Ulta Beauty grows top line 23% during Q1

Retailer bolsters in-store services, continues CEO search

BOLINGBROOK, Ill. — Ulta Beauty is off to a “good start” for 2013, company executives noted, as its net sales rose about 23% during the first quarter, and same-store sales rose 6.7%. Meanwhile, the beauty retailer continues to make progress on both its CEO search and multi-year growth plan.

Sales for the quarter ended May 4 rose about 23% to $582.7 million, compared with $474.1 million in the year-ago period. Same-store sales increased 6.7%, including the impact of e-commerce sales.

Net income rose 20.0% during the first quarter to $41.8 million, compared with $34.9 million in the year-ago period. Income per diluted share increased 20.4% to 65 cents versus 54 cents in the first quarter of fiscal 2012.

“We are pleased to announce a strong first quarter with better-than-expected sales and margin performance. The team is executing our five-point strategy very well, and our outlook for continued market share gains is excellent,” Dennis Eck, interim CEO, told analysts during a conference call to discuss results.

Eck also told analysts that the company is making “good progress” with its search for a new CEO and that, “as expected, there’s a high level of interest” in the role. The company has partnered with search firm Herbert Mines and is hoping to conclude the search in the near future.

As previously reported by Drug Store News, Chuck Rubin stepped down as president, CEO and director, in February, to become CEO at Michaels Stores, a specialty retailer of arts and crafts.

Meanwhile, the 576-store chain continues to forge ahead with its multi-year growth strategy, which includes accelerating store growth; introducing new products, brands and services; enhancing its loyalty program; broadening its marketing reach and increasing its digital focus including e-commerce.

Retailers are increasingly striving to elevate the beauty experience through in-store services, and Ulta is no exception. In fact, the company has expanded its Benefit brow waxing services, which is now in nearly 400 stores. And, after testing a new brow tinting service in the first quarter with strong results, the company is now rolling it out to the Benefit Brow Bars, said Janet Taake, SVP of merchandising.

Ulta also has fully rolled out microdermabrasion skin service in all of its stores and will begin to market the service in June. Following a test of hair extension service earlier in the year, the company launched the new service chain-wide during its “Love Your Hair” promotion in May, and is now testing in select stores eyelash services by therapists.

“We are now testing execution and broadening our service offerings, we’ve seen good growth in our guest count as well as improvements in average ticket and customer retention,” Taake told analysts. “… Whether it’s on the product or service side, we’re very excited about the pipeline of newness this year and our ability to translate current trends and a curated assortment that is compelling to our guests.”

Taake also noted that at-home beauty devices, such as the Tria hair removal device, and tools and products for healthier hair continue to be strong trends within beauty.

The company continues to expand its partnership with Clinique with eight new boutiques added during the first quarter. Ulta ended the first quarter with 51 boutiques, and plans to add more boutiques throughout the year. This fall, the company will look to add another 25 Lancôme boutiques, adding to the 80 boutiques it currently operates. By the end of the year, a significant percentage of the stores will have either a Clinique or Lancôme boutique, Taake told analysts.

For the second quarter, the company expects net sales in the range of $579 million to $589 million, compared with actual net sales of $481.7 million in the second quarter of fiscal 2012. Same-store sales for the second quarter of 2013 are expected to increase 4% to 6%.

Looking ahead to the remainder of the year, the company is on track to execute its 125 new-store plan. It expects to open 29 stores in the second quarter, 54 stores in the third quarter and 16 stores in the fourth quarter.

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