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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Under §240.14a-12

ULTA BEAUTY, INC.

(Name of Registrant as Specified In Its Charter)

Not applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

No fee required

Fee paid previously with preliminary materials.

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11


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Notice of Annual Meeting of Stockholders

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When?

Where?

Who?

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10:00 am CDT
on Wednesday,
June 1, 2022

Virtual meeting at www.virtualshareholdermeeting.com
/ULTA2022

Stockholders of Record
as of
April 4, 2022

Meeting Agenda

Proposals

   

Board
Recommendation

   

For more
information

1.

To elect Kelly E. Garcia, Michael R. MacDonald, and Gisel Ruiz as Class III Directors to hold office until the 2025 Annual Meeting of Stockholders

FOR
(all nominees)

Page 7

2.

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year 2022, ending January 28, 2023

FOR

Page 17

3.

To vote on an advisory resolution to approve the Company’s executive compensation

FOR

Page 48

We will also consider any other matters that may properly be brought before the meeting or any adjournment or postponement thereof.

Virtual Meeting

We are holding the 2022 annual meeting online, in a virtual meeting (via live webcast) format, due to an abundance of caution related to the continuing COVID-19 pandemic and the priority we place on the health and well-being of our stockholders, associates (i.e., employees), and other stakeholders. You will not be able to attend the annual meeting physically. You or your proxyholder can participate, vote, and examine our stockholder list at the annual meeting by visiting www.virtualshareholdermeeting.com/ULTA2022 and using your control number found on your proxy card. We believe that a virtual format provides improved communication and the opportunity for participation by a broader group of our stockholders, while reducing costs associated with planning, holding, and arranging logistics for an in-person meeting. In addition, hosting a virtual annual meeting reduces the environmental impact of our annual meeting.


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Voting

Stockholders of Ulta Beauty as of the record date are entitled to vote, as follows:

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Internet

Telephone

Mail

www.proxyvote.com
for beneficial ownership

1-800-690-6903
for beneficial ownership

Mark, sign and date your proxy card and return it in the pre-addressed postage paid envelope we have provided or return it to:

www.proxyvote.com
for registered ownership up until
11:59 pm CDT, on May 31, 2022

or
1-800-690-6903
for registered ownership up until
11:59 pm CDT, on May 31, 2022

For beneficial ownership:
Vote Processing
c/o Broadridge
51 Mercedes Way
Edgewood, NY 11717

For registered ownership:
Proxy Services
C/O American Stock Transfer & Trust Company
PO BOX 505008
Louisville, KY 40233 9814

Your vote is important. Whether or not you plan to attend the meeting by virtual presence, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions on the notice of internet availability of proxy materials you received in the mail. If you received paper copies of the proxy materials, kindly mark, sign, and date the enclosed proxy card and return it promptly in the enclosed envelope (which is postage prepaid, if mailed in the United States). Even if you have given your proxy, you may still revoke your proxy and vote by attending the virtual meeting online. Please note, however, that if your shares are held by a broker, bank, or other nominee and you wish to vote at the meeting, you must obtain, from your broker, bank, or other nominee, the record holder, a proxy issued in your name. For specific instructions on voting, please refer to the section, Questions and Answers — Voting Information/page 54.

Proxy Materials

This Notice of Annual Meeting, proxy statement, and form of proxy are being distributed and made available around April 20, 2022.

By order of the Board of Directors.

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Jodi J. Caro
General Counsel, Chief Risk & Compliance Officer and Corporate Secretary


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TABLE OF CONTENTS

CORPORATE GOVERNANCE

1

Proposal One — Election of Directors

7

Information About Our Director Nominees

9

Information About Our Directors Continuing in Office

11

Non-Employee Director Compensation for Fiscal 2021

15

Proposal Two — Ratification of Appointment of Independent Registered Public Accounting Firm

17

Fees to Independent Registered Public Accounting Firm

18

Audit Committee

19

Report of the Audit Committee of the Board Of Directors

20

Compensation Committee

21

Report of the Compensation Committee of the Board Of Directors

23

COMPENSATION DISCUSSION AND ANALYSIS

24

Proposal Three — Advisory Resolution on Executive Compensation

48

CEO Pay Ratio

49

STOCK OWNERSHIP

50

CERTAIN RELATIONSHIPS AND TRANSACTIONS

53

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

54

MISCELLANEOUS

59

Important notice regarding the availability of proxy materials for the annual meeting of stockholders to be held on June 1, 2022. The proxy statement and Annual Report to Stockholders for the year ended January 29, 2022 are available at https://ulta.com/investor. Brokers cannot vote for Proposals 1 or 3 without your instructions.

We are furnishing proxy materials to our stockholders primarily via the internet. Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower the cost of the 2022 Annual Meeting of Stockholders (sometimes referred to as the “Annual Meeting”), and conserve natural resources. However, if you would prefer to receive paper copies of proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials.


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F

C

orporate Governance

Board Leadership Structure

The Corporate Governance Guidelines of Ulta Beauty, Inc. (“Ulta Beauty,” the “Company,” “we,” “us” or “our”) provide that the offices of the Chief Executive Officer (“CEO”) and the Chair of the Board of Directors may be either combined or separated at the discretion of the Board of Directors (sometimes referred to as the “Board”). We currently separate the roles of CEO and Chair of the Board. Our Corporate Governance Guidelines also provide that a majority of the independent directors will select a lead independent director when the Chair does not qualify as an independent director. As part of our CEO succession last year, Mary N. Dillon transitioned to the role of Executive Chair of the Board as of June 2, 2021, and Lorna E. Nagler, an independent director, became the lead independent director.

We believe separating the roles of CEO and Chair enhances the accountability of the CEO to the Board, strengthens the Board’s independence from management, and ensures a greater role for the independent directors in the oversight of the Company. In addition it allows our CEO to focus efforts on running our business and managing our Company in the best interests of our stockholders, while the Chair provides guidance to the CEO and, in consultation with management, helps to set the agenda for Board meetings and establishes priorities and procedures for the work of the full Board. The Chair presides over meetings of the full Board as well as executive sessions (without management), which the Board generally holds several times a year. The independent directors believe that Ms. Dillon’s leadership of the Board, with Ms. Nagler serving as the lead independent director, has provided a valuable resource to the Board and helped facilitate a smooth transition of the CEO role.

As part of our CEO succession plan last year, Ms. Dillon agreed to serve as Executive Chair of the Board for one year. Accordingly, Ms. Dillon is retiring from the Board as of the date of the Annual Meeting. In anticipation of Ms. Dillon’s completion of service, our Board has appointed Ms. Nagler to serve as Non-executive Chair effective June 1, 2022. The CEO and Chair roles will remain separate under this leadership structure.

The Board believes that the current Board leadership structure is in the best interests of the Company and its stockholders at this time. The Board recognizes that no single leadership model is right for all companies and at all times and that, depending on the circumstances, other leadership models, such as combining the Chair and CEO roles, might be appropriate. Accordingly, the Board periodically reviews its leadership structure. Our Corporate Governance Guidelines provide the flexibility for the Board to modify or continue its leadership structure in the future, as it deems appropriate.

Independence

Board member independence is an essential element of Ulta Beauty corporate governance. The Board of Directors has determined that each of the current non-employee directors, other than Ms. Dillion, is free of any relationship that would interfere with their individual exercise of independent judgment with regard to Ulta Beauty. Each member of, and nominee for, the Board of Directors is independent other than Ms. Dillon, our former CEO and current Executive Chair of the Board, and David C. Kimbell, our CEO. Each member of the nominating and corporate governance committee, compensation committee, and audit committee satisfies the independence requirements of the NASDAQ Stock Market (“NASDAQ”) and the Securities and Exchange Commission (the “SEC”).

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Corporate Governance  

Board of Directors Meetings and Committees

During the fiscal year ended January 29, 2022 (“fiscal 2021”), the Board of Directors held six meetings. The Board of Directors has an audit committee, a nominating and corporate governance committee, and a compensation committee. During fiscal 2021, no director attended less than 75% of the aggregate meetings of the Board of Directors and of the committees on which they served that were held during the period for which they were a director or committee member, respectively. Directors are invited and expected to attend the Annual Meeting of Stockholders, and all our directors then in office attended our 2021 Annual Meeting of Stockholders.

The following table provides the composition of each of our committees as of April 4, 2022:

Director

  

  

Nominating and
Corporate Governance
Committee (1)

  

  

Audit Committee (2)

  

  

Compensation
Committee (3)

Mary N. Dillon*

Lorna E. Nagler**

Sally E. Blount

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Michelle L. Collins

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Kelly E. Garcia***

Catherine A. Halligan

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Charles Heilbronn

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David C. Kimbell

Patricia A. Little

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Michael R. MacDonald

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George R. Mrkonic

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Gisel Ruiz***

Michael C. Smith

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Graphic Committee Chair

Graphic Member

* Executive Chair of the Board

** Lead Independent Director

*** As new directors, Mr. Garcia and Ms. Ruiz will observe all committees until June 2022 when they will be appointed to serve on a specific committee(s).

1.Additional information regarding the nominating and corporate governance committee can be found starting on page 3.
2.Additional information regarding the audit committee can be found starting on page 19.
3.Additional information regarding the compensation committee can be found starting on page 21.

Board Role in Risk Oversight

Our Board of Directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance stockholder value. Management is responsible for the Company’s day-to-day risk management activities and processes, and our Board’s role is to engage in informed oversight of and provide guidance with respect to such risk management activities and processes. The Board recognizes that a fundamental part of risk management is not only understanding the risks our Company faces and the steps management is taking to manage those risks, but also understanding what level of risk is appropriate for our Company. As such, the Board focuses on understanding the nature of our enterprise risks, including operational, financial, legal and regulatory, cybersecurity, strategic, competitive, climate and environmental and reputational risks, as well as the adequacy of our risk assessment and risk management processes. To facilitate such an understanding, the Board and its committees receive regular management updates on our business operations, financial results, and strategy, and the Board discusses and provides guidance with respect to risks related to those topics.

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  Corporate Governance

While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management, including the audit committee, compensation committee, and nominating and corporate governance committee.

The audit committee oversees risks associated with financial accounting and audits, internal control over financial reporting, as well as data privacy, cybersecurity, and other technology risks. The audit committee assists the Board in its oversight by discussing with management the Company’s risk assessment and management policies, the Company’s major and emerging risk exposures, including significant financial risk exposures, and the actions taken by management to limit, monitor or control such exposures.

The compensation committee oversees risks relating to the Company’s compensation policies and practices. In setting compensation, the compensation committee strives to create incentives that encourage a level of risk-taking behavior consistent with the Company’s business strategy. The compensation committee oversees risks relating to the Company’s development and implementation of human capital development plans, as well as succession planning practices to foster sufficient management depth at the Company to support its continued growth and talent needed to execute long-term strategies. In addition, the compensation committee is also responsible for reviewing with management the Company’s policies, practices, and strategies relating to human capital management as they relate to the Company’s workforce generally, including policies and strategies regarding recruiting, selection, talent development, progression and retention, succession planning, workplace health and safety, culture and engagement, and diversity, equity, and inclusion.

The nominating and corporate governance committee oversees the implementation of the Company’s Code of Business Conduct and monitors compliance therewith. The nominating and corporate governance committee periodically reviews the Company’s Environmental, Social, and Governance (“ESG”) strategies, policies, risks, practices, goals, and programs, including through the Company’s annual ESG Report, except where delegated to other Board committees. In addition, the nominating and corporate governance committee oversees implementation of the Company’s Corporate Governance Guidelines, board evaluation process, and the process for recommending candidates to the Board of Directors for nomination as directors and membership on committees of the Board.

Director Age Limit

Our Corporate Governance Guidelines provide that any director who reaches the age of 75 years in the first year of his or her three-year term will not be eligible to stand for election unless the nominating and corporate governance committee, after evaluation of the continued appropriateness of Board membership in light of all of the circumstances, decides to recommend to the Board that an exception be made. In addition, any director who reaches the age of 75 years in the second or third year of his or her three-year term will, promptly following such director’s 75th birthday, submit to the Board his or her resignation from the Board. In this situation, the nominating and corporate governance committee will consider the resignation submitted, evaluate the continued appropriateness of Board membership in light of all of the circumstances and recommend to the Board whether to accept such director’s resignation or request that the director continue to serve. If such resignation is accepted by the Board, it will be effective at the next annual meeting of stockholders following the resignation.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee acts under a written charter approved by the Board of Directors that is reviewed regularly and has been published under “Governance” in the Investor Relations section of the Ulta Beauty website at https://ulta.com/investor. The primary responsibility of the nominating and corporate governance committee is to recommend to the Board of Directors candidates for nomination as directors and membership on committees of the Board. The committee reviews the performance and independence of each director, and in appropriate circumstances, may recommend the removal of a director. The committee oversees the evaluation of the Board of Directors and the committees of the Board and makes recommendations to improve performance. The committee also recommends to the Board of Directors policies with respect to corporate governance.

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Corporate Governance  

During fiscal 2021, the nominating and corporate governance committee was composed of the following independent directors: Ms. Blount, Ms. Collins, Ms. Halligan, Mr. Heilbronn, and Ms. Nagler (until June 2, 2021). Ms. Collins serves as the current Chair of the committee. The nominating and corporate governance committee met six times during fiscal 2021.

Nominating and Corporate Governance Committee Charter

The nominating and corporate governance committee charter identifies the roles and responsibilities that govern the committee, such as:

identifying and evaluating qualified candidates to become Board members;
selecting nominees for election as directors at the next annual meeting of stockholders (or special meeting of stockholders at which directors are to be elected);
selecting candidates to fill any vacancies on the Board;
reviewing the composition of the committees of the Board and making recommendations to the Board regarding the selection of the members of the committees;
overseeing the implementation of and monitoring compliance with Ulta Beauty’s Code of Business Conduct (other than with respect to accounting or auditing issues that the audit committee oversees);
reviewing the Company’s ESG strategies, policies, practices, goals, and programs, including through the Company’s annual ESG Report, except where delegated to other Board committees. Such review includes a review of the Company’s risks related to ESG;
overseeing the evaluation of the Board and the committees of the Board; and
periodically reviewing the Company’s Corporate Governance Guidelines and other governance policies.

Nomination Process — Qualifications

Pursuant to its charter, the nominating and corporate governance committee annually assesses the experience, expertise, capabilities, skills, and diversity of the members of the Board, including diversity of age, gender, nationality, race, ethnicity, and sexual orientation, individually and collectively, and considers these factors when evaluating director candidates.

What We Do:

We review the skills and characteristics of the board directors

The nominating and corporate governance committee is responsible for reviewing the appropriate skills and characteristics in the context of prevailing business conditions and, in its nominating committee capacity, for making recommendations regarding the size, composition, and desired complementary skill sets of the Board of Directors, including diversity of age, gender, nationality, race, ethnicity, and sexual orientation.

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  Corporate Governance

We search for appropriate candidates based on recommendations

We consider potential director candidates recommended by current directors, officers, associates, and others. We also consider all stockholder recommendations for candidates for the Board of Directors. Stockholders who want to suggest a candidate for consideration should send a written notice, addressed to the Corporate Secretary. We have engaged the services of search firms to provide us with candidates, especially when we are looking for a candidate with a particular expertise, quality, skill, or background.

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We interview candidates and deliberate

The nominating and corporate governance committee screens all potential candidates in the same manner, regardless of the source of the recommendation. Our review is typically based on any written materials provided with respect to potential candidates, as well as appropriate due diligence, and we review such materials to determine the qualifications, experience, and background of the candidates. Final candidates are typically interviewed by members of the committee and other members of the Board, as appropriate. After review and deliberation of all feedback and data, the committee makes a recommendation to the full Board of Directors regarding who should be nominated by the Board of Directors.

Key Objectives and Considerations:

The objective of the nominating and corporate governance committee is to create and sustain a Board of Directors that brings to Ulta Beauty a variety of perspectives and skills derived from high-quality business and professional experience. Both the Board and the nominating and corporate governance committee believe that it is essential for Board members to represent diverse viewpoints, backgrounds, experiences, expertise, and skill sets, including diversity of age, gender, nationality, race, ethnicity, and sexual orientation, differences in professional experience, education, skill, and other individual qualities and attributes that contribute to an active, effective Board.

We value our stockholders’ input and encourage them to nominate candidates. To submit a candidate, please follow the process outlined under the Nomination of Directors header in the Questions and Answers section of this proxy statement.

The committee evaluates each individual in the context of our Board of Directors as a whole with the objective of assembling a group that can best perpetuate the success of our Company and represent stockholder interests through the exercise of sound judgment. The nominating and corporate governance committee recommends those candidates who possess the highest personal and professional integrity, have prior experience in corporate management and the industry, maintain academic or operational expertise in an area of our business, and demonstrate practical and mature business judgment.

Our Board of Directors has also adopted proxy access for director nominees. Proxy access means that any stockholder or group of up to 20 stockholders owning 3% or more of our common stock continuously for at least three years may nominate and include in our proxy materials director nominees totaling up to the greater of 20% of the Board or at least two directors. For more information about proxy access, see the Nomination of Directors header in the Questions and Answers section of this proxy statement.

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Corporate Governance  

Code of Business Conduct

All Ulta Beauty associates, officers and members of the Board of Directors must always act ethically and in accordance with the Ulta Beauty Code of Business Conduct. All corporate associates, officers and members of the Board of Directors have signed a certificate acknowledging that they have read, understand, and will continue to comply with the policy, and all corporate associates and officers are required to read and acknowledge this policy on an annual basis. Ulta Beauty includes the Code of Business Conduct in new hire materials for all corporate associates. The policy is published, and any amendments or waivers thereto will be published under “Governance” in the Investor Relations section of the Ulta Beauty website located at https://ulta.com/investor.

Corporate Governance Guidelines

Our Board of Directors adopted the Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities. The Corporate Governance Guidelines have been published under “Governance” in the Investor Relations section of the Ulta Beauty website located at https://ulta.com/investor.

Director Ownership Guidelines

Our Board of Directors has adopted share ownership guidelines that each non-employee director should hold shares of our common stock or restricted stock units with a value equal to five times the annual cash retainer paid to non-employee directors by the fifth anniversary of the date the guidelines became effective for each director. As of January 29, 2022, each non-employee director serving for at least five years met or exceeded the ownership guideline.

Stockholder Communication

We welcome communication from stockholders. Any stockholder can communicate in writing with the Board of Directors on matters pertaining to Ulta Beauty by addressing their comments to the Board of Directors, c/o General Counsel, Ulta Beauty, Inc., 1000 Remington Blvd., Suite 120, Bolingbrook, IL 60440, or by e-mail at InvestorRelations@ulta.com. Our General Counsel will review all correspondence addressed to our Board of Directors, or any individual director, and will forward appropriate stockholder communications to our Board of Directors prior to the next regularly scheduled meeting of our Board of Directors following the receipt of such communication. Our General Counsel will also forward any stockholder correspondence which is more suitably directed to management to the appropriate member(s) of the management team. In addition, our General Counsel will summarize all correspondence not forwarded to our Board of Directors and make the correspondence available to the Board for its review upon our Board’s request.

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  Corporate Governance

PROPOSAL ONE
ELECTION OF DIRECTORS

Our Certificate of Incorporation provides that our Board of Directors be divided into three classes, designated Class I, Class II, and Class III, with each class consisting, as nearly as possible, of one-third of the total number of directors. Each class serves a three-year term with one class being elected at each year’s annual meeting of stockholders. Vacancies on our Board of Directors may be filled by persons elected by a majority of the remaining directors. A director elected by our Board of Directors to fill a vacancy, including a vacancy created by an increase in size of our Board of Directors, will serve for the remainder of the full term of the class of directors in which the vacancy occurred and until that director’s successor is elected and qualified.

The Board of Directors is presently composed of thirteen members, eleven of whom are non-employee, independent directors. Each director was elected to the Board of Directors to serve until a successor is duly elected and qualified or until his or her resignation, removal, or death. As part of our CEO succession last year, Mary N. Dillon agreed to serve as Executive Chair of the Board for one year. Accordingly, Ms. Dillon is retiring from the Board as of the date of the Annual Meeting. In addition, Charles Heilbronn, a director since 1995, and Sally E. Blount, a director since 2017, are retiring as of the date of the Annual Meeting.

The affirmative vote of the holders of a majority of the shares present virtually or represented by proxy and entitled to vote at the Annual Meeting will be required to approve the nominees for election. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes will be counted towards a quorum but will not be counted for any purpose in determining whether the nominees have been elected.

Summary of Qualifications and Experience of Director Nominees and Directors Continuing in Office

The following tables highlight the three most relevant areas of specific experience, qualifications, attributes, skills, and background information, including average age, gender identity, race or ethnicity, and sexual orientation, where self-disclosed, that the Board considered for each director nominee and each director continuing in office. In addition to executive leadership, which all our directors possess, a particular director may possess additional experience, qualifications, attributes, or skills, even if not expressly indicated as one of the three most relevant below.

  

  

Governance

  

  

Finance

  

  

Retail

  

  

E-commerce & Digital/ Technology

  

  

Distribution

  

  

Marketing

  

  

Strategy

  

Operations

  

Cybersecurity/
Privacy  

International

  

Lorna E. Nagler

Michelle L. Collins

Kelly E. Garcia

Catherine A. Halligan

David C. Kimbell

Patricia A. Little

Michael R. MacDonald

George R. Mrkonic

Gisel Ruiz

Michael C. Smith

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Corporate Governance  

Board Diversity Matrix (As of June 1, 2022*)

Total Number of Directors

10

Did Not

Female

Male

Non-Binary

Disclose Gender

  

(#)

  

  

(#)

  

  

(#)

  

  

(#)

  

Part I: Gender Identity

Directors

5

5

-

-

Part II: Demographic Background

African American or Black

1

1

-

-

Alaskan Native or Native American

-

-

-

-

Asian

-

-

-

-

Hispanic or Latinx

1

1

-

-

Native Hawaiian or Pacific Islander

-

-

-

-

White

3

3

-

-

Two or More Races or Ethnicities

-

-

-

-

LGBTQ+

1

Did Not Disclose Demographic Background

-

Part III: Other

Directors' Average Tenure (Years)

4.7

Directors' Average Age (Years)

59.2

Directors' Independence

9

*Assumes all directors standing for election are elected

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  Corporate Governance

INFORMATION ABOUT OUR DIRECTOR NOMINEES

What are you voting on?

You are being asked to elect Kelly E. Garcia, Michael R. MacDonald, and Gisel Ruiz as Class III Directors for terms to expire at the 2025 Annual Meeting of Stockholders and until their successors are elected and qualified or until their resignation, removal, or death.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE

Class III Nominees For Election For a Three-Year Term Expiring at the 2025 Annual Meeting:

Kelly E. Garcia

        

Michael R. MacDonald

Age: 47

Director Since: 2022

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Age: 70

Director Since: 2012

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EXPERIENCE

Mr. Garcia is the Executive Vice President and Chief Technology Officer of Domino’s Pizza, where he is responsible for providing the company’s technology vision and leadership as well as developing and implementing strategic technology initiatives to support and improve the business globally, since July 2012. His broad technology experience includes global e-commerce, loyalty, innovation, and global software product development. Prior to joining Domino’s, Mr. Garcia was Vice President of Business Intelligence and North American Operations for R. L. Polk & Company.

QUALIFICATIONS

The Board benefits from Mr. Garcia’s broad technology, digital and e-commerce experience. With over 24 years of technology and business experience in a variety of technology-related roles, including global commercial software products P&L responsibilities, Mr. Garcia brings deep digital, ecommerce data analytics and cybersecurity/privacy expertise to our Board. Mr. Garcia also brings leadership, international and strategic abilities.

EXPERIENCE

Mr. MacDonald served as the President and Chief Executive Officer and member of the Board of Directors of DSW Inc. from April 2009 through December 2015. Prior to joining DSW Inc., Mr. MacDonald served as Chairperson and Chief Executive Officer of Shopko Stores, a retail company, from May 2006 to March 2009. Prior to that time, Mr. MacDonald held executive positions at Saks Incorporated from 1998 to 2006, including as Chairperson and Chief Executive Officer of the Northern Department Stores Group for six years. Prior to serving in that capacity, Mr. MacDonald held executive positions at Carson Pirie Scott, including the position of Chairperson and Chief Executive Officer. Mr. MacDonald currently serves on the Board of Directors of Frontier Group Holdings, Inc. (NASDAQ: ULCC) since 2016 and is a member of their audit committee.

QUALIFICATIONS

The Board benefits from Mr. MacDonald’s experience serving as a director for a public company board and his prior experience makes him a valued member of the Board, a member of our compensation committee, and Chair of the audit committee. With more than 30 years of business experience in all phases of retail, including managing merchandising, marketing, stores, operations and finance functions, Mr. MacDonald brings strong leadership abilities and in-depth retail knowledge to our Board.

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Corporate Governance  

Gisel Ruiz

        

Age: 51

Director Since: 2022

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EXPERIENCE

Ms. Ruiz held a number of senior positions within the Walmart organization during a career that spanned over 26 years. Most recently, she served as Executive Vice President and Chief Operating Officer of the Sam’s Club division of Walmart. Prior to that role, she had served as Executive Vice President of International People for Walmart International, Executive Vice President and Chief Operating Officer of Walmart US, and Executive Vice President and Chief People Officer of Walmart US. Ms. Ruiz previously served on the Board of Directors of Walmart de Mexico S.A. de C.V. and Yihaodian, China’s then fourth largest business to consumer eCommerce website. She currently serves as a director of Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL), Executive Network Partnering Corporation (NYSE:EPNC) and Vital Farms, Inc. (NASDAQ: VITL).

QUALIFICATIONS

The Board benefits from Ms. Ruiz’s experience serving as a director for public company boards as well as her extensive professional retail and leadership experience. With more than 26 years of retail experience, including leadership roles in operations and human resources, with wide ranging responsibilities including cost optimization, real estate operations, in-store innovation, and sustainability, Ms. Ruiz brings deep retail knowledge and broad leadership capabilities to our Board.

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  Corporate Governance

INFORMATION ABOUT OUR DIRECTORS CONTINUING IN OFFICE

Class I Directors Continuing in Office Until the 2023 Annual Meeting:

Michelle L. Collins

        

Patricia A. Little

Age: 62

Director Since: 2014

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Age: 61

Director Since: 2019

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EXPERIENCE

Ms. Collins has been President of Cambium LLC, a consulting firm since 2007. Ms. Collins has served as a director of PrivateBancorp, Inc. since November 2014 and since its acquisition in June 2017, has been a board member of the acquirer, CIBC, and currently serves on the audit committee. Since July 23, 2021, Ms. Collins has been a board member of RSG Holdings, Inc., and serves on its audit committee.

In 1997, Ms. Collins co-founded Svoboda, Collins LLC, a private equity firm, where she served as Managing Director from 1998 to 2007 and continues to serve on its Advisory Board. From 1992 to 1997, Ms. Collins was a principal at William Blair & Company, LLC, where she focused on specialty retail, catalog, and distribution businesses in corporate finance. Ms. Collins served as a director of Integrys Energy Group, Inc. from May 2011 to June 2015 and as a member of its audit committee and Chairperson of its governance committee. Additionally, Ms. Collins’ prior public company director experience includes Molex, Inc. from 2003 to 2013, including as a member of its audit committee and nominating and corporate governance committee, Bucyrus International, Inc. from 2009 to 2011, including as a member of its audit committee, and CDW Corporation from 1996 to 2007, where she served as Chairperson of its audit committee.

QUALIFICATIONS

The Board benefits from Ms. Collins’ extensive experience serving on both private and public company boards and her prior committee experience makes her a valued member of the Board and member of our audit committee and Chair of our nominating and corporate governance committee. Ms. Collins’ experience evaluating, investing in, monitoring, and exiting private equity investments as well as advising growth companies as an investment banker also enhances her value to the Company’s Board.

EXPERIENCE

Ms. Little served as the Senior Vice President and Chief Financial Officer of The Hershey Company from 2015 until her retirement in May 2019. Prior to joining Hershey, she was the Executive Vice President and Chief Financial Officer at Kelly Services, Inc. from 2008 to 2015 and before that she spent 24 years with Ford Motor Company holding a variety of leadership roles.

Ms. Little currently serves as a member of the Board of Directors of McCormick and Company Inc. and is a member of its nominating/corporate governance committee.

QUALIFICATIONS

The Board benefits from Ms. Little’s deep financial and leadership expertise and insights gained from her more than 30 years of experience with consumer-oriented and brand-driven companies.

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Michael C. Smith

        

Age: 52

Director Since: 2019

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EXPERIENCE

Mr. Smith is General Partner and co-founder of Footwork, an early stage venture capital firm. Previously, he was President, Chief Operating Officer and interim Chief Financial Officer of Stitch Fix, the online personal styling service where he oversaw operations, styling, client experience, merchandise, and finance, from October 2018 to January 2021, and in various other executive positions at Stitch Fix, including as Chief Operating Officer from June 2012 to March 2016 and from September 2017 to October 2018. Prior to Stitch Fix, Mr. Smith was Chief Operating Officer at Walmart.com, overseeing all operations for a $5 billion division, including one of the most successful multi-channel offerings in the industry. He holds a B.A. from the University of Virginia and an M.B.A. from the Haas School at University of California, Berkeley. Mr. Smith currently serves as a member of the Board of Directors of Stich Fix (NASDAQ: SFIX), Miller Knoll, Inc. (NASDAQ: MLKN), where he is also a member of its audit committee and Big Sky Growth Partners (NASDAQ: BSKY).

QUALIFICATIONS

The Board benefits from Mr. Smith’s more than 28 years of professional experience, with deep retail experience and a strong understanding of data analytics and logistics through a customer-centric lens.

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Class II Directors Continuing in Office Until the 2024 Annual Meeting:

Catherine A. Halligan

        

David C. Kimbell

Age: 58

Director Since: 2012

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Age: 55

Director Since: 2021

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EXPERIENCE

Ms. Halligan has served as an Advisor/Consultant to Chanel Inc. since January 2014 and Narvar Inc. since February 2013. Since January 2019, she has served as a non-executive director of Ferguson plc, a foreign private issuer listed on both the NYSE and the London Stock Exchange and is in the FTSE 100 index of listed companies, including as a member of the audit, nominating and governance, remuneration, and technology committees. Ms. Halligan also serves as a non-executive director of Driven Brands Holdings, Inc., a controlled company listed on the NASDAQ, and serves as Chair of its compensation committee. Ms. Halligan previously served as a member of the board of directors of FLIR Systems, Inc. between March 2014 and its merger with Teledyne in May 2021, including as Chair of the compensation committee and a member of its audit committee.

Ms. Halligan held Senior Executive level positions with a SaaS software company and prominent retailers. She served as an Advisor from January to April 2012 and Senior Vice President, Sales & Marketing from July 2010 to December 2011 of PowerReviews Inc., a leading SaaS software for customer reviews and social commerce. Prior to joining PowerReviews Inc., from 2005 to 2010, she was an Officer, and served in various executive positions with Walmart, including Chief Marketing Officer of Walmart from 2007 to 2009 and Vice President Market Development, Global eCommerce of Walmart.com from 2009 to 2010. From 2000 to 2005, Ms. Halligan served as an Associate Partner at Prophet, a global strategy consultancy. From 1996 to 1999, Ms. Halligan held Executive retail management positions with Williams Sonoma Inc., including Vice President and General Manager, Internet and Vice President, Marketing. Ms. Halligan also has previous retail experience with Blue Nile, Inc. and the Gymboree Corporation. Ms. Halligan began her career as a Marketing and Planning analyst for Lands’ End from 1987 to 1991.

QUALIFICATIONS

With over 20 years of experience in marketing, digital, and e-commerce in the retail and SaaS software industries, Ms. Halligan provides valuable insight and expertise on strategic marketing issues, digital technology, and omnichannel business capabilities. In addition, Ms. Halligan’s business experience with large retail companies and software companies makes her a valued member of our nominating and corporate governance committee and Chair of our compensation committee.

EXPERIENCE

Mr. Kimbell has been our Chief Executive Officer since June 2021. Previously, he served as our President from December 2019 until June 2021, our Chief Merchandising and Marketing Officer from March 2015 until December 2019 and Chief Marketing Officer from February 2014 until March 2015. Prior to joining Ulta Beauty, he was Chief Marketing Officer and Executive Vice President at U.S. Cellular since February 2011. From 2008 to 2010, Mr. Kimbell served as Chief Marketing Officer and Senior Vice President of Seventh Generation, a producer of environmentally friendly household products. From 2001 to 2008, Mr. Kimbell held various positions at PepsiCo, Quaker Food Division, including Vice President of Marketing. Mr. Kimbell held a number of brand management roles in the Beauty Division of The Procter and Gamble Company from 1995 to 2001.

QUALIFICATIONS

As the Chief Executive Officer of the Company, Mr. Kimbell is able to provide the Board with valuable insight regarding the Company’s operations, its management team, and associates as a result of his day-to-day involvement in the operations of the business. Additionally, Mr. Kimbell brings over 25 years of operational and leadership experience in retail and consumer-driven businesses to the Board, so the Board benefits from his extensive merchandising and marketing expertise as well as his deep understanding of the beauty industry and the strategies needed to operate successfully in our evolving omnichannel and digital environment. In addition, Mr. Kimbell’s demonstrated leadership skills combined with his focus on inclusivity and sustainability provides valuable perspectives and insights to the Board.

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George R. Mrkonic

        

Lorna E. Nagler

Age: 69

Director Since: 2015

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Age: 65

Director Since: 2009

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EXPERIENCE

Mr. Mrkonic is the Non-Executive Chairman of Maru Group, a UK and North America based market research company unifying deep sector expertise with cloud-based customer insight communities. In addition to being Non-Executive Chairman of Maru and a member of its audit committee, he serves as a director and member of the audit and compensation committees of AutoZone, Inc.

Mr. Mrkonic is also the retired Non-Executive Chairman of Paperchase Products Limited, London, UK, a retailer of cards, stationery, wraps, and gifts. He is also the retired President and Vice Chairman of Borders Group, Inc. having served as Director from 1994 to 2004, Vice Chairman from 1994 to 2002, and President from 1994 to 1997. He began his retail career in 1978 and has led several retail companies including Herman’s Sporting Goods, Eyelab, Kmart’s Specialty Retailing Group, and Borders. In the last five years he has also served on the board of directors of Brinker International.

QUALIFICATIONS

Mr. Mrkonic’s more than 30 years of experience in the retail industry as well as his knowledge and skills as a senior executive and director of large public companies brings to our Board and audit committee a broad understanding of the complex strategic, governance, and financial issues facing large public companies in the current economic environment.

EXPERIENCE

Ms. Nagler has served as a member of the board of directors of Hibbett Sports since June 2019 and is the chair of its compensation committee. In July 2020, she was appointed to the Wisconsin Foundation and Alumni Association Board as a member of their audit committee. Ms. Nagler was President of Bealls Department Stores, Inc. from January 2011 to January 2016. She served as President, Chief Executive Officer and director of Christopher & Banks Corporation, a specialty retailer of women’s clothing, from August 2007 to October 2010. From 2004 to 2007, Ms. Nagler was President of Lane Bryant, a division of Charming Shoppes, Inc., a women’s apparel company. From 2002 to 2004, she was President of Catherines Stores, also a division of Charming Shoppes, Inc. From 1996 to 2002, Ms. Nagler held various retail management positions with Kmart Corporation, including Senior Vice President, General Merchandise Manager of Apparel and Jewelry, Divisional Vice President and General Merchandise Manager of Kids and Menswear. From 1994 to 1996, Ms. Nagler was a Vice President, Divisional Merchandise Manager for Kids “R” Us. Ms. Nagler also has previous retail experience with Montgomery Ward and Main Street Department Stores.

QUALIFICATIONS

With years of experience as a senior level executive in a wide variety of retail companies, including as the President and Chief Executive Officer of a public retail company, Ms. Nagler provides considerable expertise on strategic, management, and operational issues facing a multi-state retailer. Running a public company gave Ms. Nagler front line exposure to many of the issues facing public retail companies, particularly on the operational, financial, and corporate governance fronts. The Board also benefits from Ms. Nagler’s extensive experience in the retail industry and the informed perspectives such experience facilitates. Additionally, her past role as President and Chief Executive Officer positions her well to serve as a member of our compensation committee and nominating and corporate governance committee.

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NON-EMPLOYEE DIRECTOR COMPENSATION FOR FISCAL 2021

We strive to promote an ownership mentality among our key leadership and Board of Directors.

The Company utilizes equity compensation to encourage our directors to maintain meaningful stock ownership in the Company, aligning directors’ interests with stockholders. As a result, each non-employee director is granted an annual equity retainer totaling $160,000 in the form of restricted stock units (rounded up to the nearest whole share), valued using the share price of our common stock on the date of grant. During fiscal 2021, on the date of our annual meeting, each non-employee director received a grant of 476 restricted stock units that will vest on June 2, 2022.

Each non-employee director is paid an annual cash retainer. In addition, the Non-Executive Chair (if any), the lead independent director, and each committee Chair receives an additional cash retainer for serving in those roles. Cash payments are paid pro-rata in quarterly installments at the end of each fiscal quarter. The compensation committee reviews, on an annual basis, market data for the same peer group used to evaluate executive officer compensation gathered by the compensation committee’s independent advisor for determining compensation. In June 2021, the Board of Directors approved an increase to the cash retainer paid to the Compensation Committee Chair to bring the compensation in line with market. Additionally, they set the retainer fee for the lead independent director.

Ms. Dillon’s compensation as the Company’s Chief Executive Officer until June 2, 2021 and then as the Executive Chair of the Board on and after June 2, 2021 is discussed in “Compensation Discussion and Analysis” below and her compensation for service as a director is fully reflected in the Summary Compensation Table. Mr. Garcia and Ms. Ruiz were appointed to the Board on February 16, 2022 and therefore received no compensation for services as a director in fiscal 2021.

The following table sets forth the cash retainer amounts, by role, for service before and after June 2021:

  

  

Cash Retainer
Before

  

Cash Retainer
After

Role

June 2, 2021
($)

June 2, 2021
($)

Non-Employee Director

110,000

110,000

Non-Executive Chair

155,000

Lead Independent Director

40,000

Audit Committee Chair

30,000

30,000

Compensation Committee Chair

25,000

30,000

Nominating and Corporate Governance Committee Chair

20,000

20,000

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The following table provides information related to non-employee director compensation earned for fiscal 2021:

Fees Earned or

Stock

Paid in Cash

Awards (1)

Total

Name

  

  

($)

  

  

($)

  

  

($)

  

Lorna E. Nagler (2)

136,374

160,312

296,686

Sally E. Blount

110,000

160,312

270,312

Michelle L. Collins

130,000

160,312

290,312

Robert F. DiRomualdo (3)

90,275

90,275

Catherine A. Halligan

138,296

160,312

298,608

Charles Heilbronn

110,000

160,312

270,312

Patricia A. Little

110,000

160,312

270,312

Michael R. MacDonald

140,000

160,312

300,312

George R. Mrkonic

110,000

160,312

270,312

Michael C. Smith

110,000

160,312

270,312

1.Amounts shown represent the grant date fair value as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“ASC 718”). For a discussion of the assumptions made in the valuation reflected in this column, see Note 15 to the consolidated financial statements for fiscal 2021 contained in our Annual Report on Form 10-K filed on March 25, 2022.
2.Ms. Nagler was appointed as the lead independent director on June 2, 2021.
3.Mr. DiRomualdo retired from the Board of Directors on June 2, 2021.

The following table sets forth the outstanding restricted stock units held by our non-employee directors, other than Ms. Dillion, as of January 29, 2022:

Restricted Stock

Name

  

  

Units (#)

  

Lorna E. Nagler

 

476

Sally E. Blount (1)

 

476

Michelle L. Collins (1)

 

476

Catherine A. Halligan

 

476

Charles Heilbronn

 

476

Patricia A. Little (1)

476

Michael R. MacDonald

 

476

George R. Mrkonic

 

476

Michael C. Smith

 

476

1.Ms. Blount, Ms. Collins, and Ms. Little elected to defer the restricted stock units received in fiscal 2021 until their retirement or termination from the Board of Directors.

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PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

What are you voting on?

You are being asked to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year 2022, ending January 28, 2023.

The audit committee of the Board of Directors has appointed Ernst & Young LLP as our independent registered public accounting firm for fiscal 2022, ending January 28, 2023. Services provided to Ulta Beauty by Ernst & Young LLP in fiscal 2021 are described under “Fees to Independent Registered Public Accounting Firm” below. Additional information regarding the audit committee is provided on page 19. Ernst & Young LLP has audited the financial statements of Ulta Beauty since 1997. Representatives of Ernst & Young LLP will be available at the Annual Meeting to respond to appropriate questions and to make such statements as they may desire.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL TWO

Stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required by our Bylaws or otherwise. However, the Board of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate governance practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Ulta Beauty and our stockholders.

The affirmative vote of the holders of a majority of the shares present virtually online or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the appointment of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes will be counted towards a quorum but will not be counted for any purpose in determining whether this proposal has been ratified.

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FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The following table sets forth the aggregate fees billed by Ernst & Young LLP for professional services rendered for fiscal 2021 and 2020:

  

  

2021

  

  

2020

  

Audit Fees (1)

$

1,868,000

$

2,001,000

Audit-Related Fees

 

 

Tax Fees (2)

 

1,137,000

 

993,000

All Other Fees (3)

 

117,000

 

295,000

Total

$

3,122,000

$

3,289,000

1.Audit fees consist of fees and expenses for the annual audit of our consolidated financial statements included in the Annual Report on Form 10-K, the annual audit of our internal control over financial reporting, the quarterly reviews of our consolidated financial statements included in Quarterly Reports on Form 10-Q, accounting consultations, and services related to other regulatory filings made with the SEC.
2.Tax fees and expenses in fiscal 2021 consist of $417,000 for tax planning, advisory, and consulting services and $720,000 for tax compliance and preparation services. Tax fees and expenses in fiscal 2020 consist of $180,000 for tax planning, advisory, and consulting services and $813,000 for tax compliance and preparation services.
3.All other fees consist of fees for access to online research software as well as advisory services associated with information technology systems.

The audit committee has approved all professional fees paid to Ernst & Young LLP.

The audit committee has established procedures for the pre-approval of all audit and non-audit-related services provided by our independent registered public accounting firm. The procedures include, in part, that: (i) the audit committee, on an annual basis, shall pre-approve the independent registered public accounting firm’s engagement letter/annual service plan; (ii) the audit committee must pre-approve any permitted service not included in the annual service plan; (iii) the audit committee Chair has the ability to pre-approve any permitted service up to a pre-determined amount between regularly scheduled meetings, as applicable, and a report of such services and related fees are to be disclosed to the full audit committee at the next scheduled meeting; and (iv) the audit committee will review a summary of the services provided and the fees paid on an annual basis.

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AUDIT COMMITTEE

The audit committee provides assistance to the Board of Directors in fulfilling its responsibility to our stockholders, potential stockholders, the investment community, and other stakeholders relating to the Company’s accounting and financial reporting process and the audits of the Company’s financial statements. During fiscal 2021, the audit committee held ten meetings.

Specifically, the audit committee assists the Board of Directors in monitoring the integrity of our financial statements, our independent registered public accounting firm’s qualifications and independence, the performance of our internal audit function and independent registered public accounting firm, our compliance with legal and regulatory requirements, and our policies with respect to risk assessment and risk management, including cybersecurity and technology risks. The audit committee annually evaluates its own performance and reports its findings and action plans to the Board. The audit committee has direct responsibility for the appointment, compensation, retention (including termination), and oversight of our independent registered public accounting firm. Our independent registered public accounting firm reports directly to the audit committee.

During fiscal 2021, the audit committee was composed of the following independent directors: Ms. Collins, Ms. Little, Messrs. MacDonald, Mrkonic and Smith. Mr. MacDonald serves as the current Chair of the audit committee. Each of the following Committee members were designated by the Board of Directors as an “audit committee financial expert” as defined in applicable SEC rules: Ms. Collins, Ms. Little, Messrs. MacDonald, Mrkonic and Smith. The Board of Directors made a qualitative assessment of each member’s level of knowledge and experience based on a number of factors, including education and work, management, and director experience. The Board of Directors has determined that all members of our audit committee are financially literate and are independent, as independence is defined in Rule 5605(a)(2) of the NASDAQ listing standards and Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The audit committee acts under a written charter that was adopted by the Board of Directors and has been published under “Governance” in the Investor Relations section of the Ulta Beauty website located at https://ulta.com/investor.

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS1

The audit committee assists the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and financial reporting processes, and practices of Ulta Beauty. In addition, the audit committee oversees mitigation efforts related to data privacy, cybersecurity, and other technology risks.

The audit committee oversees Ulta Beauty’s financial process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. Ulta Beauty has an Internal Audit Department that is actively involved in examining and evaluating Ulta Beauty’s financial, operational, and information systems activities and reports functionally to the audit committee and administratively to management. In fulfilling its oversight responsibilities, the audit committee reviewed and discussed with management the periodic reports, including the audited financial statements in our Annual Report on Form 10-K. This included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The audit committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, its judgments as to the quality, not just the acceptability, of Ulta Beauty’s accounting principles and such other matters as are required to be discussed with the audit committee under generally accepted auditing standards, including the Public Company Accounting Oversight Board Standard No. 1301, Communications with Audit Committees (AS 1301). In addition, the audit committee has discussed with the independent registered public accounting firm the firm’s independence from management and Ulta Beauty, including the matters in the written disclosures and the Letter from the Independent Registered Public Accounting Firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the firm’s communications with the audit committee concerning independence.

The audit committee discussed with Ulta Beauty’s independent registered public accounting firm the overall scope and plans for their audit and developed a pre-approval process for all independent registered public accounting firm services. The audit committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of their examination, their evaluation of Ulta Beauty’s internal and disclosure controls, and the overall quality of Ulta Beauty’s financial reporting. As noted, the audit committee held ten meetings during fiscal 2021.

In reliance on the reviews and discussions referred to above, the audit committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements be included in Ulta Beauty’s Annual Report on Form 10-K for fiscal 2021, ended January 29, 2022, for filing with the SEC. The audit committee has appointed Ernst & Young LLP to be Ulta Beauty’s independent registered public accounting firm for fiscal 2022, ending January 28, 2023.

Audit Committee of the Board of Directors

Michael R. MacDonald (Chair)
Michelle L. Collins

Patricia A. Little
George R. Mrkonic

Michael C. Smith


1

This report is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any Ulta Beauty filing under the Securities Act of 1933 (as amended, the “Securities Act”) or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.

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COMPENSATION COMMITTEE

During fiscal 2021, the compensation committee was composed of the following directors, all of whom satisfy the independence requirements of NASDAQ: Ms. Halligan, Messrs. Heilbronn, MacDonald and Mrkonic, and Ms. Nagler (until June 2, 2021). Ms. Halligan serves as the current Chair of the compensation committee. During fiscal 2021, the compensation committee held seven meetings.

The compensation committee acts under a written charter that was adopted by the Board of Directors and has been published under “Governance” in the Investor Relations section of the Ulta Beauty website located at https://ulta.com/investor. Under this charter, the compensation committee is responsible for:

setting our compensation philosophy;
reviewing and approving the compensation for the CEO and the CEO’s direct reports (“C-Level Officers”);
reviewing and recommending to the Board the compensation for non-employee directors;
supervising compensation policies for all associates, including reviewing the compensation structure and procedures;
recommending to the Board the employment, appointment, and removal of C-Level Officers in accordance with the Bylaws;
establishing, amending, and terminating compensation and benefits plans and administering such plans;
annually evaluating its own performance and reporting findings and action plans to the Board; and
periodically reviewing with management the Company’s policies, practices, and strategies relating to human capital management as they relate to the Company’s workforce generally, including policies and strategies regarding recruiting, selection, talent development, progression and retention, succession planning, workplace health and safety, culture and engagement, and diversity, equity, and inclusion.

The compensation committee may under its charter delegate any of its responsibilities to a subcommittee, but only to the extent consistent with our Bylaws, Certificate of Incorporation, and NASDAQ rules.

Compensation Consultant

During fiscal 2021 the compensation committee engaged Pay Governance as its outside consultant to assist the compensation committee with executive and non-employee director compensation program design, to advise and consult with the committee on general compensation issues, and to keep the committee apprised of regulatory, legislative, and accounting developments and competitive practices related to executive and director compensation. In those capacities, Pay Governance was engaged directly by the compensation committee. Pay Governance is an independent executive compensation consulting firm and does not determine or recommend the exact amount or form of executive compensation for any executive officers. Pay Governance reports directly to the compensation committee, and a representative of Pay Governance, when requested, attends meetings of the committee, is available to participate in executive sessions, and communicates directly with the Chair of the compensation committee or its members outside of meetings. The compensation committee has reviewed the nature of and extent of the relationship between the compensation committee, the Company, and Pay Governance with respect to any potential conflicts of interest or similar concerns. Based on that review, the compensation committee believes that there are no conflicts of interest or potential conflicts of interest that would unduly influence Pay Governance’s provision of advice that is independent of management to the compensation committee.

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Compensation Risk

The Company reviewed its compensation plans, practices, and policies and determined that it does not have any such plans, practices, and policies that create risks that are reasonably likely to have a material adverse effect on the Company based on, but not limited to the following:

the Company’s variable compensation programs are linked to specific performance goals set and approved by the compensation committee for executive officers and for other associates by supervisors consistent with the Company’s compensation philosophy and business goals;
the performance periods for the pay programs are designed to match the period for which the associate has influence on the results and incorporate incentives of a longer-term nature to tie the associate to the actual results;
payments under the incentives are capped;
earned award levels are reviewed and certified by the compensation committee, management, payroll, and human resources;
the mix between fixed and variable pay is balanced so as to neither discourage proper risk taking, nor encourage excessive risk taking;
participants cannot approve their own performance goals, nor their own payouts; and
the compensation committee actively oversees the executive compensation program and has flexibility to use its judgment in assessing performance and pay.

Compensation Committee Interlocks and Insider Participation

During fiscal 2021, none of the members of our compensation committee had at any time been one of our officers or associates. None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers serving on our Board of Directors or compensation committee. See also “Certain Relationships and Transactions” below.

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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS2

The compensation committee has reviewed and discussed the following Compensation Discussion and Analysis (“CD&A”) with management. Based on this review and discussion, the compensation committee recommended to the Board of Directors, and the Board of Directors approved, that the CD&A be included in Ulta Beauty’s fiscal 2021 Annual Report on Form 10-K and this proxy statement.

Compensation Committee of the Board of Directors

Catherine A. Halligan (Chair)
Charles Heilbronn
Michael R. MacDonald

George R. Mrkonic


2

This report is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any Ulta Beauty filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.

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C

ompensation Discussion and Analysis

Our Company

Ulta Beauty is the largest beauty retailer in the United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products, and salon services. Key distinctive aspects of our business include:

One-of-a-kind Assortment. We offer guests a differentiated assortment of more than 25,000 products from more than 600 well-established and emerging beauty brands across a variety of categories and price points. We believe we offer the widest selection of beauty categories, including prestige and mass cosmetics, fragrance, haircare, prestige and mass skincare, bath and body products, professional hair products, and salon styling tools.

Store Footprint. We operate more than 1,300 stores predominantly located in convenient, high-traffic locations. With a bright and open store environment, we make it easy for guests to discover new products and services. Our store design, fixtures, and open layout provide the flexibility to respond to consumer trends and changes in our merchandising strategy. We also offer a full-service salon in every store featuring hair, eyebrow, and other beauty services.

Leading Digital Experiences. Through our website, Ulta.com, and our mobile applications, we offer guests convenient, interactive, and personalized digital experiences. Our digital channels enable always-on shopping and discovery, and our diverse fulfillment options, including buy online pick-up in store, buy online pick-up curbside, ship from store, ship to home, and same-day delivery, provide guests with value and convenience. In addition to e-commerce platforms, we offer guests a variety of unique digital experiences, including virtual try-on and skin analysis tools, which leverage augmented reality capabilities and artificial intelligence tools to provide guests with personalized experiences.

Best-in-Class Loyalty Program. Our best-in-class loyalty program, Ultamate Rewards, enables members to earn points for every dollar spent on products and beauty services at Ulta Beauty, through purchases on our private label and co-branded credit cards, and purchases at Ulta Beauty at Target. In addition to unique membership benefits, members can redeem points for discounts on any product or service at Ulta Beauty. With more than 95% of total sales coming from members, we are uniquely positioned with a deep understanding of our customers and their preferences which enables us to personalize experiences and target communications and promotions through our Customer Relationship Management (CRM) platform.

Great Guest Experiences. We cultivate human connection with warm and welcoming guest experiences across all of our channels. Our knowledgeable and approachable store associates, our differentiated service offerings, and our efforts to create relevant, compelling digital content are competitive advantages and enable us to build strong engagement with guests.

We were founded in 1990 as a beauty retailer at a time when prestige, mass, and salon products were sold through distinct channels — department stores for prestige products; drug stores and mass merchandisers for mass products; and salons and authorized retail outlets for professional hair care products. We developed a unique specialty retail concept that offers a broad range of brands and price points, select beauty services, and a convenient and welcoming shopping environment. We define our target consumer as a beauty enthusiast, a consumer who is passionate about the beauty category, uses beauty for self-expression, experimentation, and self-investment, and has high expectations for the shopping experience. We estimate that female beauty enthusiasts represent approximately 60% of shoppers and 75% of spend in the U.S. beauty category.

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  Compensation Discussion and Analysis

Executive Summary

This Compensation Discussion and Analysis (“CD&A”) describes the material elements of our executive compensation program during fiscal 2021. It also provides an overview of how and why our compensation committee arrived at the specific compensation decisions for our named executive officers for fiscal 2021, including the key factors that the compensation committee considered in determining named executive officer compensation. Below is an overview of some of these key factors:

We exceeded pre-COVID sales and earnings. The Ulta Beauty team delivered outstanding results for the year. Net sales increased to a record $8.6 billion, 40.3% over fiscal 2020 and 16.7% over fiscal 2019. Operating income increased 448% to $1.3 billion, or 15% of net sales, compared to $236.8 million, or 3.9% of net sales, in fiscal 2020. Compared to fiscal 2019, operating income increased 44%.
We delivered strong operational results. We increased the number of members in our Ultamate Rewards loyalty program by 21% to a record 37 million members. We strengthened category margins and improved our ability to optimize promotions. Our real estate portfolio is healthy and we continue to expand our digital capabilities. Between our Buy Online Pick Up in Stores “BOPIS” and our ship-from-store capabilities, about 28% of our digital orders this year were fulfilled by stores. For the full year, we delivered sales and profits that far exceeded pre-pandemic levels. Reflecting growing consumer trends, we expanded our Conscious Beauty platform, doubled the number of Black-Owned brands in our assortment, and introduced the Wellness Shop, a cross-category platform that offers guests self-care for the mind, body, and spirit.
We delivered results for our stockholders. We delivered positive stockholder returns in fiscal 2021, and our five-year total stockholder return covering fiscal 2017-2021 was more than 30%, which included generating positive returns in fiscal 2020, one of the most challenging years navigating through the COVID-19 impact on the Company. We maintained our balance sheet strength throughout the period, ending fiscal 2021 with $431.6 million of cash and cash equivalents. Since 2014, Ulta Beauty has purchased 14.0 million shares of its common stock for $3.9 billion, while continuing to make strategic growth investments.
We navigated global supply chain challenges and tight labor markets. We remain well-positioned to meet guest needs and delivered a successful fiscal year during a challenging and evolving business climate.
We ensured our compensation programs reflected evolving business expectations. Our compensation committee approved a short-term incentive program that returned to using full year financial performance goals and determined it would cap actual compensation payouts in the event business performance exceeded planned expectations given the very dynamic and unpredictable economic environment when goals were set. The compensation committee resumed granting performance-based restricted stock units (“PBSs”) delivering 50% of the target award values to Named Executive Officers (the “NEOs”) in PBSs, and reduced the weighting of stock options and restricted stock units (“RSUs”) granted to executives back to pre-COVID pandemic levels.

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Compensation Discussion and Analysis  

Compensation Overview

This CD&A describes the Company’s executive compensation program and explains how the compensation committee made compensation decisions for the following NEOs related to fiscal 2021:

Named Executive Officer

  

  

Title

David C. Kimbell (1)

Chief Executive Officer

Mary N. Dillon (2)

Executive Chair and Former Chief Executive Officer

Scott M. Settersten

Chief Financial Officer, Treasurer and Assistant Secretary

Jodi J. Caro

General Counsel, Chief Risk & Compliance Officer

Jeffrey J. Childs

Chief Human Resources Officer

Kecia L. Steelman (3)

Chief Operating Officer

1.Mr. Kimbell was named CEO effective June 2, 2021.
2.Ms. Dillon transitioned from CEO to the Executive Chair of the Board of Directors effective June 2, 2021.
3.Ms. Steelman was named Chief Operating Officer (“COO”) effective June 2, 2021.

Our compensation programs for fiscal 2021 are summarized below.

Salary increases were provided to Mr. Kimbell and Ms. Steelman in connection with their promotion to CEO and COO, respectively. Mr. Kimbell received a 15% increase during his transition to CEO and another 20% after his transition. Ms. Steelman received a 7% increase during her transition to COO and another 7% after her transition. Other NEOs received merit increases in fiscal 2021 after forgoing increases in fiscal 2020.
While there was a great deal of ambiguity around the overall economic environment of fiscal 2021, the compensation committee returned to the pre-pandemic annual incentive plan design that tied potential payouts to full-year earnings before taxes (“EBT”) attainment.
For the standard annual award of equity in March, the committee returned to a pre-pandemic mix of PBSs, stock options, and time-based RSUs to support the Company’s pay-for-performance philosophy. Because of the economic uncertainty in setting reasonable multi-year performance goals, the compensation committee set the fiscal 2021 PBSs with two one-year goals for EBT and revenue, with a target level performance cap if the Company’s total shareholder return (“TSR”) for its 2021-2023 fiscal years is not positive. The PBSs also require a third year of time vesting.
Based on our strong fiscal 2021 performance that exceeded our expectations for EBT results, the compensation committee approved annual incentive funding at the maximum level, which equals 200% of the full year’s target bonus amount.

The alignment of performance and pay in fiscal 2021 reflects our compensation philosophy.

Executive pay is delivered through a performance-based compensation program that provides the opportunity to earn meaningful compensation upon achievement of superior performance and limits earnings opportunity when results are not satisfactory. Annual incentive opportunity is directly tied to one quantifiable objective performance target: EBT. The use of EBT is designed to enhance focus on profitable growth, which is a key indicator of our operating performance. No awards are paid under this program if a threshold level of EBT is not achieved.

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  Compensation Discussion and Analysis

Our long-term incentive plan (“LTIP”) is designed to focus on our plan to drive long-term profitable growth.

The LTIP included PBSs that are earned based on revenue and EBT performance during two one-year performance periods, with a target level performance cap if the Company’s TSR for its 2021-2023 fiscal years is not positive, and also require a third year of time vesting; non-qualified stock options with four-year vesting; and time-based RSUs with three-year cliff vesting. Stock options only provide for compensation if the share price rises above the fair market value grant price, also aligning executive’s interests in share value growth, and time-based RSUs serve as a retention vehicle and further align associates’ interests with stockholders. For fiscal 2021, the compensation committee awarded NEOs 50% in the form of PBSs to support our growth goals, 30% of the targeted LTIP value in the form of stock options to maintain a focus on share price appreciation, and 20% in the form of time-based RSUs to better support retention. In March 2022, we returned to our historical practice where our PBS awards are tied to the attainment of both two-year EBT growth and two-year revenue growth goals and require a third year of vesting. Payout of the PBS awards is subject to being modified to target payout if the Company’s TSR for its 2022-2024 fiscal years is greater than 10% and performance targets are not met, or if TSR is less than 10% and performance exceeds target. 

We value stockholder engagement and consider the results of the 2021 say-on-pay vote.

At our 2021 Annual Meeting of Stockholders, approximately 90% of stockholders indicated their approval of the compensation paid to our NEOs through the advisory vote to approve executive compensation (“say-on-pay”). The compensation committee believes that this vote affirms stockholder support of the Company’s approach to executive compensation. The compensation committee will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for our NEOs. We regularly review and assess our compensation programs to ensure that they are aligned with our business strategies and that the type and mix of short-term and long-term incentive vehicles used continue to align management with stockholders’ interests and reward for high performance.

Feedback from stockholders is an important consideration that the compensation committee uses when formulating future compensation programs. The Company actively solicits feedback on a wide range of issues, including executive compensation, corporate governance, and environmental and social responsibility issues.

Philosophy

OUR PHILOSOPHY

    

HOW WE EXECUTE OUR PHILOSOPHY

Our executive compensation philosophy is to provide compensation opportunities that attract, retain, and motivate talented key executives.

We evaluate the competitiveness and effectiveness of our compensation programs against other comparable businesses based on industry, size, and other relevant business factors.

We link annual incentive compensation to our performance on a key measurable financial goal – EBT – that drives stockholder value.

We focus a significant portion of the executives’ compensation on equity-based incentives to align interests closely with stockholders.

We manage “pay for performance” such that pay is clearly linked to business and individual performance.

Overview of 2021 Compensation

Our fiscal 2021 compensation program consisted of a base salary, annual incentive plan, and long-term incentive plan. This mix of compensation is intended to ensure that total compensation reflects our overall intent to motivate executive officers to meet appropriate performance measures and to align management with stockholders’ long-term interests.

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Compensation Discussion and Analysis  

Components of Compensation

The majority of target compensation we offer our NEOs is delivered in variable, performance-based elements.

The material components of our executive compensation program design and their purposes and key characteristics are summarized in the following table:

Reward Element

  

  

Purpose

  

  

Form

  

  

Type

  

  

Duration

Fixed

Base Salary

Compensation for duties and responsibilities

Cash

Fixed

  

Short Term

At Risk

Annual Incentive Plan

Rewards NEOs for achievement of company-wide EBT goal

Cash

Performance Based

Short Term

Long-Term Incentive Plan

Rewards creation of long-term stockholder value

Performance-Based Shares

(50% of award value)

Stock Options (30% of award value)

Restricted Stock Units (20% of award value)

Performance Based

Long Term

As part of our continued emphasis on creating stockholder value, we utilize EBT as the single financial performance measure for the corporate annual incentive for all officers. This focus on a single performance objective reflects the Company’s strong linkage between stockholder value creation and management incentives. Each fiscal year, the Board of Directors approves the EBT target goal. The compensation committee then approves the threshold and maximum performance against the EBT target at the beginning of the fiscal year. This target reflected a rigorous goal setting process in which management and the compensation committee worked collaboratively to set stretch targets reflective of our ambitious growth goals which are tied to the company’s operating plans. For fiscal 2021, we achieved record performance, resulting in annual cash incentives for the NEOs payable at 200% of their target annual incentives.

We use PBSs, stock options, and RSUs as a means of providing long-term incentives for our NEOs. PBS awards are tied to the attainment of two one-year EBT growth and revenue growth goals as well as a three- TSR metric that caps awards at 100% of target if the three-year TSR is negative. The first chart below shows the mix of our current CEO’s fiscal 2021 target compensation by component and the portion of total compensation that is performance based. The second chart shows this same data for our other NEO’s (excluding Ms. Dillon) fiscal 2021 target compensation.

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GraphicGraphic

The use of stock options and PBSs emphasizes long-term alignment with stockholder value, as the stock options will not have any value unless our share price increases and the PBSs will not vest unless performance goals are met.

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Compensation Discussion and Analysis  

2021 Executive Compensation Process

What We Do:

Objectives and Considerations:

Compensation Committee Reviews Comparative Pay Levels

We review competitive pay levels among a peer group of retailers with revenues similar to Ulta Beauty, compensation survey data for similarly sized retail companies from the Willis Towers Watson 2020 Retail Executive Survey Report, and compensation survey data for similarly sized general industry companies from the Willis Towers Watson 2020 CDB General Industry Survey report.

Our CEO Provides Input for Other Executives

The CEO with input from our human resources department on competitive market positions recommends to the compensation committee other executive’s compensation based on the executive’s performance and internal pay equity among current executives and newly hired executives, as well as talent and succession planning considerations. The CEO does not participate in setting his own compensation.

Compensation Committee Makes Final Determination

The compensation committee approves executive compensation after deliberation, taking into account such factors as talent planning, succession, and Company performance. In addition, the committee considers such factors as total compensation philosophy, individual performance, and the positioning of Ulta Beauty’s executive total compensation levels relative to market.

We consider the nature and job scope of each NEO.

We consider internal pay positioning, taking into account each NEO’s pay components and levels relative to other executives with respect to role, length of time the NEO has served in the NEO’s current position, seniority, and levels of responsibility.

We consider the accounting and tax impact of each element of compensation.

We consider competitive pay levels and practices for similar positions among identified data sets.

ULTA BEAUTY 2021 COMPENSATION PEER GROUP

Big Lots, Inc.

Dollar General Corporation

Ross Stores, Inc.

Burlington Stores, Inc.

Dollar Tree, Inc.

Sally Beauty Holdings, Inc.

Capri Holdings Limited

Foot Locker, Inc.

The Michaels Companies, Inc.*

Carter’s, Inc.

L Brands, Inc.

Tractor Supply Company

Dick’s Sporting Goods, Inc.

PVH Corp.

Under Armour, Inc.

Williams-Sonoma, Inc.

* The Michaels Companies, Inc. was publicly-traded at the time it was used in this peer group analysis.

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  Compensation Discussion and Analysis

The compensation committee selected a peer group of companies with similar revenues and market capitalization and with whom we may compete for talent and assess them annually to ensure the peer group remains relevant from industry, size, and performance perspectives for use in benchmarking pay to inform its decisions.

Compensation of the Chief Executive Officer

In March 2021, the Company announced its CEO succession plan, pursuant to which, effective June 2, 2021, Mary Dillon transitioned to the newly created role of Executive Chair of the Board of Directors and David Kimbell succeeded Ms. Dillon as CEO.

In recognition of Ms. Dillon’s ongoing commitment and leadership in her role as CEO through June 2, 2021 and thereafter as Executive Chair of the Company’s Board of Directors, the compensation committee established the following compensation for Ms. Dillion in line with our normal practices in anticipation of her transition:

no change to base salary, prorated for time in role;
annual incentive with target of 170% of base salary remained consistent with prior year, prorated based on CEO service in fiscal 2021;
LTIP equity award on March 25, 2021 with a grant date fair value of $5,200,000, using the same mix of vehicles as for other senior officers (50% PBSs, 30% options, and 20% RSUs). To further align her interests with the Company, Ms. Dillon retains her right to vest in her PBSs, stock options and RSUs at the same time and based on the same performance factors as other executives, as long as she continues to provide services as CEO through June 2, 2021, and as Executive Chair of the Board through the Annual Meeting and, thereafter complies with certain non-compete, non-solicitation and confidential information covenants through March 15, 2024; and
annual cash retainer for serving as the Executive Chair of the Board of Directors was set at $800,000, prorated based on Executive Chair service in fiscal 2021.

In connection with Mr. Kimbell’s promotion to CEO, the compensation committee made the following adjustments to his compensation:

increased base salary by 15% to $915,782, effective March 21, 2021;
increased base salary by an additional 20% to $1,100,008, effective June 3, 2021;
increased annual incentive opportunity from 115% of base salary to 180% of base salary; and
LTIP equity award on March 25, 2021 with a grant date fair value of $4,510,000, using the same mix of vehicles as for other senior officers (50% PBSs, 30% options, and 20% RSUs).

2021 Compensation Components

COMPENSATION COMPONENTS

Base Salary

Annual Incentives

Long-Term Incentive Plan

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Compensation Discussion and Analysis  

Base Salary

Base salaries are reviewed annually and are set based on competitiveness versus the external market, talent planning, internal merit increase budgets, individual and Company performance, and internal equity considerations.

The NEO base salary increases for fiscal 2021 were:

Base Salary

Base Salary

Before June 2, 2021

After June 2, 2021

Named Executive Officer

  

  

($)

  

  

($)

  

David C. Kimbell

 

915,782

1,100,008

Mary N. Dillon

 

1,185,038

Scott M. Settersten

 

723,694

723,694

Jodi J. Caro

 

585,645

585,645

Jeffrey J. Childs

 

593,424

593,424

Kecia L. Steelman

 

750,402

800,010

In March 2021, the compensation committee approved merit increases of 4% for Mr. Settersten, Ms. Caro, and Mr. Childs. These base salary levels are competitive with our market. These approved increases were reflective of the general salary increase applicable to other associates that had exhibited strong performance but were already at the targeted market level.

In connection with his promotion to CEO, Mr. Kimbell received a 15% increase in March 2021 over his fiscal 2020 salary and then an additional 20% increase in June 2021 over his March 2021 salary. In connection with her promotion to COO, Ms. Steelman received a 7% increase in March 2021 over her 2020 salary and then an additional 7% increase in June 2021 over her March 2021 salary.

Annual Incentives

The NEO target annual incentives, shown as a percentage of base salaries, for fiscal 2021 compared to fiscal 2020 were as follows:

2021

2020

Annual Incentive

Annual Incentive

Named Executive Officer

Target

  

  

Target

    

David C. Kimbell

180

%  

115

%  

Mary N. Dillon

170

%  

170

%  

Scott M. Settersten

85

%  

80

%  

Jodi J. Caro

65

%  

65

%  

Jeffrey J. Childs

65

%  

65

%  

Kecia L. Steelman

100

%  

80

%  

Mr. Kimbell’s annual incentive target for 2021 was increased to reflect his expanded responsibilities in light of his promotion to CEO in June 2021. Mr. Settersten’s annual incentive target for 2021 was increased to reflect market competitiveness. Ms. Steelman’s annual incentive target for 2021 was increased to reflect her expanded responsibilities in light of her promotion to COO in June 2021.

In fiscal 2021, target EBT under the annual incentive program was $673.6 million. This target reflected a rigorous goal setting process in which management and the compensation committee worked collaboratively to set stretch targets reflective of our growth goals. The fiscal 2021 EBT goal was an appropriate stretch goal at the time it was set given that our EBT performance in fiscal 2020 had decreased to $231.1 million as a result of the pandemic, there were no clear signs of an overall economic revival, and due to concerns over continued COVID-19 outbreaks in fiscal 2021.

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  Compensation Discussion and Analysis

The fiscal 2021 annual incentive performance/payout range was as follows:

2021

 

Annual Incentive Performance

  

  

Percent to Target

  

Payout

Threshold

 

87

%  

40

%  

Target

 

100

%  

100

%  

Maximum

 

110

%  

200

%  

Based on our EBT performance of $1.3 billion, the annual incentive payout was 200% of the target based on EBT performance of greater than 110% to target. The compensation committee can use negative discretion to reduce calculated annual incentive payouts but did not apply any downward discretion in fiscal 2021.

Long-Term Incentive Plan

During fiscal 2021, we provided long-term incentive awards through grants of PBSs, stock options, and RSUs to our NEOs and certain other associates. Under the LTIP, each eligible associate may receive an award with a value that is targeted to a percentage of base salary, with the ultimate value dependent upon Company performance.

The LTIP awards, shown as a percentage of base salaries, for fiscal 2021 compared to fiscal 2020 were as follows:

2021

2020

LTIP Target

LTIP Target

Named Executive Officer

Percentages

  

  

Percentages

    

David C. Kimbell

410

%  

330

%  

Mary N. Dillon

439

%  

409

%  

Scott M. Settersten

230

%  

230

%  

Jodi J. Caro

150

%  

135

%  

Jeffrey J. Childs

100

%  

100

%  

Kecia L. Steelman

280

%  

185

%  

The compensation committee increased the LTIP target percentage for Mr. Kimbell, Ms. Dillon, Ms. Caro, and Ms. Steelman to further align their compensation opportunities with stockholders for long-term value creation and provide market competitive long-term compensation opportunities.

Mr. Kimbell’s and Ms. Steelman’s LTIP award was based on their June 2021 salary.

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Consistent with our pay-for-performance orientation, the compensation committee granted the annual LTIP award with the following mix:

Chart

Description automatically generated

PBS   

Stock Options 

RSUs

PBSs granted under the LTIP have the following characteristics:

Stock options granted under the LTIP generally have the following characteristics:

RSUs granted under the LTIP generally have the following characteristics:

tied to achievement of two, one-year revenue and EBT targets;

50% of PBS grant value ties to attainment of revenue target and 50% of PBS grant value tied to attainment of EBT target;

the number of shares earned can be less or greater than target, including zero, based on Company performance;

the PBS awards are capped at 100% of the target if three-year TSR is negative; and

following the end of the two one-year performance periods, a third year of time vesting is required before the number of earned shares is delivered to the recipient.

  exercise price equal to the fair market value of our common stock on the date of grant;

  ratable vesting, on an annual basis over a four-year period; and

  ten-year term from the date of grant.

  entitle the holder to receive an equal number of shares of common stock at settlement; and

  cliff vest 100% at the end of three years from grant date.

PBS awards granted in fiscal 2021 were eligible to be earned based on two one-year cumulative revenue and EBT targets follows:

Revenue – 50% of PBS Value

EBT – 50% of PBS Value

  

  

Percent to Target

  

Payout

  

Percent to Target

  

Payout

Threshold

 

89%

50%

89%

50%

Target

 

100%

100%

100%

100%

Maximum

 

107%

170%

110%

200%

The fiscal 2021 one-year revenue and EBT targets were $7.3 billion and $673.6 million, respectively. For fiscal 2021, we achieved one-year revenue and EBT of $8.6 billion and $1.3 billion, respectively, resulting in a payout of 170% of the revenue payout and 200% of the EBT target. Although the performance period is complete, the award payout is subject to a cap based on the Company’s three-year TSR and is not eligible to vest until 2024.

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  Compensation Discussion and Analysis

As discussed in last year’s proxy statement, the compensation committee approved a payout under the 2019 PBSs in 2021 that reflected the two-year cumulative performance period of fiscal 2019 and fiscal 2020. In assessing performance, the compensation committee elected to exclude the estimated impact of the COVID-19 pandemic on revenue and EBT in fiscal 2020. This had the impact of changing the value of the PBS award for the performance period from zero, to a weighted average payout of approximately 58.8% of target. This determination resulted in an additional compensation charge with respect to the 2019 PBSs that is included in the amounts reported in each of the Summary Compensation Table and Grants of Plan-Based Awards Table contained in this proxy.

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Executive Compensation Policies and Practices

The compensation committee and management seek to ensure that our executive compensation and benefits programs align with our core compensation philosophy. We maintain the following policies and practices that drive the compensation program for our NEOs:

What We Do

    

What We Don’t Do

Pay-for-Performance: Significant amount is performance-based and not guaranteed

No Excise Tax Gross-Ups: The Company does not provide any excise tax gross-up payments in connection with a change in control

Multiple Performance Metrics and Time Horizons: Use multiple performance metrics focusing on top-line and bottom-line growth and multi-year vesting and measurement periods for long-term incentives

No Repricing or Buyouts of Stock Options: The Company’s equity plan prohibits repricing or buyouts of underwater stock options

Annual Compensation Risk Review: Annually assess risk in compensation programs

No Tax Gross-ups for Perquisites: The Company does not provide tax gross-ups to NEOs for the limited perquisites we provide

Double-Trigger Change in Control: Include “double-trigger” change in control provisions for the vesting of equity awards and the receipt of severance

No Hedging, Derivatives, Pledging or Margin Accounts: NEOs are prohibited from engaging in derivatives and hedging transactions and from holding Company stock in a margin account or pledging Company stock as collateral

Share Ownership Guidelines: NEOs must comply with share ownership requirements

No Dividends on Unearned PBSs and RSUs: No dividends or dividend equivalents are paid on PBSs or RSUs until such PBSs and RSUs become vested and earned

Clawback Policy: We maintain a robust clawback policy that provides for recovery of incentive compensation in the event of a financial restatement, other misconduct not involving financial restatements, and for breaches of non-compete and other restrictive covenants

No Contracts: No contracts with multi-year guaranteed salary increases or non-performance bonus arrangements

Challenging Performance Objectives: Set challenging performance objectives for Annual Incentive and LTIP

Use of Independent Consultant: The compensation committee has retained an independent compensation consultant that performs no other consulting services for the Company and has no conflicts of interest

Limited Perquisites: Provide limited perquisites

Peer Groups: Use appropriate peer groups when establishing compensation

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Share Ownership Guidelines

The compensation committee has established the following share ownership guidelines to strengthen the focus of our senior officers on our long-term goals and further align their interests with stockholders:

Position

  

  

Required Amount

CEO

6X Base Salary

Other NEOs

3X Base Salary

Chief Non-NEOs

2X Base Salary

In addition to shares held directly, shares of common stock held in brokerage accounts for the executives’ benefit in trust, through tax qualified retirement plans, PBSs (which have been earned based on performance, but which are still subject to time vesting) and RSUs are included in determining whether the ownership requirement has been met and sustained. Executives subject to the guidelines are required to retain at least 50% of the net after-tax shares awarded until they have achieved the required ownership level. All executives are in compliance with our share ownership guidelines.

Clawback Provisions

We maintain a robust compensation recovery or “clawback” policy applicable to all Section 16 officers as well as other associates who receive equity grants or are otherwise selected for coverage.

Under the clawback policy, the compensation committee may recover and/or cancel previously granted or earned incentive compensation (including recovery of gains realized thereon) in the event: (a) that Ulta Beauty is required to materially restate its financial or operating results (whether or not there is any fraud or misconduct and whether or not the executive whose compensation is subject to clawback is responsible, but excluding restatements caused by changes in accounting rules, reclassification or other retrospective changes not caused by fraud or misconduct), (b) of fraud or misconduct (regardless of whether the fraud or misconduct is related to a restatement of financial or operating results), (c) of a violation of Ulta Beauty’s Code of Business Conduct, or (d) of a violation of any applicable non-compete, non-solicitation or confidentiality covenants.

No Hedging, Derivatives, Pledging or Margin Accounts

Our insider trading policy prohibits trading in puts, calls, and other derivative securities on our stock and also prohibits the purchase of financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) or otherwise engaging in transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of our stock by officers, directors, and associates. In addition, our insider trading policy prohibits our executive officers, directors, and other designated insiders from holding Company stock in a margin account or pledging our stock as collateral for a loan, with certain limited exceptions.

Long-Term Incentive Granting Policy

We have a general policy of making equity grants (stock options and RSUs) for new executive officers and NEOs once our trading window opens on the third business day following the date our earnings announcement is made for each fiscal quarter. The window generally remains open for 30 days. The annual LTIP grant is generally made in the open window following our fourth quarter earnings announcement. This timing is therefore generally consistent with when our executives and directors would be allowed to trade in our common stock under our insider trading policy. The compensation committee determined that setting the exercise price for stock options at this time was prudent in that it allowed for the market to process all reported public information prior to establishing the price. Such a practice thereby eliminates any potential manipulation regarding the timing of stock option grants. All equity grants for executives and NEOs are approved in advance by the compensation committee.

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Benefits and Perquisites

Executives can defer compensation under our non-qualified deferred compensation plan with matching contributions equal to 100% of contributions made up to 3% of eligible deferred compensation, which is more fully described in the narrative to the 2021 Non-Qualified Deferred Compensation table below. For all eligible associates, we offer a 401(k) plan with matching contributions equal to 100% of the contributions for the first 3% of eligible salary and 50% of the contributions on the next 2% of eligible salary. In addition, we offer group health, life, accident, and disability insurance to eligible associates. Our associates are also entitled to a discount on purchases at our stores.

Change in Control and Severance Plan

The Company has an Executive Change in Control and Severance Plan (the “CIC Plan”), which provides severance and other benefits should an executive be involuntarily terminated in connection with a change in control. We adopted the CIC Plan as a market-based plan that is intended to minimize distraction to our executives by providing financial security in the event of a loss of employment following a change in control. See “Severance and Change in Control Benefits” below for additional details.

Accounting and Tax Considerations

Historically, our incentive compensation programs have been designed and administered in a manner generally intended to preserve federal income tax deductions. However, the compensation committee considers the tax and accounting consequences of utilizing various forms of compensation and retains the discretion to pay compensation that is not tax deductible or could have adverse accounting consequences for Ulta Beauty.

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Table of Contents

  Compensation Discussion and Analysis

Summary Compensation Table

The following table sets forth the compensation of our NEOs for fiscal 2021:

Non-Equity

Stock

Incentive

Stock

Option

Plan

All Other

 

Salary

Bonus

Awards

Awards

Compensation

Compensation

Total

Name and Principal Position

  

  

Year

  

  

($)

  

  

($)

  

  

($) (2)

  

  

($) (3)

  

  

($)

  

  

($) (4)

  

  

($)

  

David C. Kimbell

 

2021

 

1,037,756

(1)

 

2,349,012

1,353,033

3,735,922

 

64,044

 

8,539,767

Chief Executive Officer and

 

2020

 

798,075

 

229,447

 

3,853,077

3,853,043

688,340

 

46,843

 

9,468,825

Director (Principal Executive

2019

 

730,642

 

 

986,906

 

986,403

 

358,150

 

43,811

 

3,105,912

Officer)

 

Mary N. Dillon

 

2021

 

927,912

(1)

 

3,107,895

 

1,560,097

 

1,361,492

 

10,995

 

6,968,391

Executive Chair and

 

2020

 

1,009,333

503,641

 

2,496,205

 

2,496,144

 

1,510,923

 

83,918

 

8,100,164

Former Chief Executive Officer (Former

2019

 

1,185,038

 

 

2,376,246

 

2,376,052

 

1,035,889

 

91,574

 

7,064,799

Principal Executive Officer)