ULTA - Earnings call transcript Q3 2021

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Operator

Good afternoon and welcome to Ulta Beauty's Conference Call to discuss results for the Third Quarter of Fiscal 2021. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. We ask that you please limit yourself to one question and then re-enter queue for any additional questions. [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

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

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

our this prepared the Dave Investor Scott. and can discuss statements, third is will obligation certain or no today's to in non-GAAP diluted release us found to section you earnings quarter measures, for from to We of adjusted in have which should these expect measures the corresponding EPS of XXXX. we be required revise financial except adjusted remarks website. our GAAP update afternoon by measures of fiscal forward-looking as not and the and A begin In reconciliation income operating law do comments, available with We'll Relations including so. our

as of that respond prepared ask to as call. respectfully this many time our call scheduled hour to to have questions. during up to will the allow possible one the for open we you request for you comments, Following us We

any As [ph] after always, Kate the call. Mary and for will be follow-up questions available I

turn Dave? Now, Dave. to to I'd like the over call

Dave Kimbell

The Thank you, Kiley outstanding and team delivered afternoon, again quarter. good results this Ulta Beauty everyone.

third the to sales EPS and per Operating share. of $X increased billion. increased quarter, XX.X% For net increased to XX.X% to record diluted profit a $X.XX sales

In results. results, addition excellent to producing financial also we strong these delivered operational

how We continue XX.X of last members of the the This Ultimate model which new dollar navigated members XX chain period forward. our our member culture and company strategic our in on our continue weeks who efforts Beauty am million my compared sales October and results. XXXX, framework a deliver other financial I Day will in we program enable while turn we honored to the penetration reiterate our growth and strategic great guests and markets Beauty want Analyst Beauty to Today, pre-pandemic loyalty with Starting of incredible to share our progress definition for and and in against these October, impact our an Ulta to reflects update appreciation the of levels. to our to driving remained increase holiday well introduced deliver associates Ulta I'll I our an and on longer-term to guest their winning increased strength a tight for business Ulta focus positioning XX, imperatives successful third market future beauty a of day needs share made XX% our discussed about are And to returned and associates sincere expanded positioned We season. Rewards passion challenges talented team. on power record share a for Beauty and to some serve Scott for I'm the care and we each driving disruptive based the all the excellent outstanding express it breakthrough the financials. Ulta the ended to At of I'll quarter, shape before deliver by number to Prestige and in through targets. for lead of same supply information associates' year. such labor performance our and holiday the discuss resiliency All category, of meet and to for by we inspired guests to over Beauty's Things differentiated global beauty every then passion Beauty. our I

differentiated evolve is offering delivered to enthusiast. to to And fragrance, categories newness quarter, cycling events, last In growth. promotional major robust all XX Ahava Hair Compared the strategic double-digit excite year's COVID, disruption strong delivered beauty double-digit the our compared including from our the growth [ph] strong of of XXXX, to quarter product XXXX, third Gorgeous success. and Our we skincare bath, innovate, continue to comp quarter core fiscal third by third comp of from driven assortment all and our fiscal expand event. and performance our and Days haircare Beauty, the

creamy sticks, growth with within Increased last growth continue cosmetics Compared compared new below category we within will While the category encouraged growth with trends the remained high And face. in within drive to blush strong. consumers category. pre-pandemic deliver recent moisturizers tinted refresh lip continued eye lip. year, their are and eye. slightly innovation XXXX from that balm and within lash lip confidence gloss products driving color, are give improved with to the and to second quarter driving growth levels. and lip Engagement makeup with growth makeup stash to interest Makeup the continued and the Prestige serums, in and false lashes remains us Engagement beauty are return to eyes, lip strong face levels, trend shadow like was growth to in looking growth mass with combined makeup

excite engage to guests. continues and Newness

range ColourPop, Urban combined including like with New Brown Decay, launches a and wide NYX and brands, the quarter. Tarte in from nice growth brands Bobby Elaluz, drove of product new

events. and of In strategic addition, additional guest Back this growth quarter, another and events, by into shop like In Takeover do a spring kits. our hair continue who newness the kicked on early haircare on event, and delivered our storytelling success double-digit quarter category focus driven We newness streamline or and resonate Haircare of like growth around Curlsmith assortment focused to brands Living we with the from ESS, Verb. MAC from Building events not goals, fall Briogeo relevant Gorgeous Redken and with strong marketing acquiring with service to Dyson, Hair salon guests. our members holiday event we Proof, semiannual our Bar new enhancements good our offers, brands off expanded our October, XXX engagement we KRISTIN and with services. stores. strategically engage our continued core And create engagement saw event, product

haircare all to of the prestige and and to we continue Beauty Ulta assortment on expand excited our hair We share brand ulta.com OLAPLEX, market, one launch in brands will in I'm stores in number prestige the January.

to opportunity sales give and double-digit in And to and as Our to Takeovers guests. cleansers, Back products moisturizers, respective continue last KRISTIN Bondi quarter skincare sales salon unique category growth strong IGK, of growth. Bar guests by quarter, stylists takeovers. serums maintain including invest and drove ESS Skincare quarter, and Verb delivered introduce drove self-care regimens. their new brands nice this growth another routines, all to their Boost, takeovers Similar skincare during our the

and Tula, Fresh; New brands, Clinique as as slices; Drunk exclusive products is from Beauty Elephant; including new which Ulta solid to engagement. drove Good The well Molecules guest peach and Ordinary

Crush Herrera; growth. Grande's Events is YSL to growth Dior, our fragrance our Finally, drove Carolina latest Ulta the exclusive program also Ariana well drove monthly in Woman engagement. and newness exceptional and strong is as during category bath a Beauty; from God and purchase fragrance, strong gift deliver our with continued as back-to-school quarter. included to Coach; which Fragrance

bath body the and continues category to and drive as scrubs fragrance, trend. moisturizers robust on growth remain Beyond

In guests sustainable from with engage vegan, across discover and platforms. are focused cross-category pillars: growth program, reflect categories, packaging key which we free, this clean brands and our Through initiative driving ingredients, impact. five Beauty, identify and our key with intended personal core on we growth addition values. to help to their cross-functional cruelty delivering positive Starting Conscious products from brands

Beauty, beauty brands conscious quarter, XX of brands, Better the certified we certified total end QX. XXX the new LAMIK and Not WLDKAT at Younger, including During to of bringing number the

certified During new them. brands products added SKU as help the vegan third for important as the level at guests certification is most quarter, to for we identify and our well expanded online shelf reflect in-store easily which the what to to filters search badging ingredients clean and

of Moving and our to our brands. now to assortment black-owned efforts expand BIPOC

on Sunday brands assortment double track black-owned new of two added Sugar we quarter, number third and year. are brands, and in || Nude the we the black-owned Sunday this our During to

I brand to am we Beauty Difficulty]. Mutyala, Asian brand to [Technical makeup is have share the welcomed a excited Deepica by multicultural owned our cosmetic also is Tinted. Live Ulta that brand influencer family, Founded South Live Tinted celebrates that beauty. addition, The In Asian first

Operator

[Operator Instructions]

Dave Kimbell

Hello, everyone.

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efforts So brands. of moving BIPOC our to our to black-owned and expand assortment now

black-owned on Sunday and double our in brands track new Sunday assortment we year. During added of || third we and quarter, two the black-owned number brands, are Sugar to this the Nude

a makeup from multicultural in shop to we excited to this a This wellness mind, body self-care In products Ulta consumer is platform In first spirit the colder believe of Josie the cross-category Deepica wellness especially our from way. care the Maran HAIRtamin, platform cruelty-free. Beauty Reflecting easy-to-navigate proprietary stores. we refreshed hydration to vegan The celebrates in which items addition, summer know family, and on Tinted significantly [ph]. part Asian beauty. shop Mutyala, second share beauty months quarter, launched the introduced Founded we also the as during of our and and influencer, for is in an beauty Live offers Live total OSEA accessible, welcomed shifting third we and insight, the quarter, XXX new enthusiasts to our and body online and beauty XX% solutions brand South that Alum, assortment is relevant Based is brand I'm cosmetic clean, brand connected by have research, wellness. Asian-owned conscious certified Tinted.

and efforts to personalized know World. we Turning to blurring strategy the our physical is serve our a All in omnichannel now across guests. cohesive aim journey and our increasingly the guest and guest experience deliver ecosystem, evolve connected omnichannel to channels Your to digital We through

our QX, During four ways. in omnichannel we enhanced strategy

the Beauty ready to beauty and they giving in up two buy to our promise launched Go, or fast, we that be store up most. go to online, picked less, want will pick convenient First, within our guests orders access hours

continue also utilization. to incentive guest We to encourage test strategies

During last year, BOPIS to increased orders of in the compared the year. quarter, e-commerce to third quarter XX% sales last totaling XX% compared XX%

we holiday Angeles, Second, and launched in guests DoorDash, same-day season. and convenience Boise partnering delivery value and Houston about Chicago, Boston, the Los we're Atlanta, provide will excited that with this

exclusive in Third, and select services two all stores. with services in salons. salon skin in October, stores Starting we launched relaunched

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it's offerings. early, we new are with pleased how with While engaging these are still guests

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expand across Moving beauty presence and of our to the as to guest the deepen beauty journey efforts heart community. our on the

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the In third key deepen campaigns XX% and after audiences a to an ended addition, XXXX. during We of with active X% last learning, we saw members, classrooms insight-driven with year quarter return above as moments. back-to-school virtual our opportunity across students channels million than more Gen engagement with to Z XX.X year above

by to disruption member and create was continue add build last personalization to baskets of headwinds year the largely member we a stronger maximize pandemic, life quarter from growth After and this accelerated very due pleased have While we with active driven strategies, reactivation the are new experiencing lapsed results. members, retention. and members we the returns to business cycle

members are We and in strong stores driving of conversion new online.

during We are from successfully who pandemic engagement our we members driving and the existing lapsed reengaging members. are stronger

shopping our to guests member Importantly, holiday an would consumer Based expectations expected were stuffers pre-pandemic proactively our needs. to rates holiday glamming. plans to holiday and insights, If have all-time levels XXXX holiday a many member more we now sets, ready more and XXXX get per at and this fun, earlier was gifting for collaborations spend help their took high. is more, recovered retention their Shifting on and in gatherings, year on we unique holiday. is start we more real ensure about our more life steps to about and less, gifting stocking start head guests with

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brands our have expanded Pattern explore in-store. holiday Elephant everyone. holiday When assortments an teams brands fun and an Drunk Laura the we top of and own across new giftable exciting allow To visit digital help to or store, the for brands Grande, very unique items our merchant outstanding assortment developed to experience guests gifts will Mercier, built we and banner a scan great Ulta front and QR gifts Ariana and category. launch app on Tarte, an from holiday and from Dyson, guest best online at points. discovery price opportunity Bobby of with Our codes Florence gifts, With like offerings Collection, categories Brown, Beauty our easily a giving Briogeo, have Truly for like explore easy click guests by holiday gifts ulta.com like the

center Our holiday of stores always the Ulta at Beauty. are

we've Ulta wherever As guests our experience we in great however bars innovative mandates where expanded salons capabilities, they Beauty combine in-store relaunched by in all select for state local we've with to get our omnichannel in we'll skin meet To benefit or capacity help services to and and shop every ready want Beauty. Ulta real-life except guest salon stores. celebrations, limited brow XXX% and

convenience this delivery Finally, our BOPIS, great shopping same-day and provide curbside with holiday options, guests will season.

anticipating season stress and accelerating testing inventory holiday Beauty. at supply we successfully IT to are is from start well flow our I and systems excited, holiday we and seeing to the In excited teams about to Our The our off challenges we managing holiday deliver positioned are a chain our another are support strong and guests platforms am our confident strength digital season closing, successful are engaged Ulta hiring. ready in business. proactively to to

category and expectations executing performance we recovering exceeded the teams The our are Our early our well. initial third is by holiday trends. quarter are beauty encouraged and

to for confident And us results. strategy financial share We Scott market will call now, ensure and the beauty Beauty of and capture landscape I to drive will and profitable new we are lead are the a our turn over Scott? growth. will discussion to well-defined enable the investing Ulta innovating more

Scott Settersten

new sales store stores. quarter. driven to afternoon, we Starting Thanks, everyone. Dave comp statement. reported results echo Beauty comments appreciation and XX.X% growth quarter and by all express and primarily I increased good company with stronger-than-expected income outstanding our delivering XX.X% strong for Dave's strong Today, associates transaction the in by comp like growth to another Ulta third double-digit sales QX and would performance. increased in Total my driven

stores, Average shifts year's transactions increase category price, to to top growth selling Total addition in e-commerce mix growth delivering growth. XX% expectations quarter our company increased and ticket increased X.X%, lower reflecting sales robust on In last of XX.X%. due an primarily exceeded the modest from average levels. favorable promotional for

During the opened one we and quarter, seven store. closed new stores

XX.X% line year. expenses leverage primarily costs, margin with sales XX% of increased leverage total Consistent half last We last year, our also compared From relocated XX% in fiscal mix of and XXX of XX% was to sales E-commerce remodeled sales XX% last in we And to XXXX, points of top higher with were the and XX.X% three The XX% channel basis and efforts growth strong cycled XX% this sales two compared mix fragrance due last comp as stores points first and was increased Skincare sales. we category experienced of sales, styling increased year. of year's salon to makeup cost perspective, to resulted fixed leverage quarter benefits of stores. points fixed and the costs. year. to significant basis and to third a Haircare lower of XXX Compared penetration compared from of strong shifts, XXX XX.X%. the flat what profit merchandise margin. year. of products bath increased about year QX was margin sales e-commerce last tools increase last than XX% sales gross was basis growth. in to QX occupancy optimization

elimination the of of and a reflecting the costs top leveraged, salon strong expenses salon sales, also As role. manager from lower percentage sales line

was year's our promotional benefits improvement and margin, higher result of anniversary gross will in ongoing partially by from change we third performance this sales, XXXX, management to margin efforts. offset adverse category of QX. merchandise XXX activity improved of reminder, primarily leverage expenses salon points. fixed in Higher cost the the fiscal were by a quarter margin mix. Comparing The this and merchandise leverage basis As lower channel

year. to percentage and we store was significantly compared This spend expenses of deleverage line Last print store to on last our the expense, QX third print As year, normalized. from by of year, last are was leverage corporate of more favorable. to overhead, percentage the circulation primarily a and points SG&A XXX to of offset print profitability benefits. payroll Strong cadence was marketing leverage due increased XX.X% in sales, and XX.X% decreased compared reflecting as CRM reduced And year. quarter partially drove vehicles. top basis advertising spend pandemic. and our XXXX, Compared we mentioned the SG&A as a to fiscal to QX increase our print This leveraging sales our on optimize material Dave earlier, of capabilities about of growth

$X.XX. GAAP fiscal and in As by overhead lower a X.X% sales to federal primarily of to provision adjustments sales, $X.XX payroll earnings corporate driven results. due GAAP The rate stores, on higher per by is expenses, the margin year including tax Adjusted increased quarter to optimization, to sales benefits partially year. QX earnings growth fiscal on X% of tax by combined percentage rate Diluted compared share Operating diluted compared third with delivered promotional operating third to marketing and top driven quarter XXXX. margin the last was adjusted strong to last and XX.X% of favorable the to primarily a basis of line year. were sales employment store effective share expense. XX.X% tax store of to Strong in XXXX quarter $X.XX an return of offset lower in The tax of per cost our ongoing basis. efforts, of was the company's third last XX.X% optimization impact decreased compared credits compared

$X.X on last to to inventory billion and with compared sheet Moving balance cash We flow. the $X.X year. the ended quarter billion of

quarter, core our of to proactive partners due our for we receipts cash remodels XX inventory holiday last demand current million year, at stores, disruptions. and work Depreciation last risk ended the compared additional our have closures. store to systems. In We for and $X.X impact season. to with of $XXX.X supply of in primarily with and were the teams $XX.X we and stores, holiday quarter, relocations, impairments in At remaining Capital of billion shares in end reflects Where $XXX.X reflecting the appropriate, new support expected $XX.X sales quarter seasonal million investments addition closely by a $XXX.X and IT we ensure to supply cost authorization. cash third $XX.X adequate to equivalents. driven chain was quarter, chain the million increase year's million brand prioritize efforts impact product million repurchase store XXX,XXX million. of had expenditures anticipated inventory the mitigate under the our the to In the repurchased the to

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

to now outlook for updated our XXXX. Turning

through very QX we've experienced fourth year-to-date results pleased trends in our are with and the far quarter. so encouraged by the strong are We

However, expectations between to range. the comp This guidance and growth quarter sales sales year the we reflects expectation billion now increased operating the XX% between will our continues several $X.X we left be to uncertainties, XX% holiday for and net billion financial dynamic. We environment for that will weeks sales year. forecasted the season have XX%. and with recognize growth be comp our $X.X Despite still the these expect we fourth be in XX% significant have in

XX.X% of we year, remodel be XX XX to XXXX plan open approximately expect relocate now stores and sales. or We stores. rate between operating margin will net for the XX.X% new fiscal For and

expected in growth, XXXX. earnings assumptions, expect of top line to the than from previously merchandise as from leverage Based we We margin, we will leverage come gross expansion compared improving diluted margin on these our of shift, costs, more to less Based and salon channel driven by store higher share, fiscal and now per driver IT stores, million margin We in maintenance continue operating now spend headwind other. for CapEx fixed $XXX costs. to to fixtures, including expect and on per fiscal supply between merchandise in $XX approximately repurchases. largest impact believe approximately and $XX.XX SG&A of $XX.XX million expect leverage XXXX, share about of the including $XXX will million $XXX share and now $XX be million for and between chain million and million remodels new $XXX for

a increases and As reminder, XXXX tax guidance in consistent material wage. fiscal for a no assumes federal our minimum the federal rate

Before we open the October call for questions, I'd we like to address event. from received a Day few follow-up our questions Analyst

First, dynamic we targets. earnings the we financial are In our which we October, fiscal shared in environment. targets we based revenue deliver limited and have confident growth longer-term the XXXX can through operating visibility for on

As a a share we growth compound double-digit XXXX. growth earnings annual fiscal low sales net per fiscal the X% are growth basis X% in and between and as diluted using on base range targeting reminder, through XXXX

years. range XX% margins XX% the to next we addition, profit three operating targeting the In in over are

investments Our operating our that strong strategic a margin returns. support shareholder balanced will reflect long-term deliver expectations approach disciplined and to and aspirations growth

multiyear the Regarding Project of effort enterprise our planning to platform. resource to our investments or ERP timing upgrade SOAR, related

invest the of the and most next to three million expect XXXX to over capital We planned years, $XXX with XXXX. in for million fiscal investment $XXX

this and future operating As new more scalable addition to with environment, flexible innovation. growth platform a support and reminder, us will in providing

to see XXXX. investment to begin fiscal expect from operational We benefits this in

earnings for March and provide cadence to our guidance call. our our budget fiscal regular with finalizing line still on plan Lastly, in XXXX we are financial

fiscal expected longer-term wanted targeted comp you our planned but we growth to share Comp can X%. we initial update of stronger be we to models. in to than is remain sales sales your as financial However, to XXXX range some in fiscal confident within initially we X% deliver thoughts consider growth XXXX significantly

fiscal target, operating fiscal operating expect a top more operational and reflecting of will we investment. While be XXXX we line our XX% capital be expect longer-term margin margin above within range modestly XX%, to pace in will targeted and of growth our normalized XXXX longer-term

earnings the back longer-term next to call fiscal than XXXX year's lower moderate the target now, despite the acknowledge and target. will And over EPS the turn this likely cycling to year in continue to payments challenge We Q&A rate economy our be session. the reopening growth but stimulus of operator our I'll of growth

Operator

with [Operator the Michael first comes line Our from Lasser UBS. Instructions] of question

You with may proceed your question.

Michael Lasser

evening. your to a were for provided my At this taking longer-term year. operating Good you have Thanks question. margin the XX% time lot a guidance, that you expecting

on still margin yet expect pace next operating the year. margin you have now to your guidance to mid-XX% You're operating and your within for be

margins? -- sales will more line than And to you better-than-expected that, be that part you and year, X% the So than planned for originally better X% you that anticipating next do let if as XXXX? flow investing the of you had sales would have comp increase you're to for bottom

Scott Settersten

Yes.

the later of So it today to Analyst what in your framed part part how we up the October. at our first of Michael, question, Day we're talking about is consistent with

more deliver the longer to term, company again, percentage what growth that's XX the in well reiterated sales expect great strategic of moderate So and and underway we're investment the We, people to we cost we today, the go all those for operating a confident over that that's a with next again, XX coupled function line with year, more very that along a top can costs now. margin range. capital all cycle be initiatives normalized new we environment have with

overperformance sales drive approach next operating we have a would what pragmatic disciplined, potential which, to we about as continue against investment again, results. think growth we in long-term we to always see very year the healthy to as balanced that, short-term hope So to business take would

have past So and again, you to that future. just can making sure as continue into we the in we take balanced a the expect to approach very that

Dave Kimbell

category to to the than believe at We Analyst very well market. add faster what long-term as reflected Day and both just confidence in about at a we we And The path over optimistic years I'd year Day, next of be we'll that be that we a confidence we'll and we'll that growth shared we time lot ahead, give reiterate delivering in business leading growing said, ahead. over path That's see Michael, our about as programs And the what as frame. guidance. the that Scott initiatives initiatives, that that talked lot ahead. core are the of new Analyst just and today us adding be profitable in

Michael Lasser

holiday. Thank a great you. And have

Operator

the Our of Bank of next Lorraine question from Hutchinson America. with comes line

your with question. proceed may You

Lorraine Hutchinson

Good you And into be to any I do excited to comp you're the on around you made what you. territory Thank think afternoon. follow comments about? Are move you that catalyst up cosmetics. XXXX? will the the newness wanted versus seeing positive

Dave Kimbell

skincare, makeup, that important Yes, -- as an is we're It it for us the and very with delivering double-digit level what not not to reiterate in Great. XXXX. has caught that the fragrance growth. is of topic categories, focused haircare, confidence in I feel are said performing Thanks, I'd our which comp on that by is at up level remarks, seeing. category. It that, versus even obviously, we're our But the and other encouraged Lorraine. bath, all one we

things, Our as in forward. pockets it's and side the business both of our growth business growth and double-digit the real currently improved performing And XXXX the is I we business prestige and think mass of saw we of versus look And well. quarter and driving a remains combination some success.

additional newness Laura to the stores. to of XXX We're we're Brown and Decay, Tarte. see spectrum strong to continue number in We've expanding Lancôme into launched and like Clinique and XXX Urban our from seeing NARS and from of a across Mercier, it stores Bobby brands have MAC brands Maybelline. brands, growth ColourPop, innovation and new over We from NYX

of points. that We of so really on reflect combination things believe see and benefits combination And the We've for kind us. people When individual boost hitting some we innovation, and number looks and while, market eye. really next Looks, a encourage looks. looks that, will in with or see looking to right application a bolder expression, formulas, other particularly business a idea both a evolved about of of is bringing -- been -- the both, robust that's it's colors, of is There's of And There's many natural we that's media at of drive driven by do generation pipeline skinification this kind elements bold and the to across again, of all we as kind year. look talked going trends bolder of techniques, there's a contouring duality colors the or of what is those combination looking and natural a into now, that bolder looks TikTok bright consumers think that -- including price positive. impactful, the we encouraging. see that it I that's combine which concealers next innovative around moisturizing that other color social lightweight categories.

of that and mascaras another -- having seeing mentioned is different innovation a more with product growth. space by for beauty than I've events both TikTok. we're forms, product driven while lip. mascara different looking for again, to and New of skin across and A long lashes types more continuing We've been inclusive different influence a all wear tones, that's including and different combination using at day. and or drive one times And

the coming and So a look improve us together forward. that are are that helping confidence number of things as we give category

impact the forward. feel -- are brands the brands that the as horizon trend pipeline path we ahead of the we the and at drive and category XXXX, day look total we that working both in every in on existing confident So new in to both have, and the business

Lorraine Hutchinson

you. Thank

Operator

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

may your You with proceed question.

Simeon Gutman

of big Dave, Maybe some Holidays. the with how and prior I wrote could stack to ask Happy everyone. to us launches? willing you about down OLAPLEX. Would Lancôme. Kylie. up to share Clinique Hi, I want it be relative

hair X you're but how right away Target that not but works. color. considered going to I this Part getting then pro assume to also is this curious give And into product You

Dave Kimbell

any I'm about you not real, in with OLAPLEX. going yes, our of like, partnership. specifics how exact launch give to others, match up one other already thrilled we're than We're to say Well, would with partnership

several and We with weeks exceeding have been well, now exceptionally salon our performing service for expectations. that's our

it. importantly, Our stylist thrilled And by it. guests are thrilled our by are

in out of gates really January launch And of complete product in gotten that's be able -- the strong. online, assortment a OLAPLEX. the it's to all into move as so And line stores, we to

drive As on big business haircare impact hair salon have so our the will anticipate know number prestige we business. remarks I that mentioned brand you and and the a support our and it to continue it's one and in

launch, XXX and and about Beauty leveraging tools the a all unique and So OLAPLEX program, we're of almost the excited partnership Ulta members and it capabilities real marketing fantastic we're capabilities our putting marketing XX behind the million a just with team.

every So extending we that it about Target, opportunity look is that excited And taking into -- next talk about brand here Target we'll continue at the relates about then, time. to and -- and excited specifically as step OLAPLEX. in other to over that every launch and far assortment But January. and nothing as we're to looking to of as forward evolve

Simeon Gutman

you. Thank

Operator

line Guggenheim Our Steve next Securities. with of from the comes Forbes question

You may proceed question. your with

Matthew Norton

Forbes have nature here. differences, the it's wanted for Norton customer Anything Steve to differences, seen about ask I but any would ask be demographic Matt categorical early on wanted frequency? helpful. any Target member of We to guys partnership. that spend you know Hey, for if

Kecia Steelman

I'll to the on take really we Xx how new role too our cycles results really the purchase It's a of Beauty want confirm few that plays with to we Ulta with for Xx one, Matt. This addition, see as purchase early to really to Kecia. see guests. is it comment think our typically to similar cycle year. shop who We what this members about a

but is our engagement, this increase our take start. we able really term, at after partnership to shopping going brings reimagine of the Longer us ultimately We're believe a two to strong to it's prestige. enable really member. beginning But So bit expand cycles the time little to powerhouse excited more members, what brings more off really loyalty do to spend we retailers here. because a holiday see together these a to be our opened you per update we'll to few bottom season We're these partnership stores just line, our August. increase going

Matthew Norton

the Good period. for Thanks. luck holiday

Operator

Binetti the Our Michael line next Suisse. question from comes with of Crédit

with proceed your question. may You

Michael Binetti

leverage, you point there a for today, thanks elements can the off in bit you've lot there think about in and of of some know well. you comments we grow headwinds. margin to you you're year talk But merch guys, there that form some little gross taking us help of lot here. a margin, of little forward? But like gave and need a give are Scott, this cost would as we said mix elements drivers where offset you baseline think a a you that bit on us seeing the And more the question are margin new going with that the are -- work levels Hey that as an our salon gross margin. helped I done merch things you of Or margin? fixed the on You promotional you I those channel the from leverage back? some to think of merch to

You the try some just year. as things offsets fixed about grow, there out cost still should leverage we comments as and wondering, I'm 'XX, told maybe well? your if take them as put think should to us be revenues next will so just we there's to there

Scott Settersten

quite variables for really I anything and there's I a It's time. all been with guess, some combination think about investors don't new, analyst that could incrementally share. the of with I the Yes, talking we've

end-to-end promotional talking talking been to our investments right? work opportunities. about kind about across future. of it about of chain targets by lot our for teams EFG of process across great the a We over So cost a effectiveness. business. We've done about couple been efforts, talked our occupancy We've been of all back We've variety wide years supply core has been talking the costs. gets last So

think, So this very of We're here. -- there's at a results circumstances. I lot under good very year variables play difficult producing

So for this starting now is good to work all fruit bear us.

course, now as processes we're the Project well started business plan. improvement right? Analyst multigenerational the new business with benefits. SOAR Day, to get us harder describe those And are time. here call help building our heard you as investments flows about takes guess, us is Day, thinking continuous business the lot of of across again, internally resources we blocks to at at highly longer-term infrastructure say a it, can into so reimagine X.X, of improve especially I Analyst So about the our that capture and again, skilled then of us would those a building initiatives, would which as here. some and really out take talked I I in that of some with inefficiencies that for opportunity And of But And after our we we that some start

term drive benefits three with in core good longer-term to optimization about continue us. as for for EFG and cost So thinking near will we're then the benefits CI so, the next SOAR will or years deliver us

in opportunity we XX% margins here term. So a to XX% still keep over think to healthy operating plenty of there's range longer the very

Michael Binetti

Thanks, encouraging. Scott. Very

Operator

Our Stifel. next question comes from Mark with the of line Astrachan

You may question. your proceed with

Mark Astrachan

be their what would And to sales like your pre-pandemic and Maybe thanks afternoon, on then that there and website levels. DXC thoughts about consumers try I I talk certainly just obviously helpful. are to to incremental given on question. call, kind everyone. on what Yes, just kind stickier these if guess any squeeze a follow-up bigger owners consumers relative Target expectations, reporting, you of are maybe would guess could I a of sort to I buying could question, in be growth, category. the to another just would the own brand of It seem relative seem then

you're obviously, should with curious own kind I'm watch customers you far. business suppliers it Do your going forward? an interplay over how a as for thinking they're dealing customers about got with the the I have partners and Do hasn't the then but or I say think those -- seemed also I So as how something dealing suppliers, -- impact your that's how incremental? Because, potentially you and two mean in said, think that's time? to of to that supplier so you've their things

Dave Kimbell

the that your Beauty. look year. fact, chosen and landscape of of that. it's the second Target give of can brands so physical part but to building not start then Kecia color have the -- That's through. competitive on a and at while with DTC, see many that question as that's in many I'll been in new have and of on something DTC, the Thanks, also obviously and Great. development retail manage we But DTC not can of with And importance most Mark. this found for any watching new, DTC. been as that Ulta a them partner That's we more we're monitoring -- really

experience, Kecia, do the many newer I do what with category, are with But any or brands watching Beauty start long-time look drive see we and Beauty. So our any combination driving we you to play model that which but of way into this of brands the presence far and different. add happening. more has -- adapt brand it's come been so The But and very the across said, business want And DTC brands, to separates building and retailers adjust they're been a so everything think guest we Ulta DTC DTC what's is our that kind The business Ulta know brands the the Target? for a We offer. and our some established we partnering larger differentiated in in-store that's products color from really we program, other really within categories, landscape. competitive think we're and evolution from like best. our online, offense. points, of brands and that as us differentiation have competitive we we depth services, whether price loyalty our on us, segments and we I in We forward salon us, the year. breadth DTC.

Kecia Steelman

Yes, absolutely. What the we're seeing is entire that shopping they're assortment.

this highly best-selling items, You assortment remember, SKUs, have a was of curated minis. to must-have pure

the a So pleased as of help what has intention get we shop. what Beauty shop to offer whole them not Was to that one are they shop-in-shop shopping which taste the category to are is the a was. really Ulta just in it entire

bottom line, what say We I'd like the they're assortment. shopping entire really far. so seeing So we're

Mark Astrachan

Thank you.

Operator

with question comes Our the Omar Evercore. Saad next of from line

proceed may question. your with You

Omar Saad

of a going long-term better a on and my what of think kind behind be X% at to kind Appreciate want plus top look a for get year. is like could initial what that algorithm this XXXX. to you I quarter. Great and obviously Thanks big of you taking of confidence really question. underlies afternoon. all very what's understanding kind in to the X% comps the number of Good look sales what color especially think

gains franchise. think those obviously, of But give know done Would to well year. next this way. if it don't you expect these some see this -- some it's back so I trends of grow to whether new guys love why innovation. They've investors better in year Would to love it's of around on coming of to reactivating great the customers expect or existing next customers product or a you get top year. sense that growth

Dave Kimbell

model Analyst really a out no by We differentiated is lead category and that road. We are yes, strong There challenges the isn't the guess back versus our and having of XXXX. continue for category recovering And end category actually this at -- thanks I the leading of I'd confidence. going And But Yes, us we share question. and to beauty think drive and will be increasing any us think the growth XXXX is at of category, nature this I'd Day what we shared we kind that the Omar, itself we year, the Great. recovery. and answer of by healthy very see to gain in strategic means beyond. the one that approach. us. XXXX comprehensive of strengthening think looking our do is thing gives for

of an January in we into got lot that of I'm sharing hitting we've combination assortment. be and brought appropriate. hitting excited products exceptional year, that as going has the have the And collection some about is differentiated that is in of late even a newness this a we'll be that pipeline we'll it and we've So of year that XXXX driving. in OLAPLEX like the Nobody time

always business. assortment our So drives

that high. new more going capture growth they've thought. us to a groups. we retention Ulta, in on from didn't and beauty back back -- frankly, the when like across they XXXX what And lapsed we sign shown bringing enthusiasts that's took age not a their we see members that see disruption was we Our that members. recovered in XXXX, acquiring lives We're just what's great in loyalty program faster We're many is step than because we think and believe we happening

-- talk lot why what a you've show about we prefer they're combination of to as combination heard all such after Gen in and see You know unique and growth us And continue really the prefer demonstrating actually XXXX. with example with a are We loyalty our even their opportunity strength our showing do in data strong growth digital. they us XXXX, and says and frankly, their their to spend QX showing gain believe dollars of us e-com physical. with the program. physical guests that with shop one That's as then Z of grew they loyalty our exceptional our versus to and stores digital

that continued like and other digital programs our Ulta So Beauty innovation our all leading UB of physical, and and experience we going And believe is and both Media. is where initiatives, is program Target, with across well. consumer in new evolution the course, we're the then, that massive, as

unique it So we and to won't will that's of gives it confidence. going what to a we're this think what pipeline. it's we've combination be lead and going makes is Growth But got that be us this reflected. category take a differentiated -- us year

Omar Saad

Thanks, Dave. Happy holidays.

Dave Kimbell

Omar. you, Thank

Kiley Rawlins

question, more one for time have please. We

Operator

the Oppenheimer. of with question Rupesh last Our line Parikh from comes

may your question. You proceed with

Rupesh Parikh

my taking for Thanks afternoon. Good question.

about just QX, into more wanted margins. you're for So dig I thinking Scott, guess just I operating how

gross the if SG&A line. talk and you more maybe and So the can margin puts takes just about on

Scott Settersten

for Thanks Sure. question. the

operating So going will SG&A the both And deleverage. big Again, margin some we'd XXXX, be a picture, see deleverage quarter. of flattish those in it's gross versus fourth and margin. mix margin versus of expansion XXXX, to operating in have

goodness about XXXX. from last year. margin mix, us Channel cost all margin things this more headwind the So leverage, store a versus merchandise of improvements for benefit coming mix versus we've XXXX. is gross versus year, a fixed talked Channel

leverage margin years. gross for So both

I as been is the XXXX store earlier when SG&A we to Incentive the significantly versus And guess line, it significant quarter in the back incentive deleverage more bigger XXXX. a XXXX. consistent significant compensation, with about not compare again, are XXXX, wages, Again, is in only XXXX, then talking for as year fourth it would again, the year. of all versus impact rates On comp, not is things hours all XXXX. say, labor addition but I both years. than the versus with we've and wage up

market remember, were kind XXXX. we down Again, we awareness environment. the our expense activities If you investing a as guess when this hatches, share XXXX, then were I of of advantage long story the and to, bit XXXX I in of would short marketing term. versus in over we're more different again, a say, tougher targets tailwinds capture market well. a taking investment It's and more And year, of battening in

year about that's with what excited QX I quarter. Again, So and this super very excited results short the happy kickoff story. so would through the and fourth and say far the encouraged to a

Rupesh Parikh

you. Thank Okay, great. Happy holidays.

Operator

to call this to over the for gentlemen, and reached Kimbell end of I we back turn have session. question-and-answer Ladies Dave closing like would Mr. today's remarks.

Dave Kimbell

Great. season and deliver you taking Beauty single centers joining our this every Well, and want are who our of and an Ulta we distribution and holiday are us guest thank for to working offices across all our guests each outstanding thank associates committed day. to ensure care today experience I to corporate good who hard other of stores,

have lead March to again all the in holiday safe this results. so in great retail a have in great and absolute and we a quarter and We look team the year you speaking joyous I full As season report we hope to all am past, Have we evening. best fourth said when forward proud and I to team. our of you

Operator

This conference. concludes today's

at lines the your your rest disconnect your of time. you may participation. Enjoy You this for Thank day.

Ulta Beauty (ULTA) 3 Dec 212021 Q3 Earnings call transcript