ULTA - Earnings call transcript Q2 2022

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Operator

Good afternoon and welcome to Ulta Beauty’s Conference Call to discuss Results for the Second Quarter of Fiscal 2022. [Operator Instructions] And as a reminder, this conference call is being recorded. And it is now my pleasure to introduce Ms. Kiley Rawlins, Vice President of Investor Relations. Thank you, Ms. Rawlins. proceed. Please

Kiley Rawlins

Hosting afternoon discussion you for and of quarter fiscal Good today joining the Scott and Dave of our are for Ulta XXXX. Settersten, everyone Chief John. Executive for thank us second Kimbell, Financial Thanks, Chief call Officer; the our Beauty’s for is copy our Relations Kecia for financial Investor Officer; us the Chief available of This website. session. second Officer, Operating Q&A Steelman, A the results release press afternoon, in join quarter. our of will the we section results announced

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

revise or so. required not forward-looking expect We obligation to to and you have no update statements, as do law except our by should

begin will and this We afternoon with Dave prepared from Scott. remarks

the as ask during the limit questions. respectfully allow To please time possible accommodate scheduled call, open many for we one call your our will questions comments, question. you Following prepared us to for that as to we hour this

call. any for be the IR after the always, As will questions available team follow-up

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

Dave Kimbell

again Ulta Beauty outstanding interest appreciate team your Kiley you, afternoon. performance and The Ulta Thank quarter. in Beauty. delivered continued good this We

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

pleased business. be with strength broad-based to continue very We the of our

And stores we with prestige engagement in self-care engagement comp our deep we demographics. NPD expectations the all from operational quarter. as share category of our in saw paired based expectations on as income point-of-sale increased and year channels categories beauty data healthy across solid Consumer increased a our with exceeded members our reflecting the gain emotional – channels market results. continued all beauty also solid quarter, remains strong, major Sales versus delivering This sales growth fueled teams our digital the the the and in and both healthy from last connection For with execution from well wellness. with importance Group. exceeded

about our the deliver caring to a capitalize the their our talk each a we reflects the absolute want excellence business, serving environment of in The results, Before dynamic and turbulent I recognize for our to strength navigating associates our commitment us environment overall our executing strength power the guests plans results. continue with category. and ability differentiated to thank on Ulta has enabled other beauty and of to model collaborative outstanding Beauty and despite our

framework anchors strategic proposition focus to forward. afternoon, want drive our This our progress. on strategic I update Our our an success unique we value enduring as to our and continues look share

light skincare, inclusivity and exceeded results. the all year. second and deliver a to From hair Our engage and makeup, expectations perspective, growth this on expanded and focused with definition trends approach bath, We quarter of is assortment delivering against double-digit an beauty comp disruptive care differentiated Things category first through last growth curated fragrance Beauty. drive strategic continues priority a into leading All enthusiasts to

by modest growth and from recently We growth newness are our encouraged sales that a core with increases. executed the vast comparable of from fueled benefit majority price both was

first increases year. half from calls, discussed price in the large number previous have brand of of we received on this a we have partners As our

Given pressures the year. our throughout move we receive increases the we expect to ongoing rest as of brand cost facing partners, additional

as our starting performance largest increasingly makeup Turning in activities growth both as a brands in-person like core makeup. established makeup and delivered Fenty category, categories, Beauty XXXX, used form of new and with double-digit to engage consumers second like by growth. the recently Compared Beauty, Guests our comp prestige participated mass the quarter traveled ColourPop of NYX, self-expression. sales more to to R.E.M. of to and products with continue the e.l.f. contributed from and while about-face also launched brands new Halsey Clinique,

of event of and category, designed strong and into Hair Event, largest Hair CHANEL guests, driven new Beauty spend strategic to our performance. engagement the care, penetration. a member another stores Prestige addition, In our expansion growth the quarter semiannual acquire and in double-digit ongoing increase drive delivered existing strong second MAC more contributed newness to salon by Gorgeous

drove brands product our Joico bar by salon one our strong growth, comp latest new like brands performing categories from the both core launch best product like this and prestige Guests airwrap innovation. takeovers and features and with to out tool contributed Proof in Skincare well category Pureology quarter sold and recently New of brands and Living with Redken was launched Olaplex and engage as double-digit Dyson’s driven the initial new as styling launches growth back quickly. delivering quarter and continue mass attachment and with to with Andrew Way new professional the of Fitzsimons. growth

again Elephant, growth to And PEACH and like Hero extraordinary brands focused educational engagement and Gucci, during launched D'Amelio quarter. Good contributing year. Mother’s drove YSL established to nice Bum, delivered as which from growth. and well Really appeal delivered category the fragrance our to with guests for growth well Billie as Supergoop Sun skincare launched OSEA continued strong scents with meaningful and contributed top Tula, monthly Skinfatuation with as Dior Charli strong Beauty demystify skincare and new Ulta themes recently The program, newer this performance. sales to category Dreamer comp Compelling works and & content growth brands exclusive to products Molecules. Eilish Day new Vacation Kola of our Cosmetics last events such Day Newness double-digit Father’s Fresh, newness and on and LILY, from growth Born as Drunk as

our fragrance drove brands program with Valentino established While engagement monthly greater Armada. and crush like

Ulta driving market Good these addition for guests expand about-face, at and category to Beauty of quarter, Conscious in To one the products with including brands, guest engagement SE and We newly the visibility Beauty as Light. make addresses growth, increase and certified and know offered pillar, consumers certified of to Conscious least Born brands their good at Dreamer, At page align in XXX Beauty share. to it guests easier our digital increase cross-category are with to ulta.com beauty end we we that to for And three quarter the investing all the core platforms world In are values. seek second Conscious align landing resonate what it continues the with identify to to badging is product interests. this added Beauty and refreshed on pages. products important that brands them,

across Now channels. identify Conscious on brands stores shopping and in whether pillars, products guests quickly Beauty our can digital certified or our

Moving support to expand assortment BIPOC of brands. our our and efforts to

at can assortments, so to Ulta are see reflected themselves guests our diversifying committed Beauty. all We

driving support marketing focused our beauty addition the continuing BIPOC on structural industry. enhance In these change brands portfolio expand of we for brands, within our to and to are

investment tangible leader to steps to of change the believe we resources. the and beauty, create As have through foundational capital we in a take industry responsibility

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Finally, we enhance our wellness continue prioritize as shop to they support self-care. to guests

This guests to elevated presentation journey. to offer our and of than quarter, help personal now launched we XXX brands, them a wellness easily more products and stores XXX out. of curated expanded their XXX additional inside stores Womaness we Today, best Ali guests to the assortment and offer omni than SKUs cohesive shaft brands, navigate an roughly newly their including feel more help and

experience our world. services. trends Store quarter again Moving and in return the evolve strong traffic now digital ongoing were all your as efforts a and shopping connected in-store to to ecosystem, physical to omnichannel guests through this

improve. While continues slightly store the traffic levels, to remained below trend pre-pandemic

increased quarter double-digit Our and services business of due delivered new capacity offerings. comp service to primarily growth, another

Notably, efforts to ongoing we for increases services price In member modest our services encourage core services our with offers. May. engagement accelerated reflecting salon implemented member in amplify and love addition, first through quarter, the our trial from first-time

digital engaging prompted acceleration mid As our the growth growth, our single-digit guests e-commerce tremendous to more stores, by they After return lapping normalized are COVID, quarter. channel to the channels. returned digital for delivering also comp in

the also guest alternative guests options delivery for We incentivize to continue to investing try experience. improve e-commerce orders while to

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

the a Importantly, of guest we experience, satisfaction engagement in focus the saw our associates. BOPIS store improvement and with significant reflecting

markets, While orders of stores. more limited third to fulfilled be than from profitability same-day delivery ship our capability. delivery store, metrics to AOV pleased BOPIS, of and guests were and the XX and our a use also fulfillment their this are options Between we increasing same-day of with digital continue by

more teams expand We to and a all of Future. Digital our seamless across deliver channels. experience what In continue digital channels, our Store through to call our we the continued our enhance guest experience

ulta.com product mobile This our quarter, app. more engaging we introduced pages and both on new,

store also We are improving experience. our physical

the are to that support key introduce to will deliver of allow exploring to editorial select of categories, more digital and makeup presentation in storytelling this enhance our plan events term, the and experiences. innovative – stores will we trends. around front ability a guest Longer to layout us and elevate month, stores to and Next introduce new experience. physical skincare And presentation services our we fall, unify ways a later we forward-thinking newness, the enhance growth connect new store and store

an tech To-date, will This of the variety retail on of lash we startups million robotics. officially LUUM, Prisma partnered has Revea recently fund between who to fund and that and launched startup new and in early future in robotic Haut.ai, $XX greater focused we And a emerging Adeptmind, provides the and personalization, and beauty. investing entrepreneurs investment a stage intersections beauty invested Ventures, opening quarter, announced startups in a enable shape ReStyle. extensions, including

our Finally, we continue with to enhance Target. and expand partnership

Beauty the with quarter XXX During opened shops, Ulta we ending Target locations. XX the and second quarter,

and newness Melon During the and Tula. quarter, Hair two expanding assortment, the existing and and Care to launched Benefit, including introduced Morphe Sunday Sunday the brand from Black-owned refreshed partners, offering, brands, fragrance we

be launch innovative made, reflect and the we to behavior partnership new are guest we continue progress by of on engagement anniversary As the initial the encouraged this pleased we with overall of our is value greater even are as The foundation partnership driving members enter ecosystem through strong on scale. to new we of our focused and unlock conversion we further who this channel. and loyalty

drive to connection taking an let me you of Beauty. the update Ulta steps are loyalty give and some love, emotional Now, on we with

have and inclusive. Beauty connection been individual to uniqueness. a a and on journey more create is bring our stronger, brand beauty Every to is multiyear unique inherently We emotional guests our with help can celebrate this life. purpose

and we and inspiring on making expansive a the celebrate force Building This the efforts making consumer has beauty As the equity category, of Ulta move inspire leader industry content earned new want in proud are and our will I power people Beauty to extraordinarily everyone to through greater prompt with change own empower positivity brand performed about launching the beauty across unique we all launch with culturally campaign, for brand the relevant conversations am equity sees possibilities. embrace The possibilities to will and the of previous and it way nature the we is in elements world beauty. in a for their believe our owned work, testing, beauty. the endless their and well of inclusivity forward, and new that to beauty world. beauty media campaign good and campaign paid, to discover

program, we XX% quarter active in with ended Ultimate last million Rewards XX.X loyalty quarter the our our above program, year. loyalty the to second Turning members

members quarter, driven retention our maintaining In trip Platinum Diamond addition members especially among to and converting healthy again and increased spend members, channel our with by members of per ticket in-store-only metrics omnichannel-only are average Overall both member we members. increased steady reengaging rates, and XX% XX%. higher totaling this frequency new and totaling lapsed remain members and

help strategic marketing the our more Today, capabilities offers with and we and several decisioning through precisely leveraging activity. to have lifecycle segments we years, promotional behaviors us that and personalized increase drive stronger Over loyal last to drive frequency higher will target expanded predictive to are lifetime shopping developed value. strategies CRM communications member

increases are engagement We member. offers, seeing spend per these resulting encouraging in in in

rely to new the and in and enable and has capabilities increases these leverage offers. intensity retail, our In As we brand promotional targeted UB partners response on Media, May, mass-market Media Retail less from more launched us and across tremendous. Network beauty promotions been profitable

the to are partners the with enthusiasts. of excited connect power brand transform exclusive Our beauty to ways the leverage our about opportunity they first-party data

team well and I income we new remain as a Our our unlock with to pleased about closing, the year. this brand drive more is am far up we across sales to strength we consumers enable so opportunity ramping business incredibly our have In stream excited the partners effectively. seen and engage

our operational testament important is plays financial lives. model is We And this historically recognize and as even a of self-care connection and true deep to results of based category’s immune emotional Our resilience and our today importance the discretionary customers’ we the beauty business role wellness. to the performance culture, given is has challenges, more illustrate, to power resulted macroeconomic in the not beauty compared believe stronger values our categories. in but our other

Scott future, the As resilience our and particularly ability now, wide-ranging of And the financial beauty there be to growth. the our to with drive But guests. category and for inflation, of category both business beauty Scott? results. the impact rising call look and confident we the will I the lead will in know profitable we on long-term discussion our turn remain a the to we over of challenges,

Scott Settersten

and afternoon good Thanks, Dave everyone.

growth the stores indicated, and our in Strong drove gross business operating leverage, and margin of category, focused an our of due serving sales reflect beauty associates, in impact than from results our These and environment. performance As to factors, and several guests we stronger-than-expected hard the sales I quarter brands margin of including Dave the to new expected. growth thank resulting operating dynamic of better teams results our were work this SG&A for XX%. and all better-than-expected second managing commitment the want on our of through staying resilience

the results, Net $XX in financial million a by quarter starting growth XX.X%, to in the Now, revenue driven strong for income increased quarter the stores. for Transactions and increased new Average growth performance. sales sales, the XX.X% X.X%, store statement. primarily with ticket driven by from increase and We year. an the comp other price from points executed increased were units of impact in increase primarily about price selling product to average comp. increases the transaction X.X%, price. resulting contributed primarily in overall average basis increase slightly. down mix Average The per increases retail selling that price this XXX reflects estimate

four During the quarter, we opened seven new stores and stores. relocated

XX.X% XX.X% quarter, the basis gross of points year. For to sales compared to last margin decreased XX

are retail in inventory also was increased margin impacted retail shrink promotional we organized Gross less we and by year. margin than and to brand lapping primarily favorable business. impact higher to similar was quarter, crime Although the across last adjustments merchandise inventory theft primarily had last reserve the negatively due trends seeing our increasing, year, theft the mix of landscape, due in from total lower activity quarter the overall are second during benefits and

our staffing to safe solutions associates working impact associate and reduce through of are levels. and to innovative the new additional training, guests diligently and fixtures, in technology risk keep investment We increased

We supporting Double-digit margin chain revenue. by fixed coalition chain distribution our by including costs, are above growth wage These the are were persisted half driven higher gross working will line to growth mitigate and that in enabled to but year, us as impact margin costs, to to costs the be centers. headwind $XXX.X quarter we remain supply due the organizations costs freight also growth partially costs industry address headwinds opportunities second quarter, sales expect Strong into XX.X% growth fuel gross this a higher retail rates of in the increased continue increase to an line other last top to margin moderates, offset in larger the strong in legislative top to which SG&A second with BuySafe expected of and and year. the the million. supply increased level. and leverage gross at

and a reflecting de-leverage store strategic primarily last of decreased to and SG&A have marketing XX.X% were XX corporate by partially XX.X% through offset third of leverage expense benefits year. points payroll As to Year-to-date to Lower of initiatives. sales, as higher performance. of basis strong percentage compared sales as compensation, the in plan our invested about well our overhead strategic reflecting we second investments higher support quarter, incentive our of due

digital favorable the with about our As specific vendor million to for reimbursement we for basis discussed brand compared year, these XX.X% campaigns quarter, Similar this of offsetting last this we increased last within impact expense to expense. Operating of to marketing that the XX first income incremental the partners in quarter, costs a to is marketing are the million in resulted year. income quarter. manage points we the SG&A $XXX.X second total $XXX.X direct

sales, year. basis compared As XX.X% share to of XX year. GAAP last earnings $X.XX $X.XX last share per points a to compared increased per XX% percentage Diluted operating to share margin per increased to XX%

to inventory cash last increased to the and billion $X.XX XX.X% $X.XX balance year. statement. compared Moving sheet flow Total billion to

cash to and from improvements. was relocated a new, ended IT expense. investments quarter million cloud million $XX.X expenditures compared compared addition the We as to demand. of in XX launches in merchandising support maintain In items $XX to $XXX.X primarily costs investments Depreciation increases related the stores, to additional was cash key year, last strong key of for year. shift in-stocks brand the chain were increase expected Capital to primarily $XX.X and stores, inventory to capital last to of in and impact increase to to million with efforts support $XX.X capital supply expenditures reflects ongoing investments well remodeled as in million inventory million the purchases quarter equivalents. and The due

of quarter, at cost of billion our At repurchased XXX,XXX under million. authorization. $XXX.X we current the a we shares During had $X.X billion second quarter, $X the repurchase end remaining the

second sales our XXXX. to billion and net sales are comp expect now trends and we’ve August, experienced so between increasing We outlook $X.XX our X.X% growth XX.X%. in performance to now billion, between we quarter fiscal our for and be Reflecting Turning outlook. with sales far $X.XX

Our reflecting uncertainties particularly second the our of while increased for prestige the impact to promotional inflationary an growth the spending holiday impact half margin more for the digit and will to during distribution beauty Embedded potential in of We season. in that continuing year-to-date of and is forecast points single due for could second expectation updated consider half, season. year, XX.X% consumer of reflects pressures, year expect outlook comp of trends mid sales. the the risk between XX.X% of holiday shifts the operating in likelihood a now be the

will deleverage second and investments growth half margin moderates operating pressures greater cost planned have expect We a sales in as impact. and the

in growth We expect year costs with leverage partially offset fixed gross chain expansion for and revenue, higher lower by other shrink higher and margin merchandise of margin, supply the costs.

by SG&A to We rate well growth for will partially million as across $XX as driven to continue wage expenses to expect lower related million the higher offset by $XX expense. strategic priorities, our primarily expense of de-leverage year, marketing the enterprise,

$XX updated We and and operating stores, store $XXX between assumptions now spend we new maintenance to EPS $XXX in addition, result fixtures, $XXX and pressure million between CapEx update. million and in These and for year million for including expenses for guidance $XX.XX chain expect fiscal full million diluted inflationary final million XXXX, other. supply One for In expect remodels $XX.XX. continue. IT, and approximately $XXX will in growth about in merchandise

be for closing, around pleased very the are We with $XXX performance expect will year million. we depreciation our year-to-date. In

position session. model on turn proven continue and uncertainties to profitable over to we in sustained beauty our we will beauty growth. While experiences focused great and I’ll and the face Q&A are call the believe we as macro environment, outstanding with Ulta we delivering guest now destination. the our strategy, be and differentiated confident combined to current moderate are to driving growth we back Longer-term, will resilient, associates Beauty And operator the the continue to preferred continue are category that

Operator

comes Thank Instructions] from with line question. [Operator the you. your with Parikh Please Oppenheimer. question of Rupesh our And first proceed

Rupesh Parikh

Good our afternoon. Thanks for on Also a taking strong congrats question. really quarter.

consumer. out So I I – the with I start to want start guess

business seeing you I’m increases? down in the volatility or concerns So if volatility about I out of you’ve was just behavior you’re than then prior just seeing and And any seen side no of there changes even seeing whether you’re trends, trade and more some guys price curious given curious the what the resistance months. are if any to in

Dave Kimbell

answer for Rupesh, the no. trade is Hi, short question. down the thanks on Yes,

at about talked seeing We’re time, this to quarter. not experiencing or what last similar that that we

We’re aspects all seeing strong business. growth our across of

we’re income And digits, healthy mentioned, levels every look double category seeing at e-comm services. of stores, As growth performed strength across levels. I channels, our in we as income at guests, all

guests of signals has, I So no that as our our themselves this And in down marketplace world connection this that the express that’s signs – to to or lives, guest trade real importance world reopens. beauty yet. increasing think the the within – express again, the in to them the reflection wellness of the a plays desire category

know, up our does adjust. prestige the master any that different If within show offering, price you to this behavior but show now, as to category it, model, demonstrating so, prepared if so we’re forward as seeing we’re our starts adjustments So far, of points, up, any to we strong not and when of uniquely all to But make growth. categories. we’re itself seeing look as we’re continue all of and with that prepared is importance

retailers, other this as quarter slight so we’re with may end seeing the did throughout the as what up the the quarter, far picked end started a the see with towards moderation towards and of and quarter, have June strong. quarter. you we’re but of trends early far the seen very July As pleased We

of concerns or big part no is trends any So business right across down our now.

Rupesh Parikh

Great. Thank you.

Operator

your line the with question. of ISI. Please Omar question our proceed comes And with from Saad next Evercore

Omar Saad

question. you taking Thank for my

last they a beginning confirm, retailers want that. It the sounds some guys like little margin opinion? a well still Thanks. there bit gross pre-COVID. are sustainable of last sound also that below phenomenon the like business, it’s of seems promotional still is It deceleration are just but there seeing so year, And lot June. a I Is was doesn’t year saying your around of the – you versus to levels on then thought clean. in profitability are So like pressure

Dave Kimbell

me there. I’ll deceleration the can the the start and up some just seeing gross things Let – and we’re with pick Scott of on margin

again, we quarter. showing and total got to certainly, July return the So around quarter us, trends on quarter. the July the I And was our results to the end of and slowdown in as alarming early guess, nothing But into we of did the quarter but yes, rate, said, right things, in we’re our the both, in strong. did the in We early June, were world I a business. this we up. as again, trends throughout retail see then a within at pleased modest was with number end as There of

modest of But the plays any disruption again, guest our throughout that allowed to kind we a impacts in So impact. saw it macro the quarter. the importance ride short-term through lives, and us category itself,

Scott Settersten

we’re is as generating is far business concerned, margin with very happy that results the as gross again, the And year-to-date.

performance saw last somewhat guidance has just longer-term our again, been from Our to again, is moderate what we assumes with started extraordinary. the this going longer-term out we sales year, algorithm. year, when gross margin And

something do that product the P&L Media you’re the has do looking and I’d year-over-year, we’re with something in variability, UB the mix geography that. and accounting mix at to has with if So to it for how say

been tougher, seen As here recently. to probably we we’ve is the we expect the environment a out look about little what get bit most the here across universe towards promotional of going we’ve clear remainder retail especially XXXX,

the our So levers about efforts long-term. term moderation when delivering as talk we still for with the we over have in It’s business, look of we over continuous to generate improvement the to benefits of still ESG a the lot benefit project great a in the company future. lot longer

think I continue margin, opportunities will think as look good but So feel to moderate there, we to operating margin ahead. about leverage gross certainly we we

Omar Saad

Well Thanks. done.

Operator

next Group. the Thank Telsey your Please Advisory proceed line our And Dana you. of with the comes from Telsey question question. with

Dana Telsey

Hi, congratulations performance. on the nice

You mentioned could and then next, place. the what put you’re that services Where seeing we bit are last the What increases see Can category? there. out you little be? improvement – talk you the just And increases price on had the a there? that price how of by about business impact it Thank the And scale in you you. in do had blending for year? and

Kecia Steelman

Dana. start Thanks, and to it turn over Scott. I’ll then

team the during saw some salon in double-digit comps quarter, quarter we of strong delivered with growth Our hair and strength services. our coloring

Kenra as like are We brand and fairly our these throughout have the have tried can his we we the quarter. engage Andrew And takeover examples made Dave across consumer try the was to what a and great. regions, you salon never that, all they mentioning expert before. which of see really event, What strength geographies was that Joico, sales where have really Fitzsimons, notes spoken new were with consistent is partnerships with in [indiscernible] a salon

or trial really offers. also personalized are driving We

we’re the And that our last a our was years. Dave It important. our on services, from we playing into continue really So X modest. This increased price and that’s in we’ve comp. mentioning, not is pricing try which to sales. in the first really the was hair a invest really perspective, textured then particularly From time people training to our focusing in is really stylists, come perspective, getting for education staffing our and

through that’s it’s core the growth really, business So services driving the and of that of. comparable

refining COVID. Scott? out So coming guest the I’m of with how really is pleased

Scott Settersten

We’ve number than increases price the XXX what comp Again, as, number for to already estimate where channels. far partners impact about deeper that to quarter. of expected quarter. first as quarter, and in higher now, in be it’s Again, some and early expect the points have second some in been to the throughout the the vendor a the we product all year. alerted the half saw SKUs and the total we And basis than get impacted be year. total as expect concerned the of is we of we increases the higher into We is year – there our in by assortment in queue back that to is second our slightly the been more there we of there

about will on we impacts update So further to we’re for it business our and we when the down continue thinking how road. maybe that get XXXX how quantitatively

Dana Telsey

Thank you.

Operator

Altschwager your the next question our Baird. proceed question. Mark with with comes And Please from of line

Mark Altschwager

then you. picture, X% for outlook? to in sales thinking your Good what afternoon. that we With COVID early teens seeing the whether for legs growth just medium-term whether versus it. still the new growth current the have the some trends seeing X% based replenishment Thank pent-up to is of views seeing you about projections year, And be right the low could you’re seeing you’re your recovery to cycle on for Thank innings at makeup business a on are post my the year-to-date with the the in end, CAGR perhaps to innovation-driven way high what respect and bigger question. are category, is we’re the taking calling the X-year

Dave Kimbell

know I encouraged seeing as you mass growth Great, really, Mark. and and Yes, across what with makeup, mentioned, really And double-digit we’re on prestige. yes, pleased we’re well.

had and You’ve been us a category struggling downs while, little bit. for has been for a following and that ups its

brands see What doubt rounded. side brought and in, ColourPop with pent-up and great what’s others, get is we we a mass the it’s elements there new happening that as think the we reopening, new brand the think is and we’re the innovation R.E.M. and part of performance There mass Clinique probably we both the really pleased smaller driving and really with good smaller with strong demand, is results by Elephant just some we maybe and NYX but also about-face, innovation into further MAC, although do others. of across Benefit, many that’s on in Fenty, no business. Prestige so and And Prestige well

around reminiscent higher looks, the an time, interesting glowy, are for is in time seeing the combination category an engagement. bit. are that connecting. innovation a to at strong core for of are driven it’s kind foundation encouraging. makeup little engagement of it’s that’s bold, by So fueled we’re same trend that been some looks, saw that we’re struggling are really and are strong driving seeing which things to a think of back clean equally that very frankly, playful trends euphoria have are within a now that of retro some we important of engagement right a there highlighters, glaze driven we of type XXXX by look, And kind And really while the here and that But being stay usage

that more there – So innovation and are we as pleased some driving with trends underlying express the and to to the are get that’s world occasions more the usage people and category. there the are innovation, want supporting core out and themselves is

future. So we’re our optimistic continue about will partnering ahead, the trend business and drive for path makeup our with we brands be foreseeable to in the this and to investing

are not we long-term our no targets, as updating far changing – that. or As

that outlook long-term that last So with is I’d horizon, as on our guidance. so we fall our still keep and yes, you the shared

Mark Altschwager

Thank you.

Operator

Katai the Krisztina question next your from comes our of Deutsche Bank. Please with with line proceed question. And

Krisztina Katai

all Good been of wanted afternoon on on up? guys. driving and your on then a some just consumers, back this product we just the they expectations to newness time lot there for seeing of bringing are innovation can then the back you Is skincare strong now? are layer very is talk to room lab that and the areas business strong, very that think especially should the you target How any still innovation, performance? touch side the And that opportunity about follow-up launch get coming Hey, and hair And I about back? care a business, of of growth you them you sequential there the on could member see some which maybe the you launches are just really nice quarter. partnership? from of and going secondly forward, in if congratulations has are that potential big

Dave Kimbell

in Okay. that. stuff talk There to of is lot a about great

Let of few me that. just a hit

on First, innovation.

talked in think strength driven is care. I really about of hit are now the about business on seeing power it’s and that LILY, to And new we new many are Elephant, right double-digit excited we our help we the launched COVID or every and reflection great aspects moisturizers, of so seeing that that of yes, skin PEACH around across brands entire highlights serums, skincare, our one we that let’s combination Drunk will So, that strength skincare for I kind business, are across makeup, skincare behaviors hair again, trends of categories, of of a strong growth that’s of now. brands beauty Hero, & creams, continue while. seeing sustain model category, our and growth we acne, will Fresh – the have all innovation The again, across our the which is Within right the a skincare, innovation, eye of that Clinique by assortment. drive others, developed Supergoop!, a think Vacation, in new during strengthened health by we were the like are

consumers see to Z skincare importance their dermatological and young look. is for overall or or health including foundation their There and the lays improvements. of overall a how continue in that skinification the seen We clinically skin consumers, that science growth Gen

of So, a there skin growth. driving that. core recognition active ingredients, a of these And that, savvy healthy lot hydration just around consumers been looking as been that’s a and that’s are has for driven by innovation is lot

number engagement, comp skincare. of the care, drive in and So, also Hair prestige of think, events. and both programs many OLAPLEX. We newness, we benefited to including new brands, from on mass together a hair coming execution by both strong gorgeous but double-digit strong things similarly growth our like that

being our a as Living a bring. key innovation innovation that like care to strong continue mentioned to seeing across I are of number We hair and they overall proof. Dyson Wayne, the brands

course, treatments hair health, a take accessories There that it’s be shine area, a priority. around Beauty’s category that in Ulta the to and important So, that resonate and help increasingly trend part growing of a is and been continues and and years, much health, and skin like couple strong. be important the continues to drive growing of that. and has And texture of expression for last the

high the really for a seeing the have of guests are makeup connection behaviors, pleased, importance sustain as performance is on help in high our and will categories we reasons. and are we new we number retention. a members dropping that On growth these the consumer growth, for as think Yes, driven always quarter, members, XX% future. to And the innovation, like member look So, retention there much reactivated members, are into we growth but some there record of by of more number are a guest out acquisition, as is, get. we reactivation, strong

a enthusiasts a And and So, on beauty members, as we and enthusiasts huge reactivate have large quite there to we there is quite big pool a program, should members grown, of few pool yet to and activate. going continue there to of have few our them. are after an are a beauty always activity as we is is be we think that not they

that? little want One to talk a program do to what through Target are of about the we Kecia, you bit and our ways do doing, that,

Kecia Steelman

Yes.

our and really partners the really pleased future partnership with are We brand Beauty. is how provide guests, in that Ulta target our progressing opportunities

in. leaning are We

with next of creating we to members, really and we scale that quarter new existing as that we but one loyalty this a partnership, focused that is on field members. introducing going this fact, with are loyalty an unlocking the not education nuances and dedicated training be really with on are that they team our opportunity only are In emphasis

the come they Target. into at Ulta Beauty As

excited members are Ulta continue drive at and Target expand we loyalty and we as we to Beauty grow, is So, ecosystem. feel another our to into way

Krisztina Katai

so you Thank Great. much.

Operator

the next your proceed Oliver And the with question Cowen. Chen question. you. line from of Thank Please comes with

Oliver Chen

quarter. Great Hi.

do how that against with in you the as change. pricing? disruption that fourth your of and drive of speak very don’t promotional have layout. on think time you quarter will to new promotions And terms new respect we well. sometimes to layouts always And lot inventory and promotional great personalization needs like is be the customers needs embedded you As necessarily would a the and follow-up guidance, to There to what’s a a can

prudent sounds move love thoughts your So, execution Thanks. a focus timing rationale. comes it risk on factors. like it’s I different It categories, to and would but risk on and with

Scott Settersten

Yes.

So, I one. start that will

So, our we XXX pricing, the the we our the results. are of price all embedded in are price basis partnerships for right, points increases increases through said half back reflected vendor And guidance, XQ about aware in year. that of of our

up about, framed performance the think our well. we expectations. we quarter So, above feel When like have second again, spectacular we that

so includes half of on When the guidance updated we early and last seen and think stages we the quarter. lapping of quarter strike third the year. back year, Our the trends, the trends about second have stronger some beat the far, are going again, be line performance I to top

have competitive environment. We referenced the

back that well, expect to of right. again, all holiday, the tougher quarter gift promotional this be retail We fourth Oliver. we of the for environment, In we as the year, with compete get giving, into the know half you

time. of So, short a a different game period for kind relatively it’s of totally whole

expect year a we was than be ago. So, it year to promotional more competitive, it more this

of of pushing side, strategic into the prestige us the Then referenced That’s on expenses get about talk we coming on initiative distribution kind year. income the another You deeper operating we points, additional year. beauty the points have into heard later distribution as back consideration.

Some due the manpower that’s of just sometimes delay need of that finalized. to of some hardware shortages projects of we to in and get shipping some these

there with, to nothing parts right delays some again, world in of it overly but So, the seems. now, be are concerned all there as is

year be it in the the of some So, business, half first costs, nothing the unusual year. are of the was there. costs, increased the seeing going to And it’s of the heavier half in right, than the we back pressures then inflationary

all-in, second expect half the So, and a and – reasonable year. place, what we of in good think for it’s are reasonable we the a we it’s the guide of estimate

Kecia Steelman

really new are we focused our layouts, going stores store new our forward. and our for on remodels And planned

been to changes are the made store improving experience, making the guest changes any to it’s significant since always we really we in-store a at itself. while have While

care skin in point and skincare Just and prestige store the fragrance and reference, alone. is the the – our by of point makeup makeup and the as mass a organized on today, care merchandise on other, middle side back with one with our hair of in price

and have a shops intuitive adjacencies. really guest better how Going layout differentiated forward, we merchandise categories and assortment magnify to really our really consolidated want to reflect with a

and delineation then are clear that’s real makeup brand the going and store upfront. reflect of growth skincare to that So, take the the and prestige we mass the guests also front the category moving in to with together of important

all to be So, clear mass the are going together, care prestige brand again and skin delineation. with

and guest but mass shops be together you to will will the between the it it. the So, difference organized prestige, tell way able be

We attainment going the and new storytelling support and going highlight amplify store And the trends. also going are this we really happening to that on to the the editorial sales bar that’s then and to elevate beauty beauty the center to experience the events the newness recent also more create service really of force. are front is at of and store

all We to this see are this yet really come later fall. to excited life

Oliver Chen

this positioned regards. best well, and box the in job Great you. Thank

Dave Kimbell

Thanks Oliver.

Operator

Chris JPMorgan. of proceed question. And our from your next with Please line question comes the with Horvers

Chris Horvers

Good Thanks. afternoon.

are – digits changed? follow-up the low-single half, it raising a maybe well? adding more for XQ half third originally the fourth quarter a seems the about said at treat seems get As talk of quarter back like in time, as more it to are on but how leverage. you your you promotion the comp, fourth bit keeping quarter hitting same you Scott, investments potentially like question, back for thoughts your like that cadence and It intact, the But could more maybe sounds you the

Scott Settersten

need to you don’t me Chris, the question. answer

already all You out. it figured

for So, star you gold today.

we and So, on do we at to essence. in of up I it the look guidance right I have mean call. mean really again, mean just calls, these estimates I every questions. one about it before – that’s talk and people

just we continued what the August, how early sales it like parts looked have late weeks And with last seen of of back the couple have the quarter. in mentioned Dave this July Again, of on we bounced trend. kind so And same strength.

think we are being of the the promotional strength for careful the the quarter we we up kind quarter, environment are fourth in seeded. higher. And be We reasons is to taken there. So, for have with already essence, third going

takes And that. between close so to margin navigating balance investment the that sales the line it just and

So, right. that’s exactly

Chris Horvers

since in acceleration ‘XX? I I own about was talk one quarter? versus first that you how my here, XQ answered you the can answered in maybe performed relative in And category saw I maybe guess Since – prestige the what to my question own

Dave Kimbell

The Yes. category XXXX. is up prestige versus

And so we are encouraged by that.

XXXX, kind talked Prestige about – come makeup know laggard that are prestige have had And this been we performance it has that been the particular. the seeing still to You now we Compared back. be in would last as – categories incremental strong of skincare the of the are have the throughout guess been But with pleased couple performance. that other over and yes, performance these I like we lowest, really years. performance, hair care

We have been working on this for while. a

and with As And behaviors, innovation bring specifically talked the think done I changing the combination that evolving innovation Beauty, as engagement and in of make sure Ulta assortment opening you us and products, we continued job I about. the allow consumer brands – to innovation our brands, gain know, merchants that the tremendous a lead to have up the category. have we our just share to the have within have the –

performing are with So, to the and overall pleased prestige performance see high a glad we at level.

Chris Horvers

Thanks. Best of luck.

Operator

Stifel. your question of next with the question. line And from comes Please with Mark proceed the Astrachan

Mark Astrachan

afternoon Yes. Thanks and good everyone.

relationship members any from those program from accounts your Rewards Thank that Just as have yours. about you. million about have well? curious gotten a participated loyalty it as brief kind co-linking Ultimate mentioned, contribution Target was learnings their program question, year-end. you incremental the guest in folks I of think. to at think I I Are X.X those Target am to the

Dave Kimbell

by We now. by has members seeing. as and large that encouraged specific Kecia linked a number mentioned, number not of are mentioned we we we have but we that, past are out – their have in just we been that on on are details are there new the But planning haven’t that shared really and what accounts, break doing

very Beauty been engagement been consumer really really the The Ulta are positive with has The partnership. reaction pleased in execution has We strong. aspect. has been overall positive. the a And

drive is That’s is loyalty. I touch as forward, going focus new remarks, our that engage our Beauty continue a guests to to them aspects. ultimately to to to in key So, Ulta in success way all get to connected and the mentioned

we by the that are encouraged are We driving are seeing, focused we on and well future. into what

Kiley Rawlins

have And John, we for I more one question. think time

Operator

line comes Thank proceed with Okay. Please your you. question Kelly with And Crago from the next Citi. question. of the

Kelly Crago

did just understand because sort am of during me notice coupon we that pulled about promotion of curious, more sort it Thanks And did to away in you off from in. I I know trying XX% that. another uptick Hi strong and layer low. for board not across comments I you am the squeezing recently. back store-wide the back XXXX just there. am half business just tick of or just I that’s across curious whether of was the an are the in you that and you of But saying are year, seeing promotions sort so to are promotions a some response beauty.

on that just promotional to with thoughts your then apparel has layered of on categories past? just had if you into promotional past, categories thoughts period the be been more we beauty in the some any in expect if the of secondly in even the line to there, So, curious thinking sort and had same the curious and that some strategy curious you promotions wondering forward? And Just there? environment other kind Thanks. get should going to the your during on just up category strong. of out have holiday promotional step if Have

Dave Kimbell

a there asked, but have know storewide am off some to Great. executed we do not – been comments you customer that. I has base-wide, clarify glad is Kelly. XX% I want I really not about that

have that that how in We you with more we of of a strategy on capabilities. journey personalization more to are – – have our then seen and may guests. CRM our targeted. is we that been we been and frequently. a have connecting we we What you I purposeful mentioned this know going our investing was that out year all in in core used is trigger pulling And executed that our history, haven’t how back – being

with including it’s offers that communication or a also want broad behavior and of subgroups offers other example we off, to or incentivize. use newness So XX% specific if target points smaller variety to within be but our a on we offers, based One pinpoint typically might learn several subgroups And and that it’s we subset get we return doing for but we profitability us hasn’t a may and small months and a year member Diamond coupon, drive off shopped that the that. all groups. test and understand of a XX% guest of only

any So, XX% off is nothing.

promotional. off, that an was there was of offer is – and just that be we is mass this is So side It as business some comp if – it’s storewide. know, a tends that a have you mass more our strategy that bit within offer not came to XX% of saw out the a week you

that been particular offer many of you that So year. our off, for if at an doing the offer any was focused our and we on was this of saw non-prestige side years week storewide have time that XX% was this not that business of

So that’s a comp event.

So, no incremental offers point. this at

no call, you about of having are said surprise going Scott obviously your on seeing point intensity we the seeing to that That’s has forward second as Now well, you holidays, to it. promotional promotional intensity. this and are any mentioned

it’s happening right You mentioned Kelly apparel, across just retail now.

be We to quarter, the we are our in continue focused. second promotional able intensity. decrease to And

like as programs I possible to Scott into we look giving gift mentioned, forward, mentioned. apparel. really competitive as layered expands all particularly in gifts, set in going big We But any the including haven’t holiday, the

that. we So watch are going to

that more we on the sure and And quarter to gifting strategic see in in of and both fourth are delivering are promotional move competitive be business. a the the We the glamming our we make holiday side as historically. to

incorporated that’s of So watching guidance that Scott carefully. are kind our forward. going in we mentioned And

Okay.

and wrap great values a team for your vision and you everyday. to I thank want and their to commitment by wrap that, on delivering up passionate the for here. with And today. our up thank entire again mission, So, question for again us thanking joining Ulta you I’ll Beauty all interest

corporate direct one of while unified to other working store, result is as performance forward. guests associates care take DC of take driving Ulta Beauty business our and strong of together each to care and Our the our our team

great So have third all and we again I speaking we of results. a joining again look in when to all hope Thanks report December you forward early to quarter our evening. for you

Operator

conclude Thank today’s This does conference. you everyone.

and may Thank at great disconnect participation You a time. your you for have day. this lines your

Ulta Beauty (ULTA) 26 Aug 222022 Q2 Earnings call transcript