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Comp growth and e-commerce fuel Ulta expansion

On the heels of record growth in 2013, Ulta Beauty plans to open 100 new stores this year and increase funding for e-commerce and loyalty initiatives.

Ulta is one of the, if not the, hottest concepts in retail right now, generating a 9.2% fourth quarter same store sales increase on top of a prior year increase of 8.6%. Total sales for the period ended Feb. 1, increased 14.4% to $868 million and if an extra week in the prior year reporting period is excluded from the calculation sales grew 23.3%. Full year sales increased 20.3% to nearly $2.7 billion, even when the extra week the prior year is included.

“Ulta Beauty achieved excellent top line growth in the fourth quarter,” said Ulta CEO Mary Dillon. “We delivered earnings growth consistent with our expectations and made significant progress with our key growth strategies.”

In addition to last year’s square footage growth which included 127 new stores, Dillon said the retailer added 25 significant new brands, grew its loyalty program to 13 million members and achieved rapid growth in e-commerce thanks to platform enhancements and fulfillment capabilities. E-commerce comparable sales grew 82.5% and added 260 basis points to the company’s 9.2% fourth quarter comp increase. For the year, e-commerce sales grew 76.6% and added 180 basis points to the company’s 7.9% full year comp increase.

The rapid growth of the e-commerce business could help explain why Ulta is slightly moderating its pace of growth this year to 100 new stores which is more in line with the 102 units added in 2012. This year’s expansion figure is still a significant number, however, considering it is coming on a base of 675 locations the company contends can still double over time.

Although Ulta plans to open fewer new stores this year, the company is increasing its capital expenditure budget to $265 million from $226 million last year, suggesting non-brick and mortar uses will see increased funding.

“From a position of strength, we are making important investments to support the long-term growth and success of Ulta Beauty,” Dillon said. “We are building the right supply chain and systems to support 1,200 stores and a much larger e-commerce business, we are developing our customer loyalty programs and CRM capabilities, we are investing in brand awareness to drive new customer acquisition, and we are working to deliver a differentiated customer experience. All of these initiatives are designed to drive sustainable growth and create shareholder value.”

From a profit standpoint, Ulta reported net income of $70.7 million for the fourth quarter, a 9.5% increase from the prior year period which included an extra week. Earnings per share increased 9% to $1.09, but grew by 14.7% if the extra week from prior year period is excluded.

Looking forward, Ulta said it expects first quarter comps to range between 5% and 7% and full year cops to range from 4% to 6%.