Ulta pulls a blowout performance in latest numbers

By Bethel Habte

In line with expectations, Ulta Salon, Cosmetics & Fragrance Inc. posted strong fourth quarter and annual earnings Thursday afternoon.  The stock popped.

Ulta made $87.26 million in the fourth quarter, compared with $70.68 million in the year earlier quarter. The company’s earnings per diluted share widened to $1.35 from $1.09.

The results outperformed the consensus estimate of $1.27 per diluted share.

The company broke the $1 billion mark in revenues in the fourth quarter with $1.05 billion, a 20.7 percent increase from $868.08 million in the year-earlier quarter.

The market reacted positively to Ulta’s 5 p.m. announcement, boosting the stock some 6 percent in after-hours trading and reaching its 52-week high Friday at $156. The stock’s price-to-earnings ratio is a robust 40.51 compared to the S&P 500’s 20.50.

Chief Executive Officer Mary Dillon attributed the company’s performance to increased e-commerce, as it introduces more prestige brands online that were once available only in-store. She also pointed to solid growth in the in-store salon business and a successful holiday marketing push, although she admitted slower fulfillment times stifled their potential earnings.

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“In December we stretched our ability to deliver a consistent guest experience since our speed to fulfill orders was constrained by our supply chain capabilities during this very busy time in the year,” Dillon said in a conference call.

She said that a new distribution center in Greenwood, Ind.,  scheduled to commence operations in the third quarter, will serve to mitigate slowdowns.

“Throughout our organization, planning and ensuring the successful execution of our supply chain transformation is a top priority,” she said.

Dillon said the company increased the focus on Ulta as a “great gifting location” and a one-stop shop for all beauty needs.

Cowen and Co. analyst Oliver Chen said in a note to clients that Ulta’s all-in-one approach across both “prestige” and “mass” brands has been a major advantage for the company.

“From a bigger picture perspective we believe the ULTA concept works because the retailer addresses that women want a shopping experience that reflects the way that her beauty bag looks e.g. multiple brands, multiple price points,” he stated.

The company experienced a slight decrease in gross profit to 33.4 percent from 33.8 percent in the year-earlier quarter due to increased costs associated with its ULTAmate Rewards loyalty program, which has 15 million active members.

Ulta opened 10 stores in the fourth quarter and closed one, ending the quarter with a total of 774 stores.

In 2015, Dillon said, the company is on track to open 100 more stores.

In the full year 2014, Ulta earned $257.14 million or $3.98 per diluted share, on revenues of $3.24 billion, compared with $202.85 million, or $3.15 per diluted share, on revenues of $2.67 billion in 2013.

Looking ahead to the first quarter, management expects between $833 million and $847 million in net sales, up from $714 million a year ago,  and between 88 cents and 93 cents earnings per diluted share, compared with 77 cents in the first quarter of 2014.

Dillon also announced that Chief Merchandising Officer Janet Taake will be retiring after six years with the Bolingbrook, Ill.-based company.

<div id=”featurecaption”>Photo at top: Ulta’s location on State Street in downtown Chicago is one of 774 stores. The company plans to open 100 more in 2015.</div>