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 28, 2023

☐ 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 27, 2023 was 48,561,517 shares.

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Part I - Financial Information

Item 1.Financial Statements

Ulta Beauty, Inc.

Consolidated Balance Sheets


	October 28,		January 28,		October 29,
(In thousands, except per share data)	2023		2023		2022
Assets		(Unaudited)				(Unaudited)
Current assets:
Cash and cash equivalents	$	121,811	$	737,877	$	250,628
Receivables, net		202,868		199,422		200,304
Merchandise inventories, net		2,321,306		1,603,451		2,114,669
Prepaid expenses and other current assets		117,282		130,246		137,642
Prepaid income taxes		28,773		38,308		42,572
Total current assets		2,792,040		2,709,304		2,745,815

Property and equipment, net		1,117,874		1,009,273		967,039
Operating lease assets		1,578,316		1,561,263		1,556,940
Goodwill		10,870		10,870		10,870
Other intangible assets, net		591		1,312		844
Deferred compensation plan assets		38,371		35,382		31,529
Other long-term assets		56,946		43,007		18,512
Total assets	$	5,595,008	$	5,370,411	$	5,331,549

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	597,373	$	559,527	$	647,117
Accrued liabilities		405,443		444,278		462,773
Deferred revenue		350,937		394,677		312,132
Current operating lease liabilities		287,786		283,293		275,749
Short-term debt		195,400		—		—
Total current liabilities		1,836,939		1,681,775		1,697,771

Non-current operating lease liabilities		1,616,747		1,619,883		1,621,252
Deferred income taxes		56,874		55,346		38,627
Other long-term liabilities		55,906		53,596		51,644
Total liabilities		3,566,466		3,410,600		3,409,294

Commitments and contingencies (Note 6)

Stockholders' equity:
Common stock, $0.01 par value, 400,000 shares authorized; 49,458, 51,120, and 51,785 shares issued; 48,659, 50,364, and 51,029 shares outstanding; at October 28, 2023 (unaudited), January 28, 2023, and October 29, 2022 (unaudited), respectively		495		511		517
Treasury stock-common, at cost		(82,798)		(60,470)		(60,218)
Additional paid-in capital		1,058,969		1,023,997		998,816
Retained earnings		1,051,876		995,773		983,140
Total stockholders’ equity		2,028,542		1,959,811		1,922,255
Total liabilities and stockholders’ equity	$	5,595,008	$	5,370,411	$	5,331,549

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Income

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
	October 28,		October 29,		October 28,		October 29,
(In thousands, except per share data)	2023		2022		2023		2022
Net sales	$	2,488,933	$	2,338,793	$	7,653,005	$	6,981,807
Cost of sales		1,496,866		1,375,976		4,612,469		4,149,800
Gross profit		992,067		962,817		3,040,536		2,832,007

Selling, general and administrative expenses		661,380		597,164		1,874,201		1,632,593
Pre-opening expenses		3,460		3,797		5,396		8,422
Operating income		327,227		361,856		1,160,939		1,190,992
Interest income, net		(2,497)		(849)		(14,294)		(556)
Income before income taxes		329,724		362,705		1,175,233		1,191,548
Income tax expense		80,241		88,120		278,597		289,891
Net income	$	249,483	$	274,585	$	896,636	$	901,657

Net income per common share:
Basic	$	5.09	$	5.37	$	18.08	$	17.45
Diluted	$	5.07	$	5.34	$	17.99	$	17.35

Weighted average common shares outstanding:
Basic		49,007		51,131		49,592		51,663
Diluted		49,226		51,418		49,846		51,962

See accompanying notes to consolidated financial statements.

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Ulta Beauty, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	39 Weeks Ended
	October 28,		October 29,
(In thousands)	2023		2022
Operating activities
Net income	$	896,636	$	901,657
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		181,273		182,182
Non-cash lease expense		232,772		222,548
Deferred income taxes		1,528		(1,066)
Stock-based compensation expense		33,477		32,554
Loss on disposal of property and equipment		6,310		3,892
Change in operating assets and liabilities:
Receivables		(3,446)		33,378
Merchandise inventories		(717,855)		(615,451)
Prepaid expenses and other current assets		12,964		(26,828)
Income taxes		9,535		(49,446)
Accounts payable		41,817		94,214
Accrued liabilities		(34,955)		64,164
Deferred revenue		(43,740)		(41,447)
Operating lease liabilities		(248,469)		(246,988)
Other assets and liabilities		(9,836)		20,063
Net cash provided by operating activities		358,011		573,426

Investing activities
Capital expenditures		(311,030)		(203,961)
Other investments		(4,870)		(3,068)
Net cash used in investing activities		(315,900)		(207,029)

Financing activities
Borrowings from credit facility		195,400		—
Repurchase of common shares		(840,551)		(571,908)
Stock options exercised		9,302		31,319
Purchase of treasury shares		(22,328)		(6,740)
Net cash used in financing activities		(658,177)		(547,329)

Net decrease in cash and cash equivalents		(616,066)		(180,932)
Cash and cash equivalents at beginning of period		737,877		431,560
Cash and cash equivalents at end of period	$	121,811	$	250,628

Supplemental information
Income taxes paid, net of refunds	$	266,802	$	339,290
Non-cash capital expenditures		53,936		33,982

See accompanying notes to consolidated financial statements.

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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 28, 2023	51,120	$	511	(756)	$	(60,470)	$	1,023,997	$	995,773	$	1,959,811
Net income	—		—	—		—		—		347,051		347,051
Stock-based compensation	—		—	—		—		9,721		—		9,721
Stock options exercised and other awards	150		1	—		—		8,926		—		8,927
Purchase of treasury shares	—		—	(41)		(21,659)		—		—		(21,659)
Repurchase of common shares, including excise tax	(541)		(5)	—		—		(2,266)		(283,512)		(285,783)
Balance – April 29, 2023	50,729	$	507	(797)	$	(82,129)	$	1,040,378	$	1,059,312	$	2,018,068
Net income	—		—	—		—		—		300,102		300,102
Stock-based compensation	—		—	—		—		11,818		—		11,818
Stock options exercised and other awards	4		—	—		—		220		—		220
Purchase of treasury shares	—		—	(1)		(100)		—		—		(100)
Repurchase of common shares, including excise tax	(594)		(6)	—		—		(2,737)		(275,488)		(278,231)
Balance – July 29, 2023	50,139	$	501	(798)	$	(82,229)	$	1,049,679	$	1,083,926	$	2,051,877
Net income	—		—	—		—		—		249,483		249,483
Stock-based compensation	—		—	—		—		11,938		—		11,938
Stock options exercised and other awards	5		1	—		—		154		—		155
Purchase of treasury shares	—		—	(1)		(569)		—		—		(569)
Repurchase of common shares, including excise tax	(686)		(7)	—		—		(2,802)		(281,533)		(284,342)
Balance – October 28, 2023	49,458	$	495	(799)	$	(82,798)	$	1,058,969	$	1,051,876	$	2,028,542

See accompanying notes to consolidated financial statements.

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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.

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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. Nearly every store features a full-service salon. 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 28, 2023, the Company operated 1,374 stores across 50 states, as shown in the table below.


	Number of		Number of
Location	stores	Location	stores
Alabama	25	Montana	6
Alaska	3	Nebraska	5
Arizona	35	Nevada	16
Arkansas	11	New Hampshire	8
California	169	New Jersey	44
Colorado	27	New Mexico	7
Connecticut	19	New York	55
Delaware	4	North Carolina	44
Florida	94	North Dakota	4
Georgia	43	Ohio	46
Hawaii	4	Oklahoma	22
Idaho	9	Oregon	18
Illinois	55	Pennsylvania	45
Indiana	26	Rhode Island	4
Iowa	11	South Carolina	24
Kansas	13	South Dakota	3
Kentucky	16	Tennessee	31
Louisiana	18	Texas	129
Maine	3	Utah	15
Maryland	28	Vermont	1
Massachusetts	26	Virginia	33
Michigan	49	Washington	37
Minnesota	20	West Virginia	7
Mississippi	12	Wisconsin	21
Missouri	25	Wyoming	4
		Total	1,374

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.

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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 28, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending February 3, 2024, or for any other future interim period or for any future year.

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 28, 2023. 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 28, 2023. 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 2023 and 2022 ended on October 28, 2023 and October 29, 2022, 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 will be reflected in the consolidated financial statements in future periods.

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 28,	October 29,	October 28,	October 29,
(Percentage of net sales)	2023	2022	2023	2022
Cosmetics	42%	44%	42%	43%
Haircare products and styling tools	19%	21%	20%	21%
Skincare	19%	16%	19%	17%
Fragrance and bath	13%	12%	12%	12%
Services	4%	4%	4%	4%
Accessories and other	3%	3%	3%	3%
	100%	100%	100%	100%

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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 28, 2023 and October 29, 2022:


	13 Weeks Ended				39 Weeks Ended
	October 28,		October 29,		October 28,		October 29,
(In thousands)	2023		2022		2023		2022
Beginning balance	$	346,067	$	305,913	$	388,583	$	345,206
Additions to contract liabilities (1)		107,628		97,521		250,121		224,938
Deductions to contract liabilities (2)		(109,304)		(99,443)		(294,313)		(266,153)
Ending balance	$	344,391	$	303,991	$	344,391	$	303,991

(1)	Loyalty points and gift cards issued in the current period but not redeemed or expired.

(2)	Revenue recognized in the current period related to the beginning liability.

Other amounts included in deferred revenue were $6,546 and $8,141 at October 28, 2023 and October 29, 2022, respectively.

4.Goodwill and other intangible assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, was $10,870 at October 28, 2023, January 28, 2023, and October 29, 2022. No additional goodwill was recognized during the 13 and 39 weeks ended October 28, 2023. The recoverability of goodwill is reviewed annually during the fourth quarter or more frequently if an event occurs or circumstances change that would indicate that impairment may exist.

Other definite-lived intangible assets are amortized over their useful lives. The recoverability of intangible assets is reviewed whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.

5.Leases

The Company leases retail stores, distribution centers, fast fulfillment centers, market fulfillment centers, corporate offices, and certain equipment under non-cancelable operating leases with various expiration dates through 2036. All leases are classified as operating leases and generally have initial lease terms of 10 years and, when determined applicable, include renewal options under substantially the same terms and conditions as the original leases. Leases do not contain any material residual value guarantees or material restrictive covenants.

Lease cost

The majority of operating lease cost relates to retail stores, distribution centers, fast fulfillment centers, and market fulfillment centers and is classified within cost of sales. Operating lease cost for corporate offices is classified within selling, general and administrative expenses. Operating lease cost from the control date through store opening date is classified within pre-opening expenses.


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		14

Item 3. Quantitative and Qualitative Disclosures about Market Risk		23

Item 4. Controls and Procedures		24

Part II - Other Information		24

Item 1. Legal Proceedings		24

Item 1A. Risk Factors		24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24

Item 3. Defaults Upon Senior Securities		25

Item 4. Mine Safety Disclosures		25

Item 5. Other Information		25

Item 6. Exhibits		25

SIGNATURES		27