ULTA - Earnings call transcript Q2 2024

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Operator

Good afternoon, and welcome to Ulta Beauty's conference call to discuss results for the second quarter of fiscal 2023. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kiley Rawlins, Vice President of Investor Relations. Ms. Rawlins, you may proceed.

Kiley Rawlins

Thanks, Paul. thank Beauty's joining Quarter Results XXXX. and discussion for of everyone, Ulta of for afternoon, you us for a Fiscal Good the Second our Executive Kimbell, Chief Hosting Officer. are Scott Financial and Settersten, Chief today call Officer; Dave us Kecia session. the will Q&A for Steelman, Officer, Chief Operating join

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

We to update should our and by to as from revise have afternoon prepared no except do remarks law, you us expect with not Dave obligation begin forward-looking required this and Scott. statements so. We'll or

IR call for call. Following up comments, open always, be questions. [Operator any will the we'll As Instructions] the follow-up our questions the team available for after

I'll the to call Dave. over Dave? Now turn

David Kimbell

addition results, operational executed $X.XX expenses per and Beauty SG&A our X%. delivered to performance $X.X and again billion, strong to EPS was Thank diluted priorities. you, comparable with XX.X% better Kiley, Beauty. increased Operating gross XX.X% to profit and In financial against good sales afternoon. increased profit X.X% our great We delivering team Ulta The this appreciate sales increased sales teams your than and interest Ulta in sales, share. planned. Net quarter of all

by across I our appreciation execute for operational results great with deliver initiatives. Through brand our continued sincere of categories, my first ambitious sales against XXXX. while our collaboratively and are growth important & our of the half, internal loyalty skin members, -- broader, across Jumbo of to X-week Big program like and consolidated hair popular I commitment major key transformational Mix care the more During Minis growth on the and category, strong summer Summer and channels, including newness a double-digit event events, events growth. drove into quarter, the care, Sale Love with disruption, driven we supported across our and cohesive sales member financial remain sales engagement the within strong engagement last messaging. holistic updated multiyear can Summer Big strengthened all and promotional all promotional performance drove fiscal for delivered year's Beauty Beauty guidance store for Sale. Building by discussion transformation strong want we our expectations, overall increased and agenda. Starting number traffic results, we with cross-category execution achieved we Ulta of express the quarter, comp their to working long events, and delivering milestones digital market ahead our Beauty conversion The guest both major our reimagined storytelling beauty associates makeup successful to innovation categories. All experiences to our saw solid and Match categories our product compelling our impactful confident

we be to of growth X even Turning strongest unprecedented Skin during the by category. to lap pandemic. as our performance categories, care continues

skin For growth. Prestige the care mass and quarter, delivered double-digit both

CeraVe and brands double-digit Drunk comp engagement. continues La wardrobing continue to fragrance like well, Newer scents especially and quarter. Good Roche-Posay interest a Supergoop! The to Layering category Bubble, of consumers, bath from to as the in innovation like Slices social sales Elephant Ordinary, existing perform brands, dermatologist including brands BIOMA from again continued and benefit strong and and consumer Molecules, Peach brands, results. delivered to drive and and contributed form Beautycounter Reflecting Z Hero Cosmetics category among virality. The this self-expression, and Gen growth recommended

continue well care and key and on contributed Father's guest Ariana gift-giving Trend-relevant by strategic from Carolina consumer category engagement. solutions with repair to IGK category's Burberry products Mother's Grande, from growth and and treatments prestige heat Redken, as growth events. brands brands, styling performance, comp as Day scalp Herrera, as and focused like offer and and YSL. The Biolage as the events Newness brands, Day luxury mid-single-digit for and Valentino strongly. products resonated newness other [indiscernible] professional options delivered hair newness Hair Chanel to healthy care engagement that from Matrix well like bonding, drive our drove driven

New brands, Donna's also by Jennifer exclusive this contributed Recipe Anderson, growth to including LolaVie, created brands quarter. and

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in delivered by cosmetics. performance low makeup comp mass growth, driven single-digit strong Finally,

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the launch makeup benefited our business prestige the social we challenged from of performance year. impact mass last engaging lapped cosmetics as newness the content, significant While of was in Fenty

and this Guests color primarily cut, by Our are services treatments. comp as in engaging quarter, double-digit increased hair scalp growth well core as including driven services, newer blowout again services and appointments. and business delivered extensions

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now excellence and drive operational Turning our to to efforts optimization.

We transformation initiatives and map multiyear road capabilities our efficiencies intended of unlock are ambitious to executing growth. an fuel to future new

several am we key supply resource our share enhancing a planning to have and systems. I chain, systems and pleased our discussed store that our on platform, milestones. expanding data previous As digital management we our teams are transitioning upgrading upgrading enterprise calls, new our delivered POS to optimizing store have platform,

shipping inventory last of a We and and our store successfully distribution stores productivity. expanded ERP retrieval week. next storage more to center, greater in We distribution additional new cost-effective guest. Jacksonville system XXX we start We X automated from Our which new to Carolina enabling transitioned an completed we and receiving our centers, fulfill stores. orders capacity stores, and to market month, new Greer, delivery Greer, expect e-commerce the began center ship strategically-located increase faster, capabilities XXX installation will to to Today, enable fulfillment Greenwood the platform. our from South

account, platform completed in As we in this and transformation, growth promotion of experience way new critical e-commerce our checkout. new our milestone in large-scale end-to-end store a that platform part elevate effort migrated digital channel. us engine, This significant includes guest our of cart is that to upgrade positions a multiyear our to a digital modernized and successfully a for long-term a

the Finally, stores. completed all POS we upgrade in

While and disruption our I made we finished, limiting how our to execute transformation am proud guests our and while significant of have agenda progress, worked to is have plans associates. teams not

forward, continue Looking to dynamic environment. we operate in a

the to student has forward. reduce has moderating the to will approaching. are there how and signs It a is in is card have overall remains of pointing but these restart Many impact confidence despite near strengthened, beauty debt consumer factors begun remained consumer repayments While behavior consumers bright spending, these spot. unclear term, credit growth high going loan factors,

Based the increased on growth beauty period total channels last sales double beauty half beauty for of year, XXXX U.S. Circana mass digits compared sales to prestige higher beauty than data, the same first with channels. delivering

of mid-single year, remain experienced the as but uncertainty. more Looking pricing believe we for the face to strong economic beauty from of U.S. years less rest the digits lap growth market healthy will normalize growth, impact the X into and we

normalizes, growth normalize. within continue activity also category to category expect the we As promotional will

growth years, activity. Over limited promotional unprecedented the X category last strong and demand

growing remain but low. a category. planned promotional will well below the Reflecting environment and we we in operate promotions As levels. In this was attractive in and factors, result, unsustainably these XXXX XXXX for promotional XXXX higher an year to activity closing, expect continue

strong, winning XXXX, have the Scott? the half we and we financial now, of a teams. we and the a outstanding call to first proven for our updated year. And turn discussion confident of I have We our expectations deliver fiscal a over will expectations, of for culture rest internal Scott business results. Through financial the exceeded can and the remain model

Scott Settersten

everyone. Thanks, good afternoon, Dave, and

sales our healthy drove XX.X%. shared, growth was performance engagement spend that margin. ahead Dave in operating strong gross financial guest in-store and sales results resulting also supported an planned, of were Strong second we lower of As SG&A expectations. delivered margin than quarter by better-than-expected

We increase average units points contributed last the quarter increases, in and the was increases estimate to ticket XX.X%, increased store overall than basis comp sales year. primarily, both impact executed on in for in X%, retail Net X% traffic price higher increased the performance revenues. by Turning as The primarily in per selling to Transactions by offset solid average X% by the growth were the strong sales, of driven the other transaction channels. healthy of price impact many more decreased the driven driven Average P&L. comp. which average for new about selling price. XXX quarter of growth decline price

During the relocated new stores. we quarter, X stores and X opened

we remodeled X stores. In addition,

to The merchandise margin of margin, year. Second points costs. supply to quarter XXX an last by mix compared inventory higher decrease timing promotional increase category unfavorable retail margin basis changes. XX.X% was in lower less price Overall activity, gross shrink from and was decreased merchandise chain the to driven lower primarily due XX.X% increased benefit and

it headwind a normalize, activity to important that continued levels. Inventory well note be quarter. to continues overall promotional XXXX to this While promotions is shrink remain below

the remains costs strong last due to including staffing in points XX operational fixtures, year. an revenue year-end. $XXX.X in the our pressures primarily prepared more to by South changes gross but were have investments and action million. in have of planned improvements, overhead Carolina. taking new address store sales more was growth. SG&A payroll to of lower expenses, Corporate of as higher in XX% in The and behavior. Supply deleverage higher, by SG&A in Greer, distribution Dallas incremental staffing incentive store of increases to and environment the investments, overall wage XX.X% benefits and and leverage XX.X% by to than areas will to offset corporate supply stores We strategic spend our in expense increase driven in market sales deleveraged year. benefits store in and due period the last and The offset in overhead compared was compensation. by basis was priorities, compared planned percentage partially a fulfillment increased capabilities of retrofit chain These margin our growth top fixtures to SOAR, we to of same chain other our in as we second support which little Today, having quarter, XX% progress other of half and growth XX.X% planned the IT quarter investments primarily center primarily than focused Project UB our including $XX of fixed our to our impact store ongoing transformation million in increased SG&A in we installed driven continued the to due rates related are open on to increase as these through levels less impact, to have $XX and invested average centers as the increased to efforts strategic than to initiatives. Greenwood due made disincentivize targets strategic compensation Incentive payroll million, broader the million costs can of expect Media. Year-to-date that on Our to $XXX.X our was internal we remain fleet a reflecting control, fragrance tailwind influence year. operational our outperformance. Operating to line training, challenging. the investment the flat unlawful new more income significant last quarter, associate that for to quarter enact were with in and leveraging is performance last shrink well year's compared a line

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

to compared in brand $X.XX XX balance new addition Total and additional luxury last and increase launches. Capital expenditures the as The the the year, in in We transformational higher and inventory ended inventory merchandising demand, to million reflects quarter to increase expenditures $XX.X compared IT of billion were $XX.X to million to investments compared to agenda with chain million product $XXX.X and in related cash quarter increased primarily sheet rollout brand X% support the statement. quarter billion as year. $XX our in $XX.X cash the was last to year. Turning million $X.XX impact for support increases equivalents. million our to support assortment of costs capital to well the and in the to was expansions. Depreciation stores, flow last investments cash supply

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

Moving to our outlook.

XXXX guidance second quarter our updating for better-than-expected our are We fiscal performance. reflect to

have with and sales between now X.X% $XX.XX We growth expectations billion, $XX.XX top X.X%. raised and our net line comp and million will project be sales between

second while levels of Our updated our impact year, first consumer that to resumption and and the could rising expected the debt in outlook performance of half consider including half strong student uncertainties continuing loan reflects demand repayments. the risks

the remain second be continue year-to-date to year. Reflecting gross and fairly the operating to sales, new we of will the come year, renovate low XX performance, stores we've and margins open our raised or half operating XX XX and XX this relocate expect in We margin of from XX.X% the to expect the track SG&A. the stores moderate year low will to now margin comps to of of single on and to end evenly for and XX.X% with range between deleverage both digits

from Our promotional expectations the greater reflect merchandise supply shrink, the trends as price as margin around through we year. continuation the year the costs of headwind of from of half the first chain activity benefits last retail increases timing experienced well lapping the and

expect year a pricing to modeling shift as QX saw lap purposes, we operating be third meaningfully we in of well the investment For more third in quarter QX. than quarter last as benefits margin what as second pressured from greater will spending the quarter we

share per will we updated these As third earnings be expect the diluted per the year. Reflecting and now a year between quarter share lower assumptions, last be for result, we than earnings $XX.XX. $XX.XX will for expect

months of power and reminder, our the all at and XXXX for them to and a thank through associates fiscal million like of model. I'd sales As closing, $X.XX our add of center shop $XXX to in $XXX keeping reasons earnings share. our per year. do more the their dedication resilience we fiscal X highlights our of business to between We giving guests Beauty. to the the and ongoing a commitment Ulta will In approximately XX-week anticipate XXXX first results week is million additional

on to in future, we to capitalizing are Q&A long-term category I'll back framework growth our call the operator to moderate executing turn the now, for opportunities deliver sustainable the beauty our focused and to the look our on strategic session. growth all the stakeholders. And we As over

Operator

[Operator first from Helgans is Instructions] Ashley with Our question Jefferies.

Ashley Helgans

To traffic locked the then also what how details effects on you're in you on now quarter the progressed have on any maybe can being you up, seen and fragrances And any start, throughout seeing share August? adverse sales?

David Kimbell

Yes.

for seeing, throughout through saw quarter, guidance updated with the those we trends as strong be traffic. pleased and the the into we're continue are quarter our saw actual engagement traffic Ashley, the we elevated of that we double-digit quarter with And to comp and full all accelerate And the performance well. year. reflected for sequentially

the how what and impacting -- in of business. fragrance, we're doing let Kecia kind our fragrance On discuss that's I'll

Kecia Steelman

Actually, available and we're in had stores out what product fragrance locked we XX% stock the the And were we is we've up because locked seeing our it we rolled cases of Yes. right we in stores saw initial for, the to the with sales about now. that improvement guests. actually

also that. in to to labor we're preventative being the be because from purchase. to close So able staying very want guests We're investing sales don't we

guests. little labor the take are earlier that a a the of in we sure in you to investment of our labor that able Scott, bit we're we want upping that's these from care to make bit heard is stores, So because that

quite and from our staying into we're that it. our frankly, actors out stores. able keep that to is ] So line the we're coming bad in-stock we're our bottom [ pleased guests, to The close for maintain

Operator

with Michael is D.A. question Davidson. next Baker from Our

Michael Baker

you're to I the I'm suppose you yet maybe single just don't just a store growth, And so below expecting you're that you grow you beauty be flesh if to grow bit? share, add if comps curious, but you're seemingly guys said out the wondering in to mid-single digits. think expecting only low industry help still even I'm up digits, expect up, industry. you can little you losing

David Kimbell

our we I'd into really yes, We've the is gain year, we e-com half done do very across well. look year. through new Certainly, commentary see both Yes, as outlook. The and anticipate But share. that and high. both stores. we some the see growing categories, members. so also is the second in strength. into the and we say, in some attracting year, half of -- be to performing continues to is key get business all the We're Engagement then uncertainty later as We're our first of continuing we

we're some the we're So the -- X% of total the some incorporating our That's X% year, so revenue that. And share growth. of being full the to will just -- our looking outlook while we're anticipate range, category, into category for full in at ahead confident for year we in plus plan. the be gaining that

Operator

next Our James. question Olivia is from Tong with Raymond

Olivia Tong Cheang

was My mass and a Fenty launch mentioned a is year breakout, around prestige growth the in strong big first still only you're because both you prestige question seeing ago contributor. in mass. versus that makeup, But in that mentioned skin mass for but of you

your And that, you on if growth your may about forward, in have implications view? exclude you on think different that mass as then anything are versus prestige, So you what seeing in there? going expectations comp,

David Kimbell

the could of question? What was the repeat -- What last that was last... part you

Olivia Tong Cheang

Yes.

-- if on if you're of terms the of of mass might growth? have thinking implication of mass versus stores? bigger growth your what what the terms prestige in across becomes that implications in comp, Just of a driver comp And piece

David Kimbell

across mass driven assortment marketing, our as engagement. able makeup, a And health, for trends real capitalize the offer brands entire great to on from business. strong but couple yes, And of NYX fact strong we and and that's Well, some innovation, engagements the full now aspects all others assortment I across great in a great are our at the we in consumer really by has consumer -- that. strong that stronger with across bit prestige market We're across is been look performance we've largely mass some of hitting a we benefit. really key quarters engagement discussed, as seen it, strong to --

skin us. In growth, we -- particularly dermatologist that's player recommended area in strong driving strong brands, great, seeing the we're for and care,

and adapt both growth, be it's As challenged, that we may the in And and our we those that ways forward, but is we're driving to to adjust the look unique. forward. going confident more areas strengthen to that continue always outlook lean have find are into the fact intent

pleased Of course you our masstige, know points seeing We'll all. it across business a and that continue flex luxury. We're guidance our that, strong but prestige drive we're to established continue driving the continue first growth, and it's mass, of fact gain ones And comp to the in incorporate the and Ulta growth. into adapt is business. prestige that offer Beauty. really to and now, allow across to ability growing, working and only to with the the we're strong into year, through several to half of Mass side innovation collectively, lean brands share bring and us the But in the performance

Operator

Our Anthony next is with question line from mute? Our is your Sachs. Kate Goldman from Kate Markets. next Chukumba Loop on is McShane question with Capital

Anthony Chukumba

solid the results. on Congrats

real one. a just quick So

You and fact, in expectations. exceeding mentioned it's luxury, your

You mentioned Pat launching Labs. McGrath

one Just in related X -- question just all it's parts.

is First is enough that in at -- And is comp be it's this off, percentage big driver? luxury to stores I what in? a luxury your it guess, of assortment, what the point --

David Kimbell

extension and with brands Uno, Viktor&Rolf. number pleased it's YSL with percentages. to DENONA, of McGrath. Yes. We're like in Pat Chanel A now business FORD Again, NATASHA luxury. Won't the break and assortment fragrance best it, in an reiterate, Chanel, XXX with Número strong a brands out luxury TOM Dior, very HOURGLASS, across really a Absolute, exact stores. Chanel Lancôme, of

and to expanded we to McGrath, presence, won't for in the is but road. a down this overall of business. now important of ways the into contributor a there's we'll and luxury growth but further with of get part know about continue We strategy. the drive excited side in luxury our We've been percentages, and addition while, So it an growth total evolve the innovate to it Pat find We're our comp. is exact

yes, response it's growth, -- luxury experience. we about So know excited we're it's our our and think to contributing expanded we an to guest

Operator

question next Christopher Our from JPMorgan. Horvers with is

Christopher Horvers

gross Layered question. margin

expectations then And the line? And know that the faced in remind year. your environment was shrink you the I shrink any expect quarter? you those expectations? promotional back third the that second significant to us pretty you quarter in in did of how we Scott, So of price your any changed in Have half? the do out could the improvement last Because relative around line cost items in perhaps play headwind

Scott Settersten

Sure, Chris.

our happy quarter, financial versus again, yes, the we able we're say, with for did were expectations very to overall deliver. we the So results versus --

a down I'd speaks say it breaking what people So on merchandise little here. are so was bit that the expected, we partially lever that more, and promotional to better margin focused than

as of our take being we of in able saw generally to real-time first again, so able generally and So quick we be the great shrink what X lean in be out. action same can than and better business, about strengths expected, what we to agile. I'd information have quarter. directionally That's the lean and say the

we're rest we look significant the the we year, and turn don't out expectations to not of really As a -- anticipating there.

that did bit the of quarter we it the overall a early shrink was year expectation stronger talked expect the less And as the maybe rest say first impact time And We called we'll tough and then we we bit mix -- store the the than going Over year it the than last then we really fourth in helped us sales what fixed of out in a about, be little quarter part quantified remember, negative there. so of than thought. was we was was, to what catch-up have be and fourth channel may because because stronger a slightly way. well. costs were fixed -- what --

we drivers, to we our as hard what prudent we'll seen do approach than of the the guidance, in taking we're margin consistent second look are half I'd with half always and the Again, gross to the a with first the we've work better say of XXXX. As think year, that. headwinds about do

Christopher Horvers

then And cost XQ? price the in

Scott Settersten

Yes.

into So the saw half is in the of significant last back we the step-up year started in across there we really, and increases benefit quarter was through year. the second portfolio, the -- and rolling margin a -- quarter the third where pricing really

now, So third this and is ahead us anniversary point right toughest the calling of out we're in that's why year the quarter. really is

back in a SG&A. is shifting little flows of IT the a bit peak And number delays got quarter fronts. every lot work, the quarter is that of of little project third third is of now, different our into some Third kind unique, quarter. a year we've some of which through our a on but of Again, expense

get So earlier expect increases to there margin pressure then the in price maybe the again, holiday, margin. up in sales year, step expect. would likewise, last by healthy gross to we with the quarter and and coupled from the of we more than with and manner. on -- But back year little saw cycling fourth benefits than we putting the a half the see we'll year, on more back growth third some in back pressure bounce the get in And a in moderate the over sales focusing quarter time expectations, that more

Operator

Our with next question from Barclays. Yih is Adrienne

Adrienne Yih-Tennant

does the perhaps about Scott, quarter. of EPS I'm $XX a third seems that not sort range? quarter. And to into million single-digit right going it the is the if SG&A moving bit topic mistaken, gross If in ballpark. with we million I'm to pressure, $XX that Just little stay could if third high like be more imply wondering spend I'm have on of margin that the down

Scott Settersten

I'd you're say want don't specifically, Adrienne. get code. directionally, zip it the We into Yes. right quantifying in to But

negative going side, some versus into down margin back that's going for quarter. operating So that's growth kind year, shift And yes, on on the and year-over-year third result what in meaningfully of IT quarter third the EPS roughly spend. this SG&A is saw to earlier to be yes, the the we the of

Adrienne Yih-Tennant

follow And the helpful. Super with SG&A. through just to then

a X rolling sort like of us How of phases? of to seems the guidance, and It we about just correct seems lot giving know then that X/X looks walk but make go I structures in you're the help mind. know not the running think and off? away want year. that it, lot some Because Because like I sure I it to call growth let's consensus. comes investments. perhaps it the there's the of should you're Project SG&A our just DCs year? of next -- last you a redundancy we down all through dual next half or of what like on the phases can other on So kind year. of of have or, will this help SOAR us sort website shape

Kecia Steelman

start, I'll then Adrienne, and I'll kick it Scott. to over

and ambitious how organization middle an really overall and our on anyone That's progress future pleased guests staying yes, large distraction this have So the part of associates. that that of the we we're happen we're definitely our in And a progressing to we're because our for sure. in working. want who's But disruption transformational parts scale is of project, is really sure also efforts, our of this our with really moving, while and timing we for are our forward, limited for positioning all agenda. we shifts and for taken make

going million of wrapped more So adopted time prior to $XX we're with our might and we've line the to a which still couple line the time on our incremental lines QX some we stay from see by is but a million $XX QX, into we're and we've right to and things while next the from track the how shifting time year. are for to still those very projects got mid-XXXX. have shifted confident into that up overall shifts, some few And year, of QX, of spend we even QX

I'll turn it Scott. over to

Scott Settersten

our XXXX a will future, be initiatives business us the initiatives prepared. growing and in we're core investors going investors benefits of so talk that -- today, see there we're about, Again, see are right. XX these caution making are not exactly we investments I yes, the that Beauty cultivate, We're guidance 'XX also and into would just of year growth out Ulta -- there's but to years you've for to long systems materialized tackle. term, that into XXXX beyond. go heard in 'XX that of here in the the number there's major to significant in plenty ready benefits got you're should and mean expect but we we're Yes, recoup for from here providing to queue dividends that great expect I for the that and other we've we

this, As of in I'd early here soon call we and transformation as XXXX. get core work more through some of 'XX

Operator

is Our from with Citi. next Kelly Crago question

Kelly Crago

categories. a ones just of quick have I couple on

decelerate? Just high how we a driven XQ that And on XH? in decelerated to makeup's singles -- a slowdown both makeup prestige? think growth by should in mid-single growing it subsequent slowdown makeup, in from to like looks about Was XQ. Did

index in overall. skin, you secondly some from And versus growth under category, the but there's that brands then category on we've just maybe of slowing heard do the that

So on maybe skin? starting we're see to curious be weaknesses offset in thoughts growth help just that the can whether there that And some or dynamic seeing great. any would

David Kimbell

coming biggest lot in and that look few Society, makeup, forward. Ulta in McGrath, with of on many coming out, Mass a is probably I fully to behind which engagement. lapping we of one Rabanne, history portfolio, have our mentioned business exclusive we second driver. say the Beauty I'd launches Fenty, year. But continue really, Pat biggest we second great launches that of main that driver are while great we're in is prestige Polite Yes. of launch. quarter the to the the innovation -- across a that into prestige. the newness drive that We're half the see -- and of that our though bringing as to others continues the lap Beauty innovation, lapping we we as are We'll pressure among growth anticipate Ulta on excited

is to going category, a and leaning we're our care somewhat healthy. again, yes, continue but across And -- to in meaningful share address we price we dermatologist we of do business have continue seeing both we position the We're and believe so even testament forward the strong really makeup and model, lapping that time we growth as a share. The pressure than drive the are of in drive strength in think, we mass some side lower to prestige, our that skin to is, have -- have share fact able the healthy ability, points. we and to into we're over recommended space, pleased continue side, total with launches. In can growth makeup, established drive previous our the growth the we

growth the leaning but said, forever, do with It's moderation. in. we're category, unlikely double-digit anticipate see skin got I beauty We've to total some great As we a business.

Our continue strong to bring innovation. merchants

guests, job a doing and are see more educating we teams of lot a store Our we're our and growth great delivering coming.

Operator

Our next McShane question Goldman from is Sachs. with Kate

Katharine McShane

the you events you talk like could Thanks strategy behind about a me ask here there lift did that combining approaches of this some last to a taken to I if change your will And wondered little question. chance as of bigger similar versus events promotional in half? promotional your being giving And any did second quarter? another bit for our you see past result the be year? a

David Kimbell

question pleased understanding as really, really, example It worked. wanted is Great. Yes, We excited. Summer we got and continually of sale strengths promotional we our events, did, we the full marketing, they the to well Sale strategy, reevaluated it store event, for can that strategy. were answer digital, can team, our entire how but as intensity you with as summer the results your the are years, queue. had unique elevate of and did huge events we're merchant delivering smarter acceleration we consumer great teams of teams, Kate, as, that. And but impact, an what to quarter, the that we was the much silence solid table, promotional bring a our insights, a behavior and of understanding I how Big evaluating and not in almost in back through our [indiscernible] what strong I the that. continued what guest teams, earlier better to go-to-market -- the get that I second glad any We're used think in We the --

stores engaged, Our healthy. business new We traffic members, e-commerce in delivered our on comp was we and strong attracted growth. saw both guests it strength

me execution. to to a So example it's continues it's great and for team how because frankly, -- didn't strategy I surprise leading strong elevate, look know to of the ways another

the second every we're go-to-market evaluating, strategy. the into our always year, look as we we aspect do, of As of half

our adapt of events efforts. the X our And evolve changes, starts competitive our to rolls engage delivering ways, continue sure think a to a of XX Days new we're program of a for in guests that while, so that's Beauty, you'll ways I We'll innovation year. around at out, going. to make been we're and and Sunday, get We biggest high continued level. as that Kate, see excited consumer insights

Operator

Oliver next with is Cowen. Our question TD from Chen

Unknown Analyst

beauty Neil consumer. [ about is This broader thoughts your Oliver. for ] here to would more love hear on on I the

a comment made closer the pricing trading particularly material? becomes Someone about to curious are consumers more time frame Or headwinds less price just when being how and get we you different that? to quantify focused how the around points, macro different exposure that loans? do mentioned, as on so of What's October that behavior kind your student that holds you against impact

David Kimbell

the continued Yes. we're last category. with pandemic of of high overall a a level these years for pleased of out showing of Well, this Coming that the all, just engagement. beauty first for enthusiasts engagement say now, couple just I'd are

now it this in been last and and it strong because the You guest know that years, more how over the how importance ever. long plays has they to true growing of growth connection is a emotional the than lives, that has term, category consistently our world, -- themselves the XX express

category. continue the to of pandemic some wellness tools an And emerge of of and that understanding the connection out strong consumer role beauty engagement innovation, coming increased tools the to Strong marketing behaviors through and and self-care. the and of fuel

confident So to look and of going this for we forward. it going outlook the at enthusiast remain beauty category strength the long-term fuel in the forward, the we when consumer

mentioned year, remainder a and of frankly, years. in -- we uncertainty, lapping. I the we're last couple has we of this the As lot look the my there's there in But for into been, know comments, of

category strong for while a to now. growth. lap continue We been this We've strong on growth

more including have loans. student changes coming, We

Not tease economic evolves. Historically, the watching the category difficult business resilient. has shift immune, business, our that itself been largely cautious and impacts we're category to resilient. how or certainly and of or stimulus carefully directly been kind how largely and So that any our out it's but and

I'd in optimistic we're adapting. we lives decisions carefully. influencing watching when we're out, our I what's sure guess their close Staying to look closely understanding making but their guests, really and happening So what's say and and

I've both this accessible well. Last said thing many times, model and price points and unique online our having say, I our positions in-store position, really but all us and I'd of know a experience,

that guests make we even history the them. says on here regardless are the pressures are and we're around if implementing that's to broader I in if of environment shifts, to sure goes consumers, there what to able our strategy even adapt, deliver So for there's on know we're

Kiley Rawlins

maybe Paul, I think one we have time more question. for

Operator

from is Guggenheim Forbes question final with Securities. Our Steven

Steven Forbes

what And levels. the in you merchandise the for the remarks margin profile clarify in statement? was to as comment? could your to Or Scott, well both XXXX longer-term we Dave, model, for sort And hoping a of XXXX? about activity prepared below in that margin means isolated just be think in structural mentioned in promotional change I to the maybe you promotions expectation Is is and it it risk way in remain meant of the any category frame itself?

Scott Settersten

Yes.

for we're a investors quite while, XXXX. has been I talking now to when with evergreen again, think, back pointing -- topic, So an this

a we business. the back some causing There those middle dealing in of been XXXX. for in than on category, deleverage There mix there. business. were some headwinds deceleration with was had that the So we investment makeup year international significant much the expansion some have that were was today following unexpected channel as the major in XXXX, in disruption business in was is that a different some it Again, position the

by the the back today so we the EFG, that to some during sure pre-pandemic fully the business, XXXX. of some the our making pandemic, optimization larger been and layered improvement have started course pandemic of now And say of we of but initiatives scale of continuous leverage that during were advantage able of than would much take initiatives in top that. I way cost was on it initiatives

above back what at sales in we being those exist so card really a back that Media, Things out a digital store from of pre-pandemic. in for meaningful our BOPIS now around Things position consumer cost business us those margin and year, of the today. did the we not over UB our us, to capabilities we're get our you starting much overall XXXX program, capabilities any really efficient serviced and like in store out of So XX% much profile just and days. the sales. far delivery the our new benefit Ulta looking way the gate overall the store more business and here to fleet, us of relationship, those course fixed that heard of again like Beauty of are puts say Target leverage ship in were than better base in credit going last better a much the were

and gross expanding that So again, all elements that's and margin the role course those time. but -- those not promotion of directly, play a in margin operating over

are seeing going outlets back kind in and in little going promotion sustainable saw been play again, they 'XX We've the term. and And business not other levels, last couple of what bit, out years that and us the and the that malls to a that in environment back moderate. promotion confident people feel talking people long as we -- was today. retail got we of back come to were that extraordinary the we're was level probably that 'XX that's how the -- So for over to

going days. capabilities our It concerning that the business, there's in I manage today that We're with our in were effective capabilities, our to that program able our of again, year. confident here. think and was mature again, we're plans an moderating loyalty navigating new unexpected should anything we're -- lines our manner, and Again, in and they So investors. that don't forecast, much nothing for overly to the new way CRM than being be way be through to through pre-pandemic more back nothing

range and we're X%. So deliver that in to able XX% X% expectation healthy to growth margins a moderate to very going operating XX% to we're of be confident,

good where we're headed the about and our feeling for position So future.

David Kimbell

report when while results for thank guests want appreciate to Beauty. by you to look I results. strong another speaking on for Ulta We interest associates our joining in Well, of third your all all us all the delivering care of for and I engagement Beauty their thanking quarter forward we for Great. of continued close quarter again Ulta our XX. November financial to you today.

good a have and again, Thanks evening.

Operator

concludes today's This conference.

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

Ulta Beauty (ULTA) 24 Aug 232024 Q2 Earnings call transcript