoing event in-person uncertainty participation. around we're to virtual and variant, the accommodate both

Our teams And will attendees. our team will CDC the as results. adapt continue ensure safety call over the I necessary now, our Scott? the the turn to from discussion we assess to of guidance and of Scott financial will for and to plans

Scott Settersten

XX.X% disruption statement, closed Thanks, and due as income Dave. quarter the we the last QX increased We good store. stores the to opened year Starting everyone. new sales COVID-XX. X with And stores during afternoon, to X anniversaried

increased X.X% relocated transactions Company driven comp ticket. also XX.X% in X by growth increase We a average stores X store. Total remodeled and a XX.X% and in

leverage The mentioned, primarily X% last the margin quarter of improvement sales, stores. the XXXX, As in comp and ongoing fiscal growth the XX% quarter leverage XX% efforts. hair Skincare activity as last XX.X% services second XXX XX% increase we significant Fragrance optimization sales. to to result to channel year primarily and of fixed second year. increased mixed Dave from with points Bath to stores to XX% fixed salon compared margin last sales more year; inventory our last merchandise second merchandise of costs. was gross and resurgence compared the & The X% by profit inventory last higher care sales styling Cosmetics Recall were makeup QX million higher reserves to expenses. total products strong increased at leverage XX.X benefits anniversarying the of in a as, well permanently The of and and adjust comp of XX% of tools sales, From last XX.X% flat increased to year, costs, closed of for compared skews drove sales performance. the of of top-line year. Compared last XX% the increased in sales category category discontinued quarter due sales to Strong XX% basis turning lower increased the in and compared of was was to higher and that mix, to was drove traffic cost slow favorable sales of primarily reserves margin, XX.X%. perspective, promotional increased year, year;

salon of of last percentage the compared elimination sales sales, were strong expenses a to As role. reflecting salon top-line lower year, and manager the

As improved of we anniversary in will Comparing a offset salon of the gross to change leverage, QX. and margin fixed by points. quarter Higher channel leverage fiscal year's were partially reminder, second XXX basis this adverse by mix. cost margin, this expenses merchandise performance XXXX,

percentage expenses. higher variable offset a Higher retention the CARES SG&A million store payroll Act. As primarily to anniversarying last the corporate $XX.X store sales, expenses to leverage and payroll and overhead were marketing and benefits, increased of of quarter compared the XX.X%, benefits employee year. available XX.X% partially and Store credits in of year under due last deleveraged to made in by the

the the the while significantly reflecting pandemic. print our addition, reduced that also primarily Marketing last grant to spending during Recall on due their expense stores In discretionary increased quarter, were elected our appreciation marketing. in year, closed to our we teams in recognition nonexempt we DC to print deleveraged of store operational on reflecting performance, spending material strong bonuses efforts.

investment our reengage marketing to lapsed expanding digital also are key events support in We members. and

digital of brand a our expenses. sales, resulted Strong with we multiple of campaigns and as the fiscal nice more quarter to points. create our marketing across percentage leverage top-line was targeted touch are CRM corporate store partners closely leveraging SG&A, flat. and capabilities of overhead XXXX, Compared addition, to second in more working growth In

with fiscal a flat As The XXXX of offset expenses of of as of sales. and a of overhead. Compared store the XXXX, lower payroll the XX.X% store in were was sales, basis. percentage margin operating was by percentage X.X% margin in second second to on X.X% corporate second optimization advertising quarter efforts, higher quarter fiscal a optimization, growth to impact compared of and sales on XXXX an cost driven the of adjusted by promotional Strong our the including basis, brick-and-mortar delivered top-line combined quarter operating record, GAAP results.

to was Our $X.XX, per which quarter in of per a XX.X% last pretax compensation year. included increased to Adjusted share to to in a XX.X% year share decrease in tax benefit compared result tax second related income. $X.XX due rate diluted tax $X.XX as increase share-based state of earnings year the credits $X.XX. Diluted an compared last earnings were to share per of GAAP last

XX equivalents. a repurchased repurchased cash million million. cash quarter, compared Moving of impact balance total were XX.X X.X center cash XX last shares of our last We fulfillment quarter, the of and in QX XXX.X under and million compared Jacksonville fiscal the which year, of last reflecting fast XX X.X% second authorization. end the the the to of of impairments quarter, in current increased flow, IT sheet with the store stores additional inventory the impact stores, million onto opening by At higher XX.X our inventory increased Depreciation the and at quarter driven XXXX, XXX.X year's XXX,XXX with had permanently remaining store ended in XXX.X and purchases program, store investments billion new to we were and for Capital year, demand. primarily remodels, reflecting In and million closed. support the cost opening relocation. systems we was our expenditures million the

the We conditions. modify to repurchase to in cadence But continue approximately have expect repurchases market always, to XXXX. fiscal flexibility to of shares as million in the XXX response

XXXX, we've to for results by we so experienced quarter. Turning in the third trends far now our encouraged are the updated and our first-half outlook

comp it the as between spread COVID be expect have to with for While billion in XX% be our limited, expectations be financial to range. sales to for variants, of to environment year. the net year the now our increased the to XX% we operating visibility We dynamic the remains and growth relates X.X especially near-term sales continues plan

or XX% range as rate will second expect we approximately the results the XX open comp net double-digit approximately we of low stores. We relocate sales. now expect operating moderate half, and stores be move to for the the We new continue expect remodel margin XX through to to will year

compared to from believe Based of of costs. in leverage largest channel an improving to margin gross will merchandise and constraints, previously salon growth, approximately and come driver XXXX. COVID-XX. driven shift, we per are for now $XX.XX more diluted range leverage of share, in fixed supply of Fiscal on managing in higher chain These expect result continue the less assumptions to $XX.XX SG&A expectation congestion, the others, resurgence per as the costs, headwinds, to earnings of than by We margin, expansion repurchases. top-line the XXX share expected port Like including operating from million share we including the headwind of margin, leverage global other the impact

are mitigate to we season. adequate our the receipts have brand teams diligently proactively and to appropriate, working Our holiday working partners for where with are risk, inventory we ensure prioritize to

elevated expected end expect we the our levels growth. including XXX for and third store fixtures; quarter for million likely to between We XX remodels, supply above and of spend result, inventory million and about XXX others. chain million stores, XXX in be the new fiscal XXXX, million in and As a IT, maintenance Capex sales will and XXX for million merchandise at that plan approximately

call include not the to of now, turn guidance And our federal XXXX federal assumptions related no I'll a for increases reminder, a resurgence As tax assumes any COVID-XX. back impact over material the minimum rate It to a does session. moderate Q&A and in consistent to Operator our for wage... the

Operator

X now follow-up. One to In one We'll of be question-and-answer time, conducting question-and-answer please. moment, we'll [Operator a conducting to -- the the now limit interest we you. Thank [Operator ask session. be and Instructions] participants you. a themselves question Thank Instructions]

comes first Adrienne question Barclays. your question. with with Yih from Our proceed Please

Adrienne Yih

would to been XX that. first Thank last about I is learnings belt, Good initial My for more see then your somewhere inflection Really, but then, it's any afternoon in just congratulations. your stores. see you I days and the help target quarter you to my what continuing. have under early want And momentum us question What is and huge if could it's Ulta a you great Obviously, benchmarks question with aggressive a the on very your the Target. for for early XXX much. was days starting second details with Scott. And around know follow-up be rollout? [Indiscernible].

call amount chain, as to inordinate and spent us. supply is time on of an where we although haven't Just remind first one's the an it This freight is issue.

You're not you the about point where as you Thank for exposed [Indiscernible], kind to impact any can the are talk you if can, very exposed basis half? back you much. of and, so

Dave Kimbell

for and thanks it. Well, question Great. I the comments. the genuinely appreciate

X really we're really totally a the new a with the are Let share me This this is engagement well. start few excited by we I as confident We importantly, just and us, come mentioned, comments, why going we're about details response. we're Beauty, give outlook I I'm idea really thrilled together working for And They're on feel pleased more in as the are -- the Target and nobody Kecia launch, thrilled the is is color seeing and unique how that so of really, don't operationally with we've experience the to more gates, great results the on ask partnership. consumers to stores? but guest out this. you retailers bringing in about Kecia Kecia, some and partnership, what the at doing. then in said else to because really leading the most of

Kecia Steelman

members that both about Ulta the the both operational making and excited and the Beauty we're teams. the and Target across technologies, and capturing the we're Beauty most are Target seamless execution What Yeah. forward Circle really our Ulta sure integration having members out them looking We're experience accounts. there's we QX. of love gates are of continuing open really their we're XXX this momentum We the rest what huge see. that overall. loving The in to linked guests getting And stores really on strong. this the between

Scott Settersten

And the and follow supply on up then piece chain. international I'll

We don't the products, are in of some to have do or sourcing are serums, private most made specific and exposure the a of exposure. But vendor Europe. which few well. our lipsticks, we out partner's brands the brand, as components in part Ulta like Beauty label, break really Morphe and with our limited chain China So, geographic some U.S. assortment supply

sure as in eventual can, keeping we this as again, critical time, to close at and ahead we're development. on that. despite any nothing eye plan that trying as So point well outcomes we watch-out but there we're a prepared making just a see There's at we're

in like the feel we second of holiday the for we're So, well-positioned year. half the

Adrienne Yih

luck. great, of so stars All best looking right. The are

Dave Kimbell

Thanks, Adrienne.

Operator

Thank you.

from Please, comes Simeon proceed question. with with Siegel question your next Our BMO.

Simeon Siegel

Thanks. great to just -- Hey, that, and follow-up from Dave, the follow-up everyone. Congrats the on to results. angle. slightly loyalty on [Indiscernible]

as to just follow-up, the these the base seeing expect, whether as [Indiscernible] speak just right how of you So, with just in Maybe Scott, of we're from give all, of new Thank member member speak about you're is whether you margin year, there expectations back look for to now. Can can -- expectations the over And effect. just there's just fantastic the this the can to or growth? then the you you first past beyond loyalty and year now viewing results. rates you. your speak your benefits Target but relationship

Dave Kimbell

Great. Thanks, Simeon. Yeah.

a year, through first to above let me last just in numbers, X% pleased get little to with with I above and XXXX. a quarter. this new results we're really XX.X Let me before back specifically -- X% the the out of zoom And million of And half talk loyalty about Target, loyalty bit. high year start our really really,

increase members, really existing of our from fact total across comments, loyalty million quarter and team the new member of new through. members exceptional. single Strong we've among growth that strong rates by which the a growth, day. any that store members. lapsed marketing, have high merchandising, faster great strong reactivation course, And loyalty members, analytics As the efforts than it's organization the retention a teams our our just of is anticipated, our but and delivering acquisition, had team, and, proud come to that's in we the is of X.X I member mentioned largest testament Again, e-commerce are we team, an really every teams experience and course, to effort were able that had in entire the

It's our increasing in in total our Get experience, the your their feel XX not program. them this every large introduce been with our model. part our week. Ulta loyal outlook long we like them new very And going million And Target. program very the numbers any also with Beauty and of specific program also we're drive so, things touchpoints. in and proud across continuing program, think connection it all both but our give attract innovate has to key with pillar Ulta guests key all one But about differentiating share about we the XX to is -- of it. engaged people members our we're about with Beauty Target. into over of us of our have and The Target I'm circle absolutely excited specifically really there so, with program spend channel other is to a main our walking We're Target to reasons a that has over we relationship experience million of than Ulta around us of aspect a the time, another business. then existing delighting see that loyalty new focus guests. at that to loyalty and guests through ours. the for They total opportunity attracting

to and far So, as you far, Scott, about said, so we're we're it early hit driver. excited as on about confident so do too the a and talk see to results experience the Kecia the margin? but want big

Scott Settersten

Sure, Simeon.

of this quarter on the brand very we're guests, partners delivers deliver associates to to which of behalf financial our of again, those work the hard our at results. day appreciative end results great all the what of experiences the posted and and we So proud kinds is of

would I say. stronger with the was unique we've versus over Combined P&L. over So, optimistic. reflects business say last year makes us say across results the believe benefits, long that to great Again, EBIT term. us and a we're margin is I'd -- this double-digit increasingly you've doing expectations. again, the all I performance, mix versus the of of XX external model power comp initial and the comp elevated the would factors and we execution our say The and XX XX% things drive it leverage heard the more

Day and have we're opportunities can October. do share We'll to expansion at I Our to together we confident is guess to would to too say, Analysts sales when expand that. get we margins in more say we on I not and here feel goal today. share operating going much more margin color our outlook

Simeon Siegel

luck rest of guys, again, for the the Congrats best of year. great. and Sounds

Dave Kimbell

Simeon. Thanks,

Operator

you. Thank

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

Chris Horvers

everybody. afternoon, Good Thanks.

versus quarter. So, first in [Indiscernible] my first the XQ two-year is your question accelerated

the quarter You're get looking from seen in just uncertainty. in Delta that, to any fourth in school the low despite more back the to from particular? related you the of having into comps from This fading the markets And in work any and from that should work learn what out half. is be August impact down have back double-digit

Dave Kimbell

first-half encouraged Chris. the and and great. absolutely. quarter third by world we're strengthening results by we year. Thanks, remain encouraged in our saw resurgent to momentum you certainty have full we that the the Yeah, so say, said, will year, of sales expectation And that's this for first and with through Yeah, why that's does I broader having will variants, increased in a the and the optimism us. we seeing of confidence, for throughout as with and these around feeling so and We're impact the the certainly, remainder how that far trends. difficult with business understand our -- half the excited variables that's so see the -- it we're what from impact us the

a drive second of business the play half our that and time difficult first stores of sure we about remains in then new course, be are influences to holiday. year like momentum. always behavior. year, healthy lapping business to than uncertainty. the the was exactly on in that. will XXXX of will Our dynamics And through we it's COVID and gain predict other stronger We're and as strong going reopened how half We of for out with consumer started and optimistic but in But of going the year the is unique lot a a the feel holiday to the holiday.

to but it's sales also So, last see our we're throughout reflective all we our this adjust. to the We're we sure to right we continue the beauty been the planned, of the recovery hard out And the working have been than closely first we've believe to do that with uncertainty recovery category, the doing as to thing believe brand ready partners right is there. this year. right and of forecast make is far, the I'd plans faster It's be we're lead working doing the or we adapt prudent. so of store stronger achievable, staffing, prepared, inventory, half marketing in the say, we've if as

like but our optimistic, given the So is feel appropriate environment. guidance

Chris Horvers

the first if as the And follow-up, maybe in that math case, implying you're half? lower versus Is back what half. sense. code? XX.X%-XX% like suggests drives Makes And, it a type that the in margin that's quick seems the a gross zip the rate

Scott Settersten

promotional. things we against supply Again, We've costs fuel is wider a more view like and Yeah. environment we're costs the holiday are season. We're retailers at into some around tempered the promotional baking gift-giving I the a to that. we're naturally, variety competing more of -- would prudent chain plan incremental during just say a just that got taken be

estimate, out balance, think achievable. And and if better think we'll results. better, on we deliver are we forecast, turn again, it's a sales So stronger, it's things prudent

Chris Horvers

of Best much. so Thanks luck.

Dave Kimbell

Chris. Thanks,

Operator

for As we of themselves to ask the questions. the reminder, a in interest participants to question limit time and re-queue additional one

with comes from Tong question with your proceed Raymond next Please Our James. Olivia question.

Olivia Tong

you. Great. Thank

I the fantastic, incremental profile this e-commerce you changing? of in cost mentioned are may of how imagine sales now new lot Are back it primarily do mostly of this, much this Is incremental, much so -- how is congrats increment about some you the and My is change the fixed promotional helpful? to are view over bit And of question or a or customers color more talk that they replacing also how to does little of be is First, would acquisition on that omnichannel? shopping a costs with extension efficiency you is the margin Thank you. has versus bit shop give still who of that it But margin first an customer promotional -- little Is a your people just via [Indiscernible] which leverage. in-store. -- quarter. -- way, on of the any online the the in-store margins can coming there time? improvements because efficiencies additional And is then in customer can

Scott Settersten

Yeah.

I'll margin. So the maybe with start

reserve stores, year didn't versus they if the that drivers just but We're Second the major clear, with at of much we're year, the year. sales higher better and in described a the the that course, Fixed second the for Quarter, and were any middle year. exactly of adjustments was another levels this Again, so, less in again, I stronger versus this in better say. not pretty last absorb were the Promotional, so we we first last So would of the are list so, the doing job was overall. is Second expansion kind discounting biggest in of XXXX. looking and Quarter gross the the disciplines driver half the of sales of that of significant a pretty costs because benefit. quarter significantly margin

salon think versus and I when was course, the to another year So, things element last about those manager of shift that.

there the to it. now. that keeps us. a think costs, gift other are of played forward cost and year, process are merchandise longer tools as not expand fixed term. and an about far being can learnings. for on track, opportunity good we as Those giving. that once still think sales aid There Fixed be I we back help able We as over So to again, that that to those thinking to we got things we're again, things. improvements the there's the back still leverages do half year the the again, future, the good we with quantify start we're I some The about promotional, margin, discipline, promotional, last going But got expect think on

on So efforts. feel we to they part benefits that's things ESG in. And as our term. are over will confident that other again, working there then, long something, pretty of deliver the we're continue

the -- being margin gross merch there's opportunity the plenty most still of important term. us about think for piece of we over when margin that, longer we So, think

Dave Kimbell

points that's e-com our of Then, couple we're with really healthy business, your such high on how our first omnichannel total integrating complementing important profile part mix, here, a and a of very and store e-commerce and our [Indiscernible] member pleased experience. which strong is with and

loyal and Ulta have at to Beauty in-store, in Beauty online, and in-store integrated shopping and omnichannel And cases, high so strength They those guests. levels. our Ulta. best or channels. is very been to level shopping both typically -- glad demonstrate see we guests continue even shop ingrained experience. see higher purchases. of they among to what with total some across that are in-store those beauty our do Those a on more of concentrate shopping we're online it's are more both so, that into that guests the E-commerce And at incrementality become e-commerce Because start get Ulta spend more because their

with year last the increase new introduced whole in being consumers of e-commerce our stores closed our business. e-commerce, dramatic to lot a we the and So

them of in Now, most importantly, years to an really deliver both going is as sorry, out in -- omnichannel have even e-commerce our forward. drive shopping are we across forward, total helping behavior and positive, But but more back to know business results. omnichannel will of some of we in-store, them base channels in have QX in grow that which the will I'm consumers going way sales shoppers to gone shop the shopping continuing only

significant behavior impacts excited a omnichannel one be our our of will of this omnichannel business So and the lasting believe disruption in and that e-commerce behaviors. increase this about

Olivia Tong

Great. just up if Maybe could Thanks. I makeup. on follow

has it back replenishment, isn't outside there it still of used was given out, given is another Is of it do it if fully even continued, makeup? just, given the that the of XQ, curious, that momentum there is XQ it we you think be, innovation? where the You categories going -- where versus do back are it trend other to some before, to kind particularly need to hasn't lot is why people mentioned, strength, or obviously, a just of holdback, recovered

Dave Kimbell

trends I'll what it's The just bath, in But that more a skincare, yeah. have we're makeup engagement. make-up, that, fragrance, categories and that And -- a -- we're debrief you. by been one we Sneaking makeup the I it's the haircare, just There's -- strong encouraged question. high-level That see. seeing testament remain think But other they are strong. encouraging.

and was quarter below it that weeks in it during While had was QX, slightly XXXX the times we positive levels versus XXXX.

and about Our QX, XXXX, it business is brands above in above we levels talked XXXX [Indiscernible] also was business, performing are new in well, accelerated Also brands are biggest bringing improving. our performing. QX newness, Prestige We're in our

just it's consumer think I behavior. So,

[Indiscernible]. a engagement, there, level we high when back about more the being we're high of above and As a we makeup, there's is we to steadily growing get tell XXXX see. from encouraged levels momentum by Time of will exactly excitement is what recover, And but building. level

Olivia Tong

Thanks.

Dave Kimbell

Olivia. Thanks, Great.

Operator

Thank you.

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

Steph Wissink

to I you. we've guidance that some Hopefully, a seen about leverage don't just SG&A time. wanted quick this because think you, but one a quite talk is for for on basis the I Thank in full-year

SG&A still what where some about wanted to you best understand little you the about just Thank and pieces. you components periods? Maybe, the Scott, in might future bit I a see talk you. if see to opportunities expect So, leverage the could key of

Scott Settersten

going think there of leverage you're comparison Yeah, as XXXX. to is better at back the overall., as so SG&A course, XXXX, looking on I far story good there's a be Steph, if

So I'll that's time. where spend my

a As outlook there's now good there, versus leverage stronger-than-expected to I earlier we that due lot there's say to would that's I year news. still, in be guess going back again, versus our is the sales, look so 'XX there of

variable compensation XXXX. to in stores is higher here expect pressures, number store big 'XX, the in back than on than primarily 'XX higher in We levels growth, a dollars we primarily saw what X. and Wage be incentive

a measuring You'll was so that back going we're range, significant recall against to XXXX, headwind, XXXX. a we missed our internal targets that's and when -- by be a fair headwind

gross service margin our course, half investor reallocated also net opportunities down the XXXX. that the well at line we some now of digital investments advantage going we're it's too, Company interim a a make would as the year in the be mention some calls a it's from trends for in that's significant business, good We're I overall SG&A versus Of half some role the to going market margin to and the more guide got and again, have to in good operating of we incremental to the marketing so But in where here advertising course, sales back of benefit level. strength of share manager the been think that's year, where headwind pulling of back here there we've take that channel. in expense

effective strong again, it's there So know and places we that allies. worked it's are and

Operator

Thank you.

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

Ike Boruchow

your when return [Indiscernible], But makes you growth as you to we can talk that which, were said but around everyone. Quarter the Third e-commerce more are 'XX e-commerce? doubled now Scott, I not bit half? I quite the expect which Hey, down dollar to just versus year-over-year little elevated, get lapping. and I implies more given that mean, you you about a XX%. was to do competitors XX% sense back think think,

Scott Settersten

Thanks, Yeah. Ike.

So again, yes.

quarter, COVID did store We XXX% we some of growth bit business and overnight closings again the in initial unusual. is becoming just see XXXX. stages back second a lapping of first a digital The the the the little kind and quarter but in were

in we overall to demonstrating in see stores the an again, last coming numbers what traffic was that brick-and-mortar. was that experience, improving expected, of to year. it Again, brick-and-mortar see e-com our here beauty back plan shopping the the annual and versus our important XXXX. static part sequentially guests an So, to was again, in is what decrease and,

the I Dave So, bit is anything under last business, to of his So, prepared in out think little extraordinary year, get called second circumstances. remarks. to e-commerce I remember, our it doubled a quarter, Did here, think moderation we don't right? we expect

of about rest year, As traffic there. good. trends the We're again, encouraged stores we the are the think

be to growth that of the Again, next the I is of look to range. e-commerce as mid year, over going here expect would expect to in couple terms XX% So, it moderate expect to out to the in e-commerce wouldn't as full for we the absolute we penetration year. we look low I quarters. the be rest a And

Ike Boruchow

Makes sense.

Operator

you. Thank

from comes with proceed Sachs. Kate with question. Goldman question next McShane Our Please your

Kate McShane

Thanks Hi. question. taking my for

the did than that mentioned higher your come acceleration share in in mass, there, whether other comps And in commentary if cosmetics expectations. in or an seeing on prestige the that had You categories? what it's are a gains I and wondered mass? both you within market you saw was

Kiley Rawlins

the sorry. question your Can repeat hear you? of you part didn't we I'm first

Kate McShane

mass, little are you Is in comments the I'm the category? versus sorry. an on category based just in that a in both acceleration higher your comp. at bit. seeing that than mass similar I'll and the you then there speak for saw I prestige within came up your for expectations QX? And just share what you wondered, commentary, gains

Dave Kimbell

QX different we across so newness some that brands side. for brands newness and but, brought our really And although really through showing showing Yes. about it were all driven the getting strong but both good certainly XXXX, of And we were we're them And we in mass I healthy the new again, our and makeup board, mass And segments versus are to with category. above it. versus specifically. XXXX, back in, that seeing then we're exciting our prestige all our than seeing strength the both Thanks is we Got -- re-engaged it's our that by is strong the but while prestige. XXXX. faster, Kate. categories moments in all makeup in expectations And expectations getting and mass many we're closer not aspects across both versus makeup prestige across-the-board. on -- and guests, saw and of improvement talked business. across the signs but of Yes, of where question, demonstrating the really improvement, some recovered quite true and higher to and growth has The set growth we a our

and So, yeah, encouraging. it's seeing both points we're it categories price and across

Operator

Thank you.

-- Our

Kiley Rawlins

for I X think question. have more time we

Operator

Thank you.

question with comes Our Krisztina proceed with last your Bank. Deutsche Katai question. from Please,

Krisztina Katai

to quarter. Hi. base. Good afternoon. membership strong touch And wanted the congrats on on I a very

You record. it reached mentioned that a new

lapsed You consumers ones. are with finding and re-engaging new

and to you secondly, of think wallet have compared you department competitive on in are selling we target terms views the then do stores, where landscape how any is the you are the thinking And So of really and customer XXXX? various about pandemic? evolving share how exit [Indiscernible] DTC, including like And you here the players as specialty [Indiscernible] and the do Brand players,

Dave Kimbell

as the per Loyalty, and members, we're of the healthy I well categories. the across We're engagement we're encouraged pleased there earlier, as, absolute number both member. Yeah. improvement as Great. results it's number in by just driven mentioned seeing and nice, really of absolute high-level -- by spend seeing active

beauty continuing look we that the lead at wallet, highly is to our with changes. high as so, and environment, of grow the And confident competitive. share is category always and are level time a like category this share certainly, we share driving disruptive This across efforts a feel categories we're recovery the competitive to -- lot of is are a And of engagement. the both a wallet, of

high of Beauty business driving forward beauty a our of have Ulta competitors, our for the category, and focus all leading our recovery. leading and but respect is level and on beauty We the

unique. touchpoints. the assortment provide, important particular, other our is program, done does, in guest Ulta experience, -- excellence Beauty loyalty in model stores, which Nobody and all across what the with is that we in Our so does that our

leader way part ensure our believe -- delivering business beauty forward. the certainly across and I Beauty encouraged watch we're prouder the the is our to this while we recovery focused business playing and very category that again, we of we business well model in see. really are and competitive be a driving of And unique that the of And Ulta so, aware every team definitive we're on offense driving activity, to that couldn't have is

Dave Kimbell

your Ulta We why want COVID-XX. look taking so commitment Beauty about their Analysts to all with we host more sharing each XXXX again us So, of excited Ulta dynamics in time. agility Day to area to changing future of our the and associates we October. joining through in the for about care are especially the other, Chicago forward when thank that, here of Beauty appreciate guests thank continued of and do our Really serving you And I for our today.

joining. good a for have So again and evening thanks

Operator

today's conference. This concludes

this You may lines Have disconnect for a wonderful at time. your you participation. Thank evening. your

Ulta Beauty (ULTA) 26 Aug 212021 Q2 Earnings call transcript