Ulta Outlines Ambitious Growth Plans

Ulta Beauty held an analyst and investor conference last week, simultaneously raising its financial guidance and providing an update on its long-term strategy, which includes more store and better location productivity.

For the third quarter, Ulta now expects comparable sales, including e-commerce revenues, to increase 14% to 15% versus previous guidance of 11% to 13%. The company reported a 12.8% comp increase in the third quarter a year ago. Ulta estimated that income per diluted share for the third quarter will come in at $1.35 to $1.38 versus prior guidance of $1.25 to $1.30. For the fiscal 2015 third quarter, Ulta posted income per diluted share of $1.11.

For the full year, Ulta anticipates comps of 12% to 14%, including the impact of the e-commerce business, versus previous guidance of 11% to 13%. The company expects to deliver earnings per share growth in the mid-twenties percentage range versus prior guidance of low to mid-twenties percentage range. The earnings guidance incorporates anticipated effects that its new Dallas distribution center will have on financial results as well as the rollout of prestige brand boutiques.

Ulta further confirmed its outlook for the business to deliver earnings per share growth in the low twenties percentage range for fiscal 2017, 2018 and 2019, despite growing from a much larger base than the company expected when it communicated the strategic plan in 2014. Ulta raised its view of long-term comp growth and now expects to drive 7% to 9% comparable sales gains from 2017 to 2019 compared to previous guidance of 5% to 7%.

The conference call included a discussion of Ulta plans to double its market share over the next several years through new store expansion and e-commerce. On that basis, the company anticipates becoming a billion dollar business with higher store productivity and greater share of wallet. Ulta also updated its consumer segmentation study to demonstrate a larger opportunity to target enthusiasts who represent 77% of spending in the beauty products market. The retailer provided insights about how its Ultamate Rewards loyalty program, currently representing more than 90% of company sales, can grow share of wallet with existing members, and it reviewed brand launches including Origins, Dior, Estee Lauder, Proactiv and Shiseido in the skin care and cosmetics categories, Honest Beauty hair care products and Dyson hair dryers.

Ulta updated a real estate analysis that validates incremental new store potential in the U.S. and highlights key expansion opportunities. As such, Ulta raised its outlook for store expansion to a range of 1,400 to 1,700 in the U.S. The initiative will include a new store model that should deliver higher new unit productivity and higher revenues per store at maturity, the company indicated. Ulta Beauty operates 928 retail stores across 48 states.

Mary Dillon, Ulta CEO stated, “We are confident that executing against our strategic imperatives will continue to drive excellent financial results and create sustainable, long-term shareholder value.”