Earnings call transcript Q1 2023

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Operator

Good afternoon, and welcome to Ulta Beauty's Conference Call to discuss Results for the First Quarter of Fiscal 2023. 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 reenter the queue for any additional question. [Operator Instructions] As a reminder, this conference is being recorded.

to host, pleasure my now introduce Ms. your It Investor Rawlins, Vice of President Kiley Relations. Ms. please Rawlins, proceed.

Kiley Rawlins

session. afternoon, for thank Executive Steelman, and Officer, everyone, us Good are Officer. fiscal you. Thank and Kecia call our Scott the discussion the quarter join today Ulta will Settersten, XXXX. for Financial Hosting for Kimbell, you Operating of Beauty's and results our financial Chief Q&A Chief operational Dave first us of Officer; a joining for Chief

we to statements XXXX. company's in are Before like statements safe meaning the harbor be this which within the I'd you of forward-looking of may Private begin, remind call, to facts, language. contained not of Securities constitute the Act deemed Litigation The historical conference Reform

from which on undue are SEC. in with only XX, as may in number We not of Actual XXXX. projected today, caution a May to filings place statements, materially such described of risks reliance due future and all you these speak the of forward-looking results those which the company's uncertainties, statements differ to

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

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

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

please requeue. additional questions, you If have

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

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

Dave Kimbell

Beauty. Fiscal a off afternoon, everyone. We you, your good good in to appreciate Thank is Kiley, Ulta interest XXXX start. and

was XX.X% and sales per of delivered that sales diluted $X.XX net For our consistent increased $X.X sales Operating and EPS EPS and the diluted comparable increased billion, internal margin to X.X%. were expectations. increased first sales, X.X% operating share. XX.X% with we margin Net to quarter,

we delivered Our categories, growth growth store the Ulta Beauty We brand. strong. to continued and across strengthened member traffic engagement and key be remained with healthy

guest want continuing executing I adapt for a associates great to experiences, while Ulta on creating agenda. and our thank to environment to Beauty our transformational their focus dynamic

and are The how selectively remain consumers more splurge navigate consumers showing while are operating to concerns the to continued high also continues uncertainty. treat economic to spending and Inflation and willingness environment best evolve themselves. exploring a

prioritization with reflecting Engagement years lap beauty two as as Category activity is increasing. unprecedented And remains promotional moderating growth. strong, healthy self-care. the but growth of growth of normalizes, is category we

not promotional expand and several respond over we of intend we protect tools variety While lead and we a our share intensity, have using to the will do appropriate developed years. last to as in invested

is lens guests experience Beauty Using the of with guests Beauty touch our at through points stores, Target, our Beauty and our the to how Ulta e-commerce experience share. gaining business Ulta include Ulta and consumer multiple our physical resonating

we As than seen category quarters, have our previous faster grew prestige in sales mass in categories.

price sensitivity. is e.l.f. to is difficult to certainty Roche-Posay increased such and if products with innovative with La or It consumer brands mass robust of to due mass strong growth as the engagement due know

consumer variety we such, points is category. retailer are beauty beauty price in level between, Ulta wide everything the capture from Beauty shifts any Importantly, offers and uniquely the luxury a to to only positioned that as mass points entry within in and price of

both Hall. strong prestige Beauty double-digit and content engaging driven social comp best and and our primarily newness, mass again through XX delivering by growth, was this Care performing Spring Skin Days category with quarter performance of media

quarter. to growth like during the Elephant innovative and BYOMA, from as well as Hero brands Bumble, ordinary Beautycounter and Drunk Cosmetics, new including the Newness brands, contributed

category robust forward brands La and Roche-Posay content for platforms brands social engagement growth media like like continue addition, CeraVe. resulting in In trend dermatologist-recommended driving

two consecutive strong lapping delivered categories bath double-digit this growth. low percent years and fragrance of The double-digit quarter growth

as Grande, program established crush newer and fueled Billie from strong engagement Newness Eilish brands, meaningfully Ariana with Lancôme fragrance brand Valentino contributed monthly our as well Herrera and Dior. Carolina and

women's healthy addition, stay fragrances. In both and giving men's Valentine's gift was across

delivered quarter, Hall. engagement and growth for the by XX and Beauty Days driven of guest single-digit newness high Makeup Spring with

Soft and expressive nails driving are bronzing, glossy lips category. growth the eyes for trends and

brands, and New NYX range products NT drove brands growth. a contributed Natasha quarter, like from Dior, and sales about-face during wide also the Denona while to new e.l.f., of including

drive expansion into of more MAC newness sales. addition, combined to the compelling stores, with In continued

focused the including as Finally, Products hair styling growth or lower and offset with treatments strongly. newness as those as in hair resonating lapped last well color for the strong for hair scalp category by health, bonding quarter, we was care demand hydration focused on flat year. products tools and on

O’dell Recipe, growth new Redken for IGK. and and Divi and Kenra products for Donna's resonated Mayo healthy brands content Batiste Eva from were as Way, notable well Trend-relevant masstige like brands drivers guests category. Newer and media Fitzsimmons Andrew as products the social drove while engaging Nyc, from with

growth in services. double-digit by business and Our makeup comp cut and this delivered blowout again style, driven services growth quarter,

As we are and our have services. more stylist members talent, offerings expanded our enhanced using service

back takeovers new acquisition products brands participating opportunity new our guests and and salon give bar introduce to our for will drove sales member to And unique stylists brands. growth a

we persistence and reflect shared, Now, full year quarter the trend. similar this other shrink have of to to what our inventory we retailers see continue this from updated to guidance have pressure

as of is various is a rise and ORC shrink violence increasingly during factors, aggression incidents. especially these challenge, result in an theft, the specifically Organized Retail we've or seen concerning While Crime

Our the first safety associates well-being of priority and guests. and is our our

structures fixtures, address and security concerning to trend. We are aggressively committed in training, safe and work are this to ensuring staffing environment support and increased a investing

of by our and be communities, retailers will brand stakeholders, associates, investors and it all not guests, solved impacts partners, ORC alone.

retail, the it Given complexity, take problems. solve and to these legislative enforcement across collaboration will manufacturing, law levels

together, optimistic meaningful creative, restore working for bring I can create solutions Now experiences to safe and am sustainable forward impact we shopping everyone.

of its but other has been a historically deep this connection resilient connection self-care macroeconomic given of believe As form to is even emotional importance We the to compared and with challenges, consumers. to we previously categories wellness. beauty discussed, immune beauty greater today due is have more not as discretionary

this guides our navigate our profitable our long-term to drive As build and priorities dynamic we growth. and positions us market operating strategic leadership on environment, framework

Let this me an first of leading definition update the beauty strategy framework in an inclusivity give progress our trends. made expanded with the assortment on enthusiast we've focused Things Starting the our to Beauty, you thoughtfully light growth and with against with curated quarter. is to on efforts drive our All

and first clean high-performing beauty luxury on Odell for whole eye, safety for known and the accessible skincare standards makeup artistry further with During Beautycounter, pioneer, with Natasha the we unmatched Denona, focused clean, brands, our high-quality cheek, assortment and including a the hair family. care offering brand of brand pallets across quarter, products base exciting enhanced several a launch ingredient makeup

by Beauty drive at and Driven To and engagement beauty additional strong XXX interest, on growth. platforms launched we fueling Gen capture ulta.com. Ulta category in share are luxury Z luxury stores and market this social quarter, brands

like vision Chanel like including are with Our to to provide Danone. beauty iconic with modern Hourglass Ulta Lancôme luxury engaging and Numero reflect in, what luxury is luxury brands with uniquely luxury guests brands Absolue, brands Dior Natasha clean a and guests most experience. Lux at Beauty artistry for and like Strategically curated

strengthening continue to and assortment, core addition our platforms. we evolve amplify to cross-category expand, In our

including certified Lauder, We conscious with [ph]. XXX by Nutritious certified pillar, and quarter at some first the share me Lux and quarter least one beauty ended brands Mayo brands, Winky newly highlights. Let Estée

Beekman sample beauty promote In tote essential and of XXXX sustainability discovery, and celebration drive certified Day, conscious Bouche, reusable to Ulta Beauty launched a products the XX Hero we kit Earth and from a including ACURE. collectible brands, with

support discovery brands the new of Big purchase XXX% We kit kit donated We featuring to and XX Sisters and launch and Big to of continue Beauty brands the brands founded Gold. black-owned of Brothers with and brands, founded black-owned a price America. created this of was Hanahana

Black brands Beauty History Sunday. owed Black Month, innovative through rich highlight new supported celebrated and like sugar used social and and Bakerie and of Sunday recognition we platforms the storytelling to Beauty Black our digital to In II community

your As to we are beauty touch of all we enhance enthusiasts, they all experiences investing are guest in world, our points. beauty on across their wherever meet journey,

rollout front-end a store, our This our of both and ulta.com quarter, the digital app. completed guest-facing innovative across delivering the two-year experience phased we fresh, guest element of

enjoy our new and checkout experiences, experiences new and buy capabilities. browse discover Ulta from navigation also finder at seamless including guests and and Beauty can Luxury foundation benefit more more, and Today, save recommendation search more, enhanced

management Later this will order digital infrastructure of year, promotion journey to store enhance we capabilities. and our our in milestone our experiences. the a transition pricing to converting and enhanced front-end by back-end The omnichannel major of support inventory completion and our is finish checkout, the

goals. growth while changes digital noting our teams active worth e-commerce delivering our these is platform it And maintaining and an executed

digital, we disruption services the proud how While of IT experienced guest minimizing minor I impact. while teams worked some together have transition, and the during am guest our

is guest to experience capabilities. continue support To anywhere -- anywhere, buy omnichannel fill expand we our

This markets. stores in introduced new markets, option across XX bringing this the same-day of quarter, with number six XXX we to delivery stores convenient

it through products in system. associates store store not guests easier making we're online addition, when for assist In ordering to in our available POS upgraded

are transition have to systems complete before X,XXX store stores and We track on this in refreshed holiday. POS

to reengagement Ulta introduces Turning with ending are back bounce ensure We of our to Ulta partnership to new Beauty. in locations. point CRM to our guests, we Beauty This guests opened shops enables four capabilities touch and with leveraging Target. quarter, XXX the lapsed Ulta and Beauty

experience. field and our outstanding team to guest working and dedicated and engagement, support partnership deliver together support with continues we target Our partners training are field to with an the

and beauty Beauty sits with heart our is of loyalty creating the a community. engagement, work authentic personal increase are emotionally with the To consideration at we category. connected connections that guests

Month, quarter, trends more health Prom activations Hispanic including Beauty consumers. that the meaningful Z, key Ulta awareness stronger, with and improved becoming brand to we brand significant metrics Black is cultural increases moments, impactful Day and around more These Earth In in Black executed first continually and across guests. relevant and delivered the Gen confirm History

the and driven lapsed X% by last first We with first XX year, healthy rates. reactivation, retention acquisition, the than new member active million quarter ended members, quarter higher member

by also primarily growth reminders members. driven of frequency growth are Platinum trip personalized members. Elite Spend driving and incentives increased, Diamond Increased per visibility, and of member and

high-loyalty the that increased and At than strong same indicator XX% more in tiers to the number offer. a these the is has of of which in to compared members period Ulta year, elevated last higher all quarter, Beauty engagement end of the first

cycle Our new delivering store to and member acquisition refreshed member drive created the associates plan growth results. member associate members, we lapsed reactivate communicate nurture tools multifaceted to and and help is go-to-market the new To drive life program's benefits. training

integration targeted executed communications reactivation awareness. we and program campaigns signage stores in improve refreshed And tested retention and the to our our contactability. personalized drive enhanced guest-facing across We and digital digital introduced experiences loyalty of new to

power the connect data harnessing our are we Network, way the exclusive transform Media Retail our first-party enthusiasts. of with brands our Media, UB beauty to Turning to

and With campaigns engaged dedicated on more opportunities quarter, resources new and place, include to our with more portfolio this expanded digital tools advertising we digital product properties. Ulta-owned manage in brands

As drive operating efficiencies operational to to UB overtime. will it to fuel to roadmap confident our new will future continues multiyear excellence an growth. and transformation are scale, we unlock are our capabilities executing Reflecting initiatives, and ambitious add company meaningful we of priority which -- value our Media optimization, operation

systems We enterprise new our and while store our management processes, resource further our and data digital system, management all with POS technology and and facilities, systems capabilities supply planning platform, to upgrading analytical are architecture optimizing to upgrading enable expanding transitioning stores. our modern order chain upgrading in our expanding systems

milestones progress the several We good have deliver months. roadmap major and over made our expect to next against

While to collaboratively impact limit and moved disruptive, and be associates. guests can our quickly consistently have change this of to magnitude teams

our first and culture across in success measures enterprise, Our in to modernized Ulta protect purposely success we drive consistency In language. of is enhance are quarter, our competency people we a and further talent. refreshed model our processes, enabled common Beauty teams the cultivate and talent management launched by investing culture clear world-class to establish and the and with

leadership field our associate and recognition reward experience new the education. recognition, partners field we teams associates bringing our general for in leadership And, service award and meaningful We also to of support program elevate meeting, launched hosted managers, ways. managers, several development and district days brand together annual a product

this growth. Ulta from talented our and their away driving for by serving our I and walked associates passion guests Beauty's inspired event,

expand to social and impact. our we Finally, continue environmental

is hard packaging This select partnered of the with put use. packaging, the locations diverted so the from to recycling test Pact best Collective, collecting landfills to program industry recycle quarter, and its it is we goal highest in beauty and with to that

our in and these impact key which a updates the beauty force to priorities published ESG our good. We also describes for business on areas XXXX our initiatives, their our and ESG as to of positive provide approach report, connectedness

In a start. XXXX good closing, is to fiscal off

against an environment. are agenda, teams navigating while executing transformational Our dynamic well a ambitious

evolve, expect we continued of are profitable environment operating category proven and Beauty for we power the While team, position the the continue to with confident business growth. the will world-class resilience Ulta our model combined of

call And now, to the financial for over results. I of will discussion a turn Scott? the Scott

Scott Settersten

good and everyone. Dave Thanks afternoon

results we XXXX our line anticipating and are were trends would with As in for that unprecedented reflected the quarter materialized We Dave These moderate increase. our generally first said results. environment today, in would the entered that and reported that beauty growth in quarter the in category earlier, expectations. the promotional the first

strong new the driven quarter performance. Starting increased X.X% XX.X%, in and comp growth with Net the sales sales store by income statement. for

royalty to the The sales growth from traffic, both growth double-digit offset driven store by credit was and average quarter X.X% other decline In income in due in transactions, increase primarily $XX target our in revenue growth primarily ticket. partnership. card which for a an in XX% addition, due than income more million, increased to comp

The more offset overall which price. transaction, countries. than the contributed executed in average of most product points which units basis to We year, price increases, were reflected selling that average estimate last XXX per about decline lower ticket higher

through through lapping February, moderated we momentum from a benefited tailwinds Comp subsequently Looking sales mid-single-digits, continued year. sales headwinds from at last cadence into to quarter, quarter. the which coded move the as the of post-holiday also

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

one remodeled relocated two we store addition, In and stores.

the gross XX of period basis last the sales. was year to same at For margin down compared quarter, XX% points

merchandise of strong lower costs, leverage shrink, by inventory and salon chain growth other revenue Higher margin, store supply offset higher fixed deleverage and were expenses in of partially costs.

earlier, and crime. to shared organized a Dave experience retail trend continue of worsening As we theft

these and staffing, are these third-party to We training are organizations actively mitigate through with to and and fixtures, in trends collaboratively address stabilize working and we enforcement working investments law challenges.

from In gross benefit category price lower greater to and mix which primarily pressure addition increased margin, to due by activity impacted from offset than was margin shrink, shifts, promotional increases. merchandise more

chain additional related our incurred costs to quarter the in efforts. also optimization We supply

better which slightly than SG&A $XXX to increased million, plan. XX.X% was our

partially wage benefits sales. period XXX increased store overhead expense deleverage higher and XX.X%, primarily by to leverage a As to by to compensation staffing year, points store and incentive benefits, increased to of expenses rates due corporate percentage due and last compared of marketing and increased SG&A sales, driven Store the basis XX.X% of payroll levels average primarily expense, compared higher offset and to same last year. payroll

Marketing in Corporate increased, strategies in capabilities omni priorities, acquisition our investments awareness, due UB Project overhead including Media. and and increase to retention, expense other related strategic deleveraged IT drive to the quarter penetration. expense investment to and SOAR, brand member reflecting member primarily expand

first quarter of XX.X% XX.X% in Operating the margin was sales compared of sales of to XXXX.

extraordinary quarter of and results XXXX. of lapping our decline expected, primarily As the deleverage in fiscal the reflects operating impact the in margin SG&A first

first $X.X quarter driven company's to primarily the higher lower interest year. benefit The to the to tax share to last compared year. per from GAAP $X.XX due tax to rate and earnings decreased higher for by during balances tax Diluted accounting $X.XX quarter. increased average cash is for effective XX.X% quarter X.X% rates compared interest stock-based to income The last average rate income Net compensation. greater increased in million, the XX.X%

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

the impact increases existing the brand cost support to inventory to addition purchases brands. new increase stores, of and new XX of demand, support to expansion and impact In of launches net the higher reflects product

compared related for last capital was million increase quarter, The stores. in the million and expenditures investments Capital and $XXX.X primarily new in to IT as remodeled year. to well $XX.X supply expenditures as relocated were chain,

to decreased cloud capital $XX.X million expense. of store to last year, depreciation a due to Depreciation million, and compared from $XX.X shift primarily lower investments IT to

had million with cash our of quarter the in at equivalents. cost the We quarter, repurchase we of cash million. under XXX, XXX quarter, $XXX.X remaining end ended a At we $X authorization. shares billion repurchased $XXX current first the $XXX.X In the and million

to outlook. now Turning our

our expectations trends. year recent reflect performance our for have the actual We full and to refined quarter first

We but margin. updating annual expectations and sales maintaining diluted per for our are our for earnings growth share, comp outlook operating are

for sales We expect year growth X% X% the comp continue we be and as the moderating move growth to will through between with year.

single-digit year between the As gross first half expect range upper of operating our of we the on be shared for margin. in be growth will then half. growth to view full XX.X% for reflecting an and expect moderate XX.X% now updated sales, primarily low the we in second call, the single-digit margin comp We to and last

We margin our a higher environment. include deleverage gross have of original increased more our outlook expectations and impact from the shrink and competitive promotional for to

continue We incremental of strategic inflationary spend expect driven million as well deleverage of ongoing $XX SG&A pressures. million the to to by impact investments as primarily support to $XX

current income updated reflect now year. for interest We the of for interest environment rate income for million and planning our have interest $XX the assumptions to are about

We be earnings in our quarter rate first per assumptions now diluted the our have XX.X%. for incorporated result in $XX.XX tax expect of share the tax These $XX.XX rate guidance full also effective forecast to the into range year will approximately year for per and share.

in shareholders. a for business the our beauty to We us health off our model strategies category, that positions solid proven uniquely belief optimistic about growth the is associates and our and steadfast XXXX deliver in fiscal our guests, confident closing, team our In start. remain of and to

And back moderate to turn to operator now over Q&A the the our call I'll session.

Operator

you. Thank

Instructions] a now We will conducting [Operator session. be question-and-answer

you. Thank

with Siegel Simeon Please with BMO your from proceed is question. question first Our Markets. Capital

Simeon Siegel

about have Ulta Do dynamic any seeing external Dave, of signs Ulta to whether customers Hi, trade I mass of the you're guess, within Good view somewhere from know else? offering. versus afternoon. either you. I you or trading prestige as you into talked out down, everyone. Thank any the

Dave the I more UPT of I first or lower compare. is was ticket. the if transactions? opinions don't a And about tightening little you on Any mix or Scott, despite it's hoping then because a you speak could if this the and decline ASP bit a higher or know in think dynamic

lot further any be Thanks there would Just a helpful. color guys.

Dave Kimbell

than Thanks, growing so in we Yes. detail procedure. that we saw quarters of underneath. said our right business we and What previous call, are bit little seeing, now is that as faster And mass a Simeon. about and we the in some look is as

actually As there's we all although. income all income there's cohorts, across all across look levels, levels, across good income -- cohorts, growth roughly across equivalent

growth consistently. did moderate The rate pretty QX from

remains traffic spend did member as said, strong, have traffic we units per As per double-digit Average average we fewer ticket increased. decline transaction.

NYX, When going The exceptional Ordinary, on at we category, it's brands some really -- and Roche-Posay. the look category, mass some mass La our have newness like high-performing e.l.f., brands in we

know growing the So that contributing we that is process. mass so it's And higher to -- that. fact certainly than is

engagement. apart It's in engagement driver difficult the that. But that. we as an a double-digit of are strong driving prestige the for sure, of care same because and as our newness side us At know and of business of level those the prestige they exactly well, growth great for brands some example there's skin strong core have we high parse time, to relevant culturally on comping

feel Engagement What is remains the strong. total closely. we high. category watching we're So is

and previous out coming in self-care the quarters, talked wellness continue. that more category important that's of and is we've pandemic expect to an in connected this overall even important and As we emotionally

last by engagement's quarters, moderate. of continue level we've seen back getting but high, high-end high know to consumer ultimately in we've about But the to several years, more as encouraged growth these think the we be engagement. in overall talked historical and two average, we will of We that

Scott Settersten

Yes.

would state. overall, Simeon, just I remind that So you, we did

member up are across per units as year-over-year year-over-year, the is period enterprise total for So the total and up well. spend

trends we're that at Very strong of channels, both great see. strong in traffic play. model a in again, channel So our brick-and-mortar evidence pleased healthy, but business especially to

last decelerating guess, been When three was course units look specific bit I down. four would It's again, the I say. transaction, over it a quarters, at the we or of per the

totally to again, So see to surprising not that. us

than we're in and And are from at this away not again, trying at looking we how just selective just this too bit take time last at what much the would that year. that people to now more being at maybe they little consumers time. read point a into looking were trends But most

Simeon Siegel

Great. of Thanks of Best a the lot luck for the guys. rest year.

Dave Kimbell

Thanks.

Operator

Thank you.

Rupesh question. from with Parikh Please Our next question proceed Oppenheimer. comes with your

Rupesh Parikh

Thanks for my Good afternoon. question. taking

I So, back your commentary go environment. promotional to to the on wanted

to we've it's of gotten the to how I of out XXXX more seen you some seeing. promotions gap competitive look there, color earlier? to if in at you hoping terms clearly, get out what the just there. more guys was are compared maybe So, maybe And pre-pandemic what is

Dave Kimbell

actually I as out the anticipated over of bit couple that increase all even we've talked years. was of a year anticipated coming the it as that progressed promotional had this Well, about And to Yes. on we than did planned we call, quarter. more and little through be mentioned the quarter that what more and for activity we promotional trends saw the

approach know that all the And the to to we but So long-term we be competitors. look are important activity, environment. this an our and and leader broader not gain category when category. been intensity, to the competitive promotional of to for sure to has make is a strong continue our this we share in It's at competitive lead

of increase and some activity the competitive And so driving what's promotional. that's in the

XXXX, anticipate versus we're through As be year. case we've this the planned XXXX, will and and still that below that,

about we've environment. throughout we're in that As leading certainly we talked that a not to But promotional, quarters, getting it XXXX highly more up you back We're getting the last was several those the and Rupesh, to really anticipated anticipating as the promotional levels. seeing period. know well, and

X% pinpointed our now growth million capabilities be through we've loyalty for us As gives we'll in the a loyalty we our growth to and in tools, more more be as unfolds. program, as XX in targeted and CRM and with new those several thoughtful those the expand some years hard loyalty grow some the new and environment we certainly the to worked activities members strategic, ahead last X% two promotional employed program, program, last strategic our our to efforts, reminder, our capabilities look in years continue year to

Rupesh Parikh

Thank you.

Operator

Thank you.

Forbes is Please question Securities. Steve your Guggenheim from proceed with with next Our question.

Unidentified Analyst

evening. Meyer on with This I Good is Anders [ph] Forbes. start services. to wanted for Steve

So two-part trends in One, by further you the prepared you on remarks, within outside maybe rate? a question. details of seeing the broadly comment were the member measured can utilization services and possibly

And purchase two, service consumers approximately receiving in-store on can the of update the an you make percentage that I provide is a in after past, an XX%. believe there

there's So, any see to Thank wanted I you. moderation there? if

Kecia Steelman

Yes. for you Yes. thank Well, the question.

So again, like we seen is back the prepared remarks, was what quarter. business these We in that the -- again we we we've strong our talked really about salon service -- in burdens.

guests is So, back are specifically service you new what that event, can But XX% bar our that share I purchased what purchasing not we've through with that activations those ever seen guests. of are to brands. we by break out is those

the resonating we them So the services and is get guest really experience in when chair.

the trends average helps that [ph] are that of hair -- we're loss around care And also services of then our health main with Hutan our color is and seeing treatments around hair ticket. care really the driver business. overall

So, the really strong. business is

overall really over hired stylists to quarter. Our business. are in XXX We this critical our stylists last

Ulta capacity, unique we that it's got We've a at and business here proposition is the Beauty. strong. have So

Unidentified Analyst

you. Thank Great.

Operator

you. Thank

Please with proceed Bank. with your is question. Krisztina Katai next from Our Deutsche question

Krisztina Katai

some the high-profile brand Hi. with that your successful afternoon on you a creating? member. for records, wallet luxury Good Has and had to assortment of the the given Ultimate with taking and continues your thank question. and spend I set launches which for Rewards share the both right, also increase program, question members, of membership you're

needed of ask vast I whenever or return also see do of tailored that you Thank And personalized of some type as you on promos you amount the the you that you. more wanted data leverage have? what to offer

Dave Kimbell

the our driving the one have program, assets, teams off. really continue loyalty work the that yes, that experience we've pay I'm our our greatest commitment Well, is Rewards that and does made, of to store that investments Great. the excited that to Ultimate team

continue X% brands, believe wallet more share proud in our about We members working. best growth, member members plans diamond continue new are growth we -- our in of strong of I points. strategies, separately, add engage really we spend We're showing do new we do QX, We to being per experiences, guests. to them add in of touch our growth. believe talked and platinum improve

of shop to that is collectively designed we our to share guest do our a we add credit salon, to Everything shop, of wallet. share to use to at to our them shop to have If Target. really these store-only get increase to card, the online, download wallet. app, All get experiences

us in omnichannel their one store-only guest that And we shopping times. example, works an continued we have And wallet. way us over online when evidence that do it starts increases spend that, to X.X of with increase share a

improving continue our touch we're as with of more of members, engaged them to know all of do which points. guests. So And the grow, journey we getting we're share we engaged add we across new we our wallet as on

So, We're of that. a lot committed finding to success. we are

that new in that's years, or some replenishment of our things been the off return. of As the are strong far on we've as personalization, and our for around of another working working categories engaging working. see hard like programs aspect several and it We experience return is paying

tools, innovation capabilities, enough guests. continue data new experimenting all bringing And in in of and the invest engaging fact, is with in leveraging our return to to across ways more going we're that strong

us the we're world of buy more So opportunity personalization, seeing good returns, data. our ahead for and there's see in you a lot we will

Krisztina Katai

luck. of much. Thank so Best you

Dave Kimbell

Thanks.

Operator

you. Thank

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

Ike Boruchow

P&L. sound like just I wondering you that's it's more of I'm just And meaningful what's was a color could asking, theft guys component place? Scott, does in shrink everyone. dynamic on the you it the fairly if give Hi, impacting taking

would And just impactful the remainder we if for is we you're to your what there's be more pricing QX was know any just how helpful little a what way you impact bit not or gross the understand so of there year? margin? can in quantify it in that Anything the so

Scott Settersten

Yes.

when us So, the adjustment I really that -- about it operating for year. when think was surprised thing in shrink financial was totality the the quarter, results the we and think that's about margin the really and the driver and

knew to strong moderate sales a years. after were little spectacularly going two we bit So,

up the maybe not richer expecting than promotional environment going driver. some. The knew is shrink was were but to we by the ramp slightly driver We far. it's that's And

put we're of trends what those that's so the and expecting a to And year. quarter, continue meaningful pretty our first the drag on rest

are coming some shrink moderate behind XXXX, were putting We're into to they haven't banking still our way. the rest great still going investments We're of is Again, were we this. financial a yet. bit thought But from into of doing -- tactics. A standpoint, of the of the But effort we're a because on improvement a we little not job. mitigation hopeful. lot resonated teams going any trends the

remain of the kind So of the a challenge year. for rest

Dave Kimbell

we unfortunately, and our Ike, But this associates. working There's really Scott It's investments, in the asked. as and the the to financial -- is described. this is better, getting hard. topic. script, I'm mentioned glad efforts, impacting it's important not I and worse, certainly add our you that guests. I'd And we're a despite And our -- impacting critical impact need

from we're -- some control, going taking. bit And going we take leaders to need but with other from working of our local describe national we I and steps from detail Kecia DAs, efforts, ask partnership from in support in more it's what leaders. what from the governmental directly to enforcement, this, other law But hard is I'm retailers, support within to mentioned a but we're

across a needs retail. macro try for -- a a problem find an But highlight it heavily I'm solutions, some both want and our you they're on. those are Kecia, macro hopefully do of business a This involved to in answer, we personally that to to it's focused doing and help answers lot. is few it But and things? contribute is topic to one important

Kecia Steelman

educating them see areas It's the target And types year situations. Sure. lock this fragrance best fragrance specific of associates after. We're these chain training by to also we end those with base going Yes. increasing the handle XX% locations. and of is one setting. We'll cabinets in be in just our of how labor we're as the that of

a store, activity see shocking. you're it's this in shopping happening, If you pretty

have camera I'm that out coming catching the in. sure there systems -- seen groups the reports of some these you've come

in even in we've So, the security guards help ease security we them guards, from to what at armed our coming and throw in. with invested parking can partnering some lots do locations, landlords

very disturbing deciding and court a to it's I this we're retail associates the lines press open happens So, course-correct an with there, entire keeping as said, and our group. communication full out with like

Scott Settersten

that Just one final on one. Ike, note,

store So in for as purposes, quantification above a cost. fixed all offset reference first shrink deleverage the the totally point expectations, quarter,

Operator

you. Thank

with question is Korinne Piper question. Wolfmeyer next Please from your with Our Sandler. proceed

Korinne Wolfmeyer

doing. touch you've questions. taking how just little I thanks and I'd bit on that's know on afternoon a and loyalty bit retention Good Hey. your the program on like for talked a to -- been the efforts. customer

a little stick their and that customers and Ulta doing we How with ensuring keeping think retention rate maybe you. mass maybe you about are lower-cost or wallet more, consumers out bit pressure But more retailers strong? as items. seeking Thank say, in

Dave Kimbell

really in imagine, as the in entire everybody would delivering Korinne, team and for Well, starts participates great And our that retention. with a fundamentally you loyalty company experience. and huge focus

that, XX,XXX consistently they our that's and and experience, in, walk our guest that to delighting guests they the positive love to so key engaging experience is a proud committed and have guests uplifting about. every that our every stores in are that's that time what We retention fun, is associates I'm experience -- receive that

we an important our digital in all number strong, remains in-store at of from, got said, engage Target we activities touch experience personalization delight And points, that and QX. we've our communication and retention loyalty growth in our the our and with of guests of experience of guests. and all connection with efforts our Ulta Beauty and excite as X% Target, our our and -- really I through have was a driver that Our and

So, do. with that have pleased we retention rate we are strong, feel very probably best-in-class we a and retention that

offer between as changes, is some talked Beauty. of prestige. does all question masstige that all aspects the the about environment And I of shifts that categories. the things We're and the and again, from entry-level unique Ulta ones the shifts, Nobody only one an And as that price to script Beauty what points, luxury, that as mass Ulta prestige -- price, of earlier does. to and about in

delighting our all forward. continue can part one different aspect been they price and on that's that that as long buy exciting lean -- going Ulta adjust their keep to spending key and within of choose aspects, as do and across a So, we to leverage guests, if and business our they key maybe points, to or we'll decide

Operator

Thank you.

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

Olivia Tong

the then your categories, that said Thank you And you want it channels try broad-based. have incremental of the be compare promotions Can from, you to about but certain promo you could to about levels fairly promos, pushing you I you. harder if to it's to said expand coming whether little competitive. won't certain they whether I course, bit as peers? are know talk how see leave you a you, your or it's talk

And is the to year can data your and same promote Thank you still of last stay that leverage you competitiveness? the and there you level at you. have members loyalty do could potentially that more

Dave Kimbell

Yes.

we that happening. the competing everybody the say environment again, incremental it with to all prestige, an category. I'd beauty directly are because competitive beauty. we mass First, across model, see of We to promotion really And intense our parts see sells luxury, of

activity And luxury. across watch promotional we're and so and across mass, prestige, track we across seeing

it. of part all that's so And

it's And part wouldn't say so any of category. I one the

far we have perfect As as insight. don't exactly,

But then competitors of get macro track are doing measurements. that each and gives happening picture. internal what exactly watch do a data their what's industry all year-to-year, we some know very and our don't we us understand closely observe we of So,

is about delivering and right just to So, at the time. it us, a guests for great right the value experience making we're that sure our delivering

plan invested what's and more reduce to targeted. touched and in allowed on saw capabilities that's our XXXX XXXX. have promotion be to even you And us it, but heavily our for we personalize have of those tools million And be as a will we in And that we from the XX because that it levels the as part believe in levels, this year, fact level mentioned have, now people. earlier, that we I we elevated more the below we

us mean off a that's more personalization We've personalized the for be capabilities. us. and sense level, that more there to lot doing more we a offers as whole covers, better under allows make paying CRM important way. won't pinpointed, new value-add that do doesn't We got at experience in and we're they here an But have some scale broad

Operator

Thank you.

Our next with from Please Lasser proceed Michael question with is UBS. your question.

Michael Lasser

Thank you so much afternoon. my taking questions. Good for

this to One some out going their probably of of increase is the feature activity pressure as put that's is is slow, and narratives well. to that from shrink the margins, coming through, are going skeptics of it's to going come on and going to report trends to that's element promotional Ulta now going hypothesis Beauty's

scenario? that to year, at margins? have So to in if what your your your pace the margins levels, mid-XX% were you that's where go the XXXX margins going mean for to on activity are somewhere in dilution to you increase add And promotional shrink look the that be if that would back this on range, in and

Dave Kimbell

-- we're Scott your Let me committed to comp I'd this is I'm to X% to confident do, out are but going to more what we really that. question. on or start, track do bit to and definitely growth, What our around year delivering a more say We color, in give on and doing guided specifically be we're ask to color that. X% That's we'd we set that for and business.

margin give over to that, a more made and that's confident our profitability our reflection some adjustment but things, We've in our time. we remain of margins. very an on Scott detail operating will specific but long-term operating

believe shrink of do highs get I ability, and go what in And address We our about, to will capabilities going impact not to promo our of others. part back because personalization the we the is talked historic just -- issues. some and around

some I there. might questions that So out of be understand those

But to I'll what to delivering tell you, committed we we do. set are out

our margin, to navigate off whatever comes way, doing we've and place. to believe our EPS in good strong are team in operating a right QX. strategies strong to growth, is the that got X.X% the start We and model and right positioned comp, uniquely we

So that's how I level. question? it Scott, color about But macro of at specifically Michael's any feel kind a about

Scott Settersten

just mix, No, slightly that, add temporary I headwinds. again, richer promotional and shrink would

of those ready very to to things. are and We be able able kinds react to

XX% we we're So, have that the very Dave's this again, point, and with to range is business, to right have toolbox to optimize really is the the accretive future. XX% we getting that levers still the that's part confident be margin digital model, the of things to like in. store business our UB ground long-term just Media, kind of of Store, a off the Project

large All for underway these long over we have a stakeholders going meaningful right benefits other now time. provide strategic initiatives period are our to of

our in confident very So outlook.

Michael Lasser

Thank very and you good much luck.

Dave Kimbell

Michael. Thanks

Operator

you. Thank

question with Anderson Susan is proceed your next from Our Please question. with Canaccord.

Susan Anderson

the I you then in Hi. that where from response rest and basket? the the and terms to that's how talk store? Good relative wellness their to do pretty you question. going trending also, a longer evening. term? of adding if could about for wondering health see consumer taking good of the been my business Are was Thanks seeing that Thanks. And you

Dave Kimbell

before idea wellness this and important is -- as shop glad I'd an talk wellness assortment connection I'm and I there, has little this I you a we while. the asked the self-care talked the of growth I'd Yes, about start have specifically the about wellness overall for and opportunity. it beauty say

part importance So, beauty you will that and fact that wellness before, The engagement. and strong growth very is of drive more as routine of their of trend this continued a but the understand may think couple heard years an have overall more it over last is consumers coming important positive. the out we

makeup wellness driving of all so much both in just also forms but the across into designed fragrance more idea and of innovation that's one innovation. specifically in It's and wellness, for products bringing

expand We May in about We're currently to XXXX. did of be XXX doors. launch doors in this continue We'll presence. that our adding shop year to more wellness

a have We presence strong online.

well. We have XXX focus, great it's category It's SKUs experience. XXX brands, across working a and really

there's engagement pleased connection. getting Kardashian, we're by six brands and Kourtney impact Megababe, started we like a experience, and But just wellness, Lemme of pillars just we're its that segments with add, across strong really in high A engaging number that Gold level all Truly, of our also assortment. Love in Kitsch, of really

growth area good excited in for the over time, and of see we long-term. potential we're the so that that business And about

Kiley Rawlins

one have think I we for time more question, Operator, please.

Operator

Thank you.

proceed is question Morgan final Please Our Simeon with with Stanley. Gutman from your question.

Simeon Gutman

everyone. Hi,

I to think wrong it's call, Simeon is you but parts. had start question okay. the two the My

some of that's actually to is customer AUR number thinking or in driven is related the some the the about basket? the not and innovation of earlier part put point they and first items resistant reaching some whether question, of his the The the inflation,

of second, work shrink you've given across think we're seeing ramping just much other level how still accrual and about get? to to could much it Thanks. what for how it And how accrued retailers, and

Scott Settersten

I'll start Maybe with shrink.

just addressed minutes I fixed earlier, first here few in leverage just shrink offset quarter, store directional So, hiring. basically a in the cost

Simeon. topline, with that's a upward huge So trending last step couple been peer years remember, of on the again, over the

we're continue to of at on able And deliver year. to so it we not stage, be doesn't seem in through but rest XXXX, expecting to the going were would the that. trend expect this that -- we like moderation some We're

optimistic how plays gross the that about of the out rest in margin way. not So,

Dave Kimbell

member, covered just say, Yes, glad I'd about we're how thoughts yes, And good and both I it's seeing of to to end there our Simeon, point, some book on I spend Q&A units. think Simeon, that. by we per mean, so the AUR, the we're do the

business, a we're pressures we a our on read hard high indicators I our also mean, know to there's beauty. on there's how lot see there, still We engagement consumer of in is of navigating. but a out positive working and level get

Beauty continue in when we delivering great our points engaged across engagement drive them know and make because aspects, is get touch we of Ulta we're that, guest our core business, to newness, innovation, now focus do all to that all experience respond. our so a sure they great And to

So, category continue appropriately. are and leading out that calls the we're we that carefully. make We'll tracking sure report to earnings all future in

Dave Kimbell

distribution say me centers again, know the all of strong and continue to offices, I'd will So, evolve. our stores, our -- like Beauty environment by, we're We Ulta just thanking another across our with close for stakeholders. let our delivering to that, associates quarter corporate office

continue said, very quarter. -- the strategies, to But we look foundation in build we as committed and first I've that our confident to remain the forward team our in to and build we are set growth long-term here we as

all So, report and second we again XX. weekend to we'll look Day for I Thanks. quarter, we soon. a all hope the talk forward you speaking results to to you again Memorial August has when nice everybody

Operator

Thank you. This concludes today's teleconference.

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

Ulta Beauty (ULTA) 25 May 232023 Q1 Earnings call transcript