Ulta Salon, Cosmetics & Fragrance Inc.
) posted fourth quarter 2011 earnings of 73 cents per share, which
surpassed the Zacks Consensus Estimate of 68 cents. Quarterly
earnings shot up 49.0% from the year-ago quarter earnings of 49
cents per share and also beat management's guided range of 67 cents
to 68 cents. In full-fiscal 2011, reported earnings were $1.90 per
share versus $1.16 in 2010.
The better-than-expected results were due to double-digit growth
in the top line resulting from strong holiday sales.
The salon operator reported net sales of $582.5 million in the
fourth quarter, up 23% year over year and were well above
management's projected range of $574 million-$579 million. In
full-fiscal 2011, net sales increased 22.1% to $1,776.2
Comparable store sales in the quarter escalated 11.5% from 10.4%
reported in the prior-year quarter due to higher traffic. During
the quarter, management succeeded in driving traffic based on
leverage in value offerings, marketing initiatives, introduction of
new brands and customer service and expects the same trend to
continue going forward. The beauty retailer also benefited from
continued demand across all its categories and unit expansion.
Gross margin expanded 100 basis points (bps) year over year to
34.1% in the fourth quarter, mainly attributable to cost reductions
through improved supply chain and marketing leverage.
Selling, general and administrative expenses, as a percentage of
sales, slipped 110 bps to 21.3% during the quarter.
In the reported quarter, operating income surged 49.5% year over
year to $73.2 million, while the operating margin grew 230 bps to
Ulta ended 2012 with cash and cash equivalents of $253.7 million
and had no debt on its balance sheet.
Merchandise inventories at the end of the quarter stood at
$244.6 million compared with $218.5 million at the end of the
previous quarter. The increase was mainly due to the addition of 60
new stores since July 31, 2010. However, average inventory per
store dropped 3.0% year over year on the back of better inventory
The company also announced a special cash dividend of $1.00 per
Ulta opened 7 new stores in the quarter, thus bringing the total
number of stores to 449.
The company will continue to focus on store expansion and hence,
plans to open 100 stores in 2012. In the first quarter of 2012, the
company expects to open 13 new stores.
In the first quarter of 2012, Ulta expects earnings per share
between 46 cents and 48 cents, a significant growth from 37 cents
in the year-earlier quarter, aided by Ulta's sound marketing,
merchandising and stores expansion strategies.
Net sales are estimated in the range of $452 million to $460
million based on a comparable store sales growth of 6% to 8%.
In 2012, the company expects to achieve comparable store sales
growth at or slightly above the high end of its long term goal of
3% to 5% and net income growth towards the high end of it's long
term target of 25% - 30%.
The company reported better-than-expected results and will
continue to introduce exciting merchandising and marketing programs
to attract customers in 2012. Hence, we expect an upward movement
in estimates in the coming days. The Zacks Consensus Estimates for
2012 and 2013 are pegged at $2.33 and $3.00 per share,
Ulta has a Zacks #1 Rank, implying a short-term Strong Buy
rating on the stock. Our long-term recommendation for the stock
Meanwhile, one of Ulta's competitors,
) reported second quarter 2012 adjusted earnings of 32 cents per
share, way ahead of the Zacks Consensus Estimate of 8 cents and the
year-ago quarter earnings of 25 cents.
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