| Segment reporting |
19. Segment reporting
The Company operates specialty beauty retail stores selling cosmetics, fragrance, skincare products, haircare products, wellness products, and services. Nearly every store features a full-service salon. The Company has one operating segment and one reportable segment, both of which include retail stores, salon services, and e-commerce.
The Company’s President and Chief Executive Officer operates as the chief operating decision maker (“CODM”) and evaluates performance based on net income that is reported on the consolidated statements of income. The measure of segment assets is reported on the consolidated balance sheets as total assets. The Company’s net sales are primarily generated within the United States and its long-lived assets are located primarily in the United States.
The CODM considers both budget-to-actual and forecast-to-actual variances on a monthly basis for profit measures when assessing performance and making decisions about allocating capital and resources. The CODM also uses net income in competitive analysis by benchmarking to competitors. The competitive analysis along with the monitoring of the financial results are used in assessing performance of the reportable segment and in establishing compensation.
Within the reportable segment, there are significant expense categories regularly provided to the CODM and included in the measure of the segment’s net income as shown below:
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Fiscal Year Ended |
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January 31, |
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February 1, |
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February 3, |
(In thousands) |
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2026 |
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2025 |
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2024 |
Net sales |
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$ |
12,392,820 |
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$ |
11,295,654 |
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$ |
11,207,303 |
Less: |
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Cost of sales (1) |
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7,547,596 |
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6,908,401 |
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6,826,203 |
Associate expenses (2) |
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1,714,677 |
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1,459,231 |
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1,391,175 |
Advertising expense, net (3) |
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490,980 |
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431,455 |
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422,779 |
Pre-opening expenses |
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15,821 |
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13,689 |
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8,510 |
Other segment expenses (1) (4) |
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1,090,754 |
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917,906 |
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880,607 |
Interest expense (income), net |
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1,787 |
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(15,094) |
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(17,622) |
Income tax expense |
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373,869 |
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378,948 |
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404,646 |
Equity net loss of affiliate |
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3,857 |
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— |
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— |
Net income |
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$ |
1,153,479 |
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$ |
1,201,118 |
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$ |
1,291,005 |
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(1) |
Included within cost of sales and other segment expenses is depreciation and amortization expense of $300,772, $267,042, and $243,840 is fiscal years 2025, 2024, and 2023, respectively, as described in Note 2, “Summary of significant accounting policies.”
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(2) |
Associate expenses include salaries, wages, bonus, and other forms of compensation related to associates as described in Note 2, “Summary of significant accounting policies.” |
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(3) |
Advertising expense, net consists of print, digital and social media, and television and radio advertising, net of vendor income that is a reimbursement of specific, incremental, and identifiable costs as described in Note 2, “Summary of significant accounting policies.” |
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(4) |
Other segment expenses include other corporate overhead and store operating expenses within SG&A expenses as described in Note 2, “Summary of significant accounting policies.” |
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