UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended October 29, 2022

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _____________

Commission File Number: 001-33764

ULTA BEAUTY, INC.

(Exact name of Registrant as specified in its charter)

incorporation or organization)

Identification No.)

Delaware

(State or other jurisdiction of
incorporation or organization)

38-4022268

(I.R.S. Employer
Identification No.)

1000 Remington Blvd., Suite 120

Bolingbrook, Illinois

(Address of principal executive offices)

60440

(Zip code)

Registrant’s telephone number, including area code: (630) 410-4800

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ULTA	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of November 28, 2022 was 50,880,771 shares.

Table of Contents

ULTA BEAUTY, INC.

TABLE OF CONTENTS


Part I - Financial Information

Item 1. Financial Statements
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Cash Flows		5
Consolidated Statements of Stockholders’ Equity		6
Notes to Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3. Quantitative and Qualitative Disclosures about Market Risk		24

Item 4. Controls and Procedures		25

Part II - Other Information		25

Item 1. Legal Proceedings		25

Item 1A. Risk Factors		25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26

Item 3. Defaults Upon Senior Securities		26

Item 4. Mine Safety Disclosures		26

Item 5. Other Information		26

Item 6. Exhibits		27

SIGNATURES		28

Table of Contents

Part I - Financial Information

Item 1.Financial Statements

Ulta Beauty, Inc.

Consolidated Balance Sheets


	October 29,		January 29,		October 30,
(In thousands, except per share data)	2022		2022		2021
Assets		(Unaudited)				(Unaudited)
Current assets:
Cash and cash equivalents	$	250,628	$	431,560	$	605,053
Receivables, net		200,304		233,682		169,212
Merchandise inventories, net		2,114,669		1,499,218		1,916,343
Prepaid expenses and other current assets		137,642		110,814		105,584
Prepaid income taxes		42,572		5,909		37,501
Total current assets		2,745,815		2,281,183		2,833,693

Property and equipment, net		967,039		914,476		908,665
Operating lease assets		1,556,940		1,482,256		1,464,533
Goodwill		10,870		10,870		10,870
Other intangible assets, net		844		1,538		1,770
Deferred compensation plan assets		31,529		38,409		36,403
Other long-term assets		18,512		35,647		31,833
Total assets	$	5,331,549	$	4,764,379	$	5,287,767

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	647,117	$	552,730	$	747,451
Accrued liabilities		462,773		364,797		329,672
Deferred revenue		312,132		353,579		272,628
Current operating lease liabilities		275,749		274,118		274,365
Accrued income taxes		—		12,786		—
Total current liabilities		1,697,771		1,558,010		1,624,116

Non-current operating lease liabilities		1,621,252		1,572,638		1,565,921
Deferred income taxes		38,627		39,693		67,267
Other long-term liabilities		51,644		58,665		43,663
Total liabilities		3,409,294		3,229,006		3,300,967

Commitments and contingencies (Note 6)

Stockholders' equity:
Common stock, $0.01 par value, 400,000 shares authorized; 51,785, 53,049, and 54,907 shares issued; 51,029, 52,311, and 54,170 shares outstanding; at October 29, 2022 (unaudited), January 29, 2022, and October 30, 2021 (unaudited), respectively		517		530		549
Treasury stock-common, at cost		(60,218)		(53,478)		(53,312)
Additional paid-in capital		998,816		934,945		915,814
Retained earnings		983,140		653,376		1,123,749
Total stockholders’ equity		1,922,255		1,535,373		1,986,800
Total liabilities and stockholders’ equity	$	5,331,549	$	4,764,379	$	5,287,767

See accompanying notes to consolidated financial statements.

Table of Contents

Ulta Beauty, Inc.

Consolidated Statements of Income

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
	October 29,		October 30,		October 29,		October 30,
(In thousands, except per share data)	2022		2021		2022		2021
Net sales	$	2,338,793	$	1,995,775	$	6,981,807	$	5,901,501
Cost of sales		1,375,976		1,206,301		4,149,800		3,560,276
Gross profit		962,817		789,474		2,832,007		2,341,225

Selling, general and administrative expenses		597,164		503,403		1,632,593		1,411,577
Pre-opening expenses		3,797		1,832		8,422		7,778
Operating income		361,856		284,239		1,190,992		921,870
Interest expense (income), net		(849)		413		(556)		1,196
Income before income taxes		362,705		283,826		1,191,548		920,674
Income tax expense		88,120		68,537		289,891		224,203
Net income	$	274,585	$	215,289	$	901,657	$	696,471

Net income per common share:
Basic	$	5.37	$	3.97	$	17.45	$	12.68
Diluted	$	5.34	$	3.94	$	17.35	$	12.60

Weighted average common shares outstanding:
Basic		51,131		54,291		51,663		54,921
Diluted		51,418		54,660		51,962		55,280

See accompanying notes to consolidated financial statements.

Table of Contents

Ulta Beauty, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	39 Weeks Ended
	October 29,		October 30,
(In thousands)	2022		2021
Operating activities
Net income	$	901,657	$	696,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		182,182		204,734
Non-cash lease expense		222,548		206,017
Deferred income taxes		(1,066)		1,908
Stock-based compensation expense		32,554		38,217
Loss on disposal of property and equipment		3,892		3,357
Change in operating assets and liabilities:
Receivables		33,378		23,897
Merchandise inventories		(615,451)		(748,128)
Prepaid expenses and other current assets		(26,828)		1,818
Income taxes		(49,446)		(80,027)
Accounts payable		94,214		266,104
Accrued liabilities		64,164		24,482
Deferred revenue		(41,447)		(1,755)
Operating lease liabilities		(246,988)		(222,451)
Other assets and liabilities		20,063		213
Net cash provided by operating activities		573,426		414,857

Investing activities
Capital expenditures		(203,961)		(108,418)
Other investments		(3,068)		—
Net cash used in investing activities		(207,029)		(108,418)

Financing activities
Repurchase of common shares		(571,908)		(762,167)
Stock options exercised		31,319		30,297
Purchase of treasury shares		(6,740)		(15,511)
Net cash used in financing activities		(547,329)		(747,381)

Effect of exchange rate changes on cash and cash equivalents		—		(56)
Net decrease in cash and cash equivalents		(180,932)		(440,998)
Cash and cash equivalents at beginning of period		431,560		1,046,051
Cash and cash equivalents at end of period	$	250,628	$	605,053

Supplemental information
Cash paid for interest	$	1,598	$	1,594
Income taxes paid, net of refunds		339,290		301,312
Non-cash capital expenditures		33,982		13,148

See accompanying notes to consolidated financial statements.

Table of Contents

Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)


				Treasury -
	Common Stock			Common Stock			Additional				Total
	Issued			Treasury			Paid-In		Retained		Stockholders'
(In thousands)	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
Balance – January 29, 2022	53,049	$	530	(738)	$	(53,478)	$	934,945	$	653,376	$	1,535,373
Net income	—		—	—		—		—		331,395		331,395
Stock-based compensation	—		—	—		—		10,356		—		10,356
Stock options exercised and other awards	73		1	—		—		6,501		—		6,502
Purchase of treasury shares	—		—	(14)		(5,172)		—		—		(5,172)
Repurchase of common shares	(332)		(3)	—		—		—		(132,831)		(132,834)
Balance – April 30, 2022	52,790	$	528	(752)	$	(58,650)	$	951,802	$	851,940	$	1,745,620
Net income	—		—	—		—		—		295,677		295,677
Stock-based compensation	—		—	—		—		12,519		—		12,519
Stock options exercised and other awards	95		1	—		—		18,018		—		18,019
Purchase of treasury shares	—		—	(3)		(1,153)		—		—		(1,153)
Repurchase of common shares	(798)		(8)	—		—		—		(301,606)		(301,614)
Balance – July 30, 2022	52,087	$	521	(755)	$	(59,803)	$	982,339	$	846,011	$	1,769,068
Net income	—		—	—		—		—		274,585		274,585
Stock-based compensation	—		—	—		—		9,679		—		9,679
Stock options exercised and other awards	38		—	—		—		6,798		—		6,798
Purchase of treasury shares	—		—	(1)		(415)		—		—		(415)
Repurchase of common shares	(340)		(4)	—		—		—		(137,456)		(137,460)
Balance – October 29, 2022	51,785	$	517	(756)	$	(60,218)	$	998,816	$	983,140	$	1,922,255

See accompanying notes to consolidated financial statements.

Table of Contents

Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)


				Treasury -							Accumulated
	Common Stock			Common Stock			Additional				Other		Total
	Issued			Treasury			Paid-In		Retained		Comprehensive		Stockholders'
(In thousands)	Shares	Amount		Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balance – January 30, 2021	56,952	$	569	(692)	$	(37,801)	$	847,303	$	1,189,422	$	56	$	1,999,549
Net income	—		—	—		—		—		230,289		—		230,289
Stock-based compensation	—		—	—		—		8,978		—		—		8,978
Foreign currency translation adjustments	—		—	—		—		—		—		(56)		(56)
Stock options exercised and other awards	94		1	—		—		5,031		—		—		5,032
Purchase of treasury shares	—		—	(21)		(6,766)		—		—		—		(6,766)
Repurchase of common shares	(1,243)		(12)	—		—		—		(392,297)		—		(392,309)
Balance – May 1, 2021	55,803	$	558	(713)	$	(44,567)	$	861,312	$	1,027,414	$	—	$	1,844,717
Net income	—		—	—		—		—		250,893		—		250,893
Stock-based compensation	—		—	—		—		10,119		—		—		10,119
Stock options exercised and other awards	104		1	—		—		17,775		—		—		17,776
Purchase of treasury shares	—		—	(1)		(208)		—		—		—		(208)
Repurchase of common shares	(747)		(8)	—		—		—		(243,476)		—		(243,484)
Balance – July 31, 2021	55,160	$	551	(714)	$	(44,775)	$	889,206	$	1,034,831	$	—	$	1,879,813
Net income	—		—	—		—		—		215,289		—		215,289
Stock-based compensation	—		—	—		—		19,120		—		—		19,120
Stock options exercised and other awards	87		1	—		—		7,488		—		—		7,489
Purchase of treasury shares	—		—	(23)		(8,537)		—		—		—		(8,537)
Repurchase of common shares	(340)		(3)	—		—		—		(126,371)		—		(126,374)
Balance – October 30, 2021	54,907	$	549	(737)	$	(53,312)	$	915,814	$	1,123,749	$	—	$	1,986,800

See accompanying notes to consolidated financial statements.

Table of Contents

Ulta Beauty, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share and store count data) (Unaudited)

1.Business and basis of presentation

Ulta Beauty, Inc. was founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services. The stores also feature full-service salons. As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc. and its consolidated subsidiaries.

As of October 29, 2022, the Company operated 1,343 stores across 50 states, as shown in the table below.


	Number of		Number of
Location	stores	Location	stores
Alabama	24	Montana	6
Alaska	3	Nebraska	5
Arizona	32	Nevada	16
Arkansas	11	New Hampshire	8
California	166	New Jersey	44
Colorado	26	New Mexico	7
Connecticut	19	New York	52
Delaware	4	North Carolina	43
Florida	92	North Dakota	4
Georgia	43	Ohio	45
Hawaii	4	Oklahoma	21
Idaho	9	Oregon	18
Illinois	55	Pennsylvania	45
Indiana	25	Rhode Island	4
Iowa	11	South Carolina	24
Kansas	13	South Dakota	3
Kentucky	15	Tennessee	28
Louisiana	18	Texas	125
Maine	3	Utah	15
Maryland	28	Vermont	1
Massachusetts	24	Virginia	32
Michigan	49	Washington	37
Minnesota	19	West Virginia	7
Mississippi	12	Wisconsin	20
Missouri	25	Wyoming	3
		Total	1,343

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X. These financial statements were prepared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

Table of Contents

The Company’s business is subject to seasonal fluctuation, with significant portions of net sales and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season. The results for the 13 and 39 weeks ended October 29, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending January 28, 2023, or for any other future interim period or for any future year, in particular as a result of the uncertainty around the continuing effects of the COVID-19 pandemic, geopolitical events, and inflationary cost pressures on future periods.

These unaudited interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended January 29, 2022. All amounts are stated in thousands, with the exception of per share amounts and number of stores.

2.Summary of significant accounting policies

Information regarding significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Annual Report on Form 10-K for the year ended January 29, 2022. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” in the Annual Report.

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The third quarter in fiscal 2022 and 2021 ended on October 29, 2022 and October 30, 2021, respectively.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. Actual results could differ from those estimates. The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and right-of-use assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, geopolitical events, and inflationary cost pressures, will be reflected in the consolidated financial statements in future periods.

Table of Contents

3.Revenue

Net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue. Other revenue includes the private label and co-branded credit card programs, royalties derived from the partnership with Target Corporation, and deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

The following table sets forth the approximate percentage of net sales by primary category:


	13 Weeks Ended		39 Weeks Ended
	October 29,	October 30,	October 29,	October 30,
(Percentage of net sales)	2022	2021	2022	2021
Cosmetics	44%	45%	43%	44%
Haircare products and styling tools	21%	21%	21%	20%
Skincare	16%	16%	17%	17%
Fragrance and bath	12%	12%	12%	12%
Services	4%	3%	4%	4%
Accessories and other	3%	3%	3%	3%
	100%	100%	100%	100%

Deferred revenue

Deferred revenue primarily represents contract liabilities for the obligation to transfer additional goods or services to a guest for which the Company has received consideration, such as unredeemed Ultamate Rewards loyalty points and unredeemed Ulta Beauty gift cards. In addition, breakage on gift cards is recognized proportionately as redemption occurs.

The following table provides a summary of the changes included in deferred revenue during the 13 and 39 weeks ended October 29, 2022 and October 30, 2021:


	13 Weeks Ended				39 Weeks Ended
	October 29,		October 30,		October 29,		October 30,
(In thousands)	2022		2021		2022		2021
Beginning balance	$	305,913	$	256,227	$	345,206	$	269,032
Additions to contract liabilities (1)		97,521