Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the thirteen-week period (“Third Quarter”) and thirty-nine-week period (“First Nine Months”) ended October 31, 2020 compared to the same periods ended November 2, 2019. During the third quarter of fiscal 2020, the Company recorded long-lived asset impairment and restructuring related costs, primarily related to the suspension of our Canadian expansion, which reduced reported net income by $17.7 million or $0.32 per diluted share. A reconciliation of non-GAAP financial measures to the respective GAAP measures is included in this release.
“Today, we reported financial results that exceeded our expectations as we continue to navigate a year of uncertainties with agility and strength,” said Mary Dillon, chief executive officer. “I am proud of how well our teams are responding and leading throughout this difficult period, and I want to thank all of our Ulta Beauty associates for their continued commitment to serving our guests and taking care of each other during this unprecedented time.”
“We know guests are changing how they shop beauty, but importantly, their engagement with the category remains strong,” continued Dillon. “As a well-loved brand curating all things beauty, all in one place, we take great pride in our responsibility to lead the industry and redefine beauty experiences for guests, inclusive of safety measures. As the prevalence of COVID-19 increases across the country, we will continue to monitor closely and adjust operations as needed to ensure the safe delivery of beauty essentials.”
For the Third Quarter of Fiscal 2020
*Net sales decreased 7.8% to $1.6 billion compared to $1.7 billion in the third quarter of fiscal 2019 due to the impact of COVID-19.
*Comparable sales (sales for stores open at least 14 months, including stores temporarily closed due to COVID-19, and e-commerce sales) decreased 8.9% compared to an increase of 3.2% in the third quarter of fiscal 2019. In the third quarter of fiscal 2020, transactions declined 15.4% and average ticket increased 7.6%.
*Gross profit decreased 12.5% to $545.5 million compared to $623.4 million in the third quarter of fiscal 2019. As a percentage of net sales, gross profit decreased to 35.1% compared to 37.1% in the third quarter of fiscal 2019, primarily due to deleverage of fixed costs due to lower sales and channel mix shifts. These pressures were partially offset by higher merchandise margins primarily due to lower promotional activity.
*SG&A expenses decreased 7.3% to $416.4 million compared to $449.2 million in the third quarter of fiscal 2019. Lower store payroll and benefits, store expenses, and marketing expenses were partially offset by higher corporate overhead expenses and personal protective equipment (PPE) and COVID-related expenses. As a percentage of net sales, SG&A expenses increased to 26.8% compared to 26.7% in the third quarter of fiscal 2019, due to lower sales resulting from the impact of COVID-19.
*Impairment, restructuring and other costs of $23.6 million includes $15.9 million related to the suspension of the planned expansion to Canada, $5.7 million due to employee severance, and $2.0 million lease termination costs related to the permanent closure of 19 stores.
*Pre-opening expenses decreased to $4.2 million compared to $6.5 million in the third quarter of fiscal 2019. Real estate activity in the third quarter of fiscal 2020 included 17 new stores and two relocations compared to 31 new stores, three remodels, and two relocations in the third quarter of fiscal 2019.
*Operating income decreased to $101.3 million, or 6.5% of net sales, compared to $167.8 million, or 10.0% of net sales, in the third quarter of fiscal 2019. Adjusted operating income was $124.9 million, or 8.0% of net sales.
*Tax rate increased to 25.1% compared to 23.1% in the third quarter of fiscal 2019. The higher effective tax rate is primarily due to less investment tax credits received.
*Net income was $74.8 million compared to $129.7 million in the third quarter of fiscal 2019. Adjusted net income was $92.5 million compared to $128.6 million in the third quarter of fiscal 2019.
*Diluted earnings per share was $1.32 compared to $2.25 in the third quarter of fiscal 2019. Adjusted diluted earnings per share was $1.64 compared to $2.23 in the third quarter of fiscal 2019.
For the First Nine Months of Fiscal 2020
*Net sales decreased 22.4% to $4.0 billion compared to $5.1 billion in first nine months of fiscal 2019 due to the impact of COVID-19.
*Comparable sales decreased 23.8% compared to an increase of 5.4% in the first nine months of fiscal 2019. During the first nine months of fiscal 2020, transactions declined 30.1% and average ticket increased 9.0%.
*Gross profit decreased to $1.2 billion compared to $1.9 billion in the first nine months of fiscal 2019. As a percentage of net sales, gross profit decreased to 29.8% compared to 36.8% in the first nine months of fiscal 2019, primarily due to deleverage of fixed costs due to lower sales, channel mix shifts, and deleverage of salon expenses due to lower sales. These pressures were partially offset by lower promotional activity.
*SG&A expenses decreased to $1.1 billion compared to $1.2 billion in the first nine months of fiscal 2019. As a percentage of net sales, SG&A expenses increased to 27.1% compared to 24.5% in the first nine months of fiscal 2019, primarily due to higher expenses related to strategic growth investments made in fiscal 2019, PPE and COVID-related expenses, and the deleverage of store expenses due to lower sales resulting from the impact of COVID-19, partially offset by leverage related to the store payroll and benefits, including the employee retention credits made available under the CARES Act.
*Impairment, restructuring and other costs of $83.9 million includes $40.4 million due to the impairment of tangible long-lived assets and operating lease assets associated with certain retail stores, $21.9 million related to the permanent closure of 19 stores, $15.9 million related to the suspension of the planned expansion to Canada, and $5.7 million due to employee severance.
*Pre-opening expenses decreased to $12.8 million compared to $15.7 million in the first nine months of fiscal 2019. Real estate activity in the first nine months of fiscal 2020 included 28 new stores and three relocations compared to 73 new stores, 12 remodels, and six relocations in first nine months of 2019.
*Operating income decreased to $12.5 million, or 0.3% of net sales, compared to $613.3 million, or 12.0% of net sales, in the first nine months of fiscal 2019. Adjusted operating income was $97.9 million, or 2.5% of net sales.
*Tax rate increased to 40.3% compared to 21.8% in fiscal 2019. The higher effective tax rate is primarily due to a near break-even pre-tax operating income in fiscal 2020, less investment tax credits received, and tax expense from the income tax accounting for share-based compensation compared to a benefit in fiscal 2019.
*Net income was $4.3 million compared to $483.2 million in the first nine months of fiscal 2019. Adjusted net income was $68.8 million compared to $469.0 million in the first nine months of fiscal 2019.
*Diluted earnings per share was $0.08 compared to $8.27 in the first nine months of fiscal 2019. Adjusted diluted earnings per share was $1.22 compared to $8.03 in the first nine months of fiscal 2019.
details at: http://ir.ultabeauty.com/news-releases/news-release-details/2020/Ulta-Beauty-Announces-Third-Quarter-Fiscal-2020-Results/default.aspx