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Ulta Salon, Cosmetics & Fragrance (ULTA)
Q4 2012 Earnings Call
March 14, 2013 5:00 pm ET
Laurel Lefebvre - Vice President of Investor Relations
Dennis K. Eck - Chairman, Interim Chief Executive Officer and Chairman of Compensation Committee
Scott M. Settersten - Chief Financial Officer and Assistant Secretary
Alex J. Lelli - Senior Vice President of Growth & Development
Janet Taake - Senior Vice President of Merchandising
Jeffrey Severts - Senior Vice President of Marketing
Daniel Hofkin - William Blair & Company L.L.C., Research Division
Neely J.N. Tamminga - Piper Jaffray Companies, Research Division
Brian J. Tunick - JP Morgan Chase & Co, Research Division
Matthew J. Fassler - Goldman Sachs Group Inc., Research Division
Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division
Simeon Gutman - Crédit Suisse AG, Research Division
Gary Balter - Crédit Suisse AG, Research Division
Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division
Irwin Bernard Boruchow - JP Morgan Chase & Co, Research Division
Joseph Altobello - Oppenheimer & Co. Inc., Research Division
Previous Statements by ULTA
» Ulta Salon, Cosmetics & Fragrance's CEO Discusses Q3 2012 Results - Earnings Call Transcript
» Ulta Salon, Cosmetics & Fragrance's CEO Discusses F2Q 2012 Results - Earnings Call Transcript
» Ulta Salon, Cosmetics & Fragrance's CEO Discusses Q1 2012 Results - Earnings Call Transcript
Thank you. Good afternoon, and thank you for joining us for Ulta's Fourth Quarter 2012 Conference Call. Hosting our call are Dennis Eck, interim Chief Executive Officer; and Scott Settersten, Chief Financial Officer. Also joining us are: Alex Lelli, Senior Vice President, Growth and Development; Janet Taake, Senior Vice President, Merchandising; and Jeff Severts, Senior Vice President, Marketing.
Before we begin, I'd like to remind you of the company's safe harbor language. The statements contained in this conference call which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC. We may make reference during the call to the metric free cash flow, a non-GAAP financial measure defined as cash provided by operating activities minus purchases of property and equipment. With that, I'll turn the call over to Dennis.
Dennis K. Eck
Thank you, Laurel. Good afternoon, everyone. I'm very pleased to have several members of our senior management here. Ulta has a strong and tenured leadership team. Scott, Alex, Janet and Jeff are among the key leaders driving Ulta's business forward.
We will take you through the fourth quarter numbers. Ulta drove terrific results in the fourth quarter, wrapping up another year of sales and earnings growth. We will share our expectations for continued excellent performance in 2013.
For those of you who are not familiar with my background, I have been the Non-Executive Chairman of the Board of Ulta for the past 10 years. I've worked closely with the management team over the last decade. I'm honored to take on the role of interim CEO. Our primary focus is to maintain a high-quality business at Ulta. I will be working with other members of the Board to find the right CEO to lead Ulta in the years ahead. The search is underway. We are working with Herbert Mines and Associates, a top executive search firm, to identify the best possible candidate to lead this company.
You saw our announcement about Scott Settersten's appointment to the CFO role today. I'd like to congratulate him on his well-deserved promotion. With that, I'll turn it over to Scott.
Scott M. Settersten
Thank you, Dennis. As you've seen in the results we announced this afternoon, the Ulta team delivered another very strong quarter and year. Ulta remains a compelling growth story, which continues to build upon our successful 5-point growth strategy.
To recap, the Q4 headlines. We grew the top line 30%, including the benefit of an extra week in the quarter. Comparable-store sales were 8% on top of 11.5% in Q4 of 2011. We were pleased with our sales in January, which benefited from our planned inventory investment. This allowed us to reduce stockouts and to come out of the holiday season in a healthy and stocked position, while ending the year with inventory levels more in line with the rest of the year. We increased operating margin 110 basis points from 12.6% in Q4 of last year to 13.7% this year. Earnings grew at 37% to $1 per share. These excellent results wrapped up a strong year in which we grew sales 25%, drove an 8.8% comp and delivered 41% earnings-per-share growth for the full year.
I'll go through the financial statements in more detail and talk to you about our plans for this year in a moment. But first, I'd like to ask the team to provide some updates on our progress with Ulta's 5-point multiyear growth strategy. One, accelerating store growth. Two, introducing new products, services and brands. Three, enhancing our loyalty program. Four, broadening our marketing reach. And five, increasing our digital focus, including ulta.com. First, I'd like to introduce Alex Lelli, our Senior Vice President of Growth and Development, to talk about our store growth. Alex has more than 30 years' experience in real estate development for big-box retail, and has been with Ulta since 2005. His team is responsible for real estate analytics, site selection and all the elements of getting leases signed and fixtures, stores, fixture and open. Over the course of the last 8 years, Alex and his team have quadrupled our store count, and the quality of the real estate and the new store productivity speak for themselves. Alex?
Alex J. Lelli
Thanks, Scott. Good afternoon, everyone. Ulta is a compelling store expansion story. And my team has the expertise, creativity and proven track record to deliver 15% to 20% annual square footage growth as we build out our 1,200-store plan. 2012 was an outstanding year for us, and here's why. We increased square footage by 23%, opened 102 new stores, relocated 3 and remodeled 21 stores. That is a significant increase in activity compared to 2011. Focusing just on the fourth quarter, we opened 13 new stores and ended the year with 550 stores in 45 states. We continue to be very pleased with new store productivity, driven by high-quality sites, a growing awareness of the Ulta brand and strong grand opening promotions.