William Blair Growth Stock Conference June 12, 2013 Scott Settersten, Chief Financial Officer

Transcription

1 William Blair Growth Stock Conference June 12, 2013 Scott Settersten, Chief Financial Officer Presentation Name, Month XX, 2012

2 Safe Harbor Statement This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, or the Exchange Act (as amended), and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as outlook, believes, expects, plans, estimates, or other comparable words. Any forward-looking statements contained in this presentation are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales; our ability to attract and retain key executive personnel; our ability to successfully execute and implement our common stock repurchase program; and other risk factors detailed in our public filings with the SEC. You are urged to carefully review the disclosures we make concerning the risks, uncertainties and assumptions that may affect our business and operating results, including, but not limited to, the risks, uncertainties and assumptions set forth in our most recent Annual Report on Form 10-K under the captions Risk Factors, Business, Legal Proceedings and Management s Discussion and Analysis of Financial Condition and Results of Operations and any of those made in our other reports filed with the SEC. Please consider our forward-looking statements in light of those risks, uncertainties and assumptions as you evaluate this presentation. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management s beliefs and assumptions only as of the date of the relevant document. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We undertake no obligation to update any forward-looking statements after the date of this presentation, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws and regulations. 1

3 Why Invest in ULTA? Fast growth retailer with 48% penetration into 1,200 U.S. store plan Differentiated retail concept taking share in a fragmented market Attractive beauty industry and favorable demographic shifts Strong pipeline of newness in merchandising across categories Well-defined growth strategies Long-term financial model targeting 25% - 30% annual net income growth and mid-teen operating margin Strong operating cash flow enabling self-funded growth and free cash flow generation Tenured, experienced team in place to deliver strategies 2

4 Who We Are Only national beauty retailer of prestige, mass and salon products and services under one roof 576 convenient locations in 46 states as of Q ~10,000 sq. ft. stores carry 20,000 SKUs, 500 brands Rapidly growing e-commerce business Compelling loyalty program with ~11 million active members 3

5 One-Stop Shopping for Beauty in Convenient Locations One-Stop Shopping for Beauty Compelling Value Proposition Mass Salon Prestige Loyalty Program Exclusive Product Promotions / Events Convenient Off-Mall Locations Full-Service Salons 4

6 An Inviting Specialty Store Experience Exciting Modern Store Design Friendly, Well-Trained, Non-Commissioned Beauty Advisors Experiential Boutiques & Testers Licensed Stylists & Estheticians 5

7 Track Record of Sales and Earnings Growth 550 Number of Stores at Year End CAGR +15% Sales and Comp Store Sales Growth $2,220 $1,776 $1,455 $1,085 $1, CAGR +20% Comps 0.2% 1.4% 11.0% 10.9% 8.8% $172 Net Income $25 $39 $71 $120 CAGR +62% Growth (0.3%) 55.8% 80.5% 69.3% 43.5% Note: $ in millions. 6

8 Significant Market Share Opportunity ULTA has ~2% share of the >$100 Billion U.S. Market $41 Billion Salon Services Market Hair Care Services, Skin Care Services, and Nail Salons 41% Hair Care 10% Skin Care 10% Cosmetics 10% $59 Billion Beauty Products Market Fragrance 6% Other* 23% Source: 2012 data from April 2012 Euromonitor and September 2011 IBIS World reports * Other includes: bath and shower, deodorants, depilatories, men s grooming, oral care, and sun care products. 7

9 ULTA Beauty Customer Profile Broad-based: format appeals to women of all ages, from teenagers to mature women Suburban: 75% of Ulta Beauty stores in trade areas with <150K households Affluent: average household income > $70K Fashion and style conscious Appreciates convenience of one-stop shopping Values newness Prefers welcoming, friendly environment to high pressure, commissioned sales environment Embraces technology: researches products and tips online, engages social communities 8

10 5-Point Multi-Year Growth Strategy Accelerate Pace of New Store Expansion 1,200 Store Plan in the U.S. Continue to Expand Offering with New Products, Services and Brands Enhance Successful Loyalty Program Broaden Marketing Reach Increase Focus on Digital Strategy Long-Term Targets: 15% - 20% Annual Square Footage Growth 4% - 6% Annual Comparable Store Sales Growth* *Includes e-commerce sales 9

11 Growth Plan Targets 1,200 U.S. Stores 576 stores in 46 states 48% penetrated into plan Rapid new store growth Expanded square footage by 16% in 2011 Added 101 net stores in 2012, for 23% square footage growth Opening 125 Stores in 2013 for 22% square footage growth ~75% in existing centers ~33% in new markets Note: Store data as of May 4,

12 Proven Ability to Add New Brands new brands added since 2009, including 20 in Strong pipeline of new brands continues in

13 Expanding Service Offering in Salon Rolled out OPI gel nail service in 2012 Microdermabrasion rolled out to all stores in Q Hair extension service offered chain-wide as of May

14 Prestige Brand Boutiques Enhance Shopping Experience Most stores offer 4 6 prestige brand boutiques Clinique boutiques in 51 stores as of Q1 with additional expansion in 2013 Lancôme boutiques in 80 stores, adding 25 in the fall of 2013 Bare Minerals Benefit Clinique Dermalogica Lancôme Philosophy 13

15 Enhance Successful Loyalty Program Over 11 million active loyalty program members Represents over 50% of sales Higher shopping frequency and spending vs. non-members Converted 50% of stores to improved loyalty program, ULTAmate Rewards, expect to convert remaining 50% of stores in early 2014 Implemented new CRM platform in Q Enables more sophisticated segmentation based on customer behaviors Facilitates tailored, one-on-one marketing initiatives to customers 14

16 Broaden Marketing Reach Building on our strong foundation of print advertising Partnering with national media to highlight our position as a beauty and trend authority Expanding into new marketing media to build brand, reach new and existing guests Increasing focus on social media Print / Special Events National Media Digital Marketing Social Media 15

17 Building E-Commerce Capabilities Significant growth opportunity from a base of low single digit penetration Including e-commerce in comp sales, beginning in % growth in Q1 2013, contributing 140 basis points to the comp Launched mobile apps in 2012 Expanding on-line assortment Increasing digital marketing presence Investing substantial resources in web site redesign, fulfillment capability, and people in

18 Strong Performance in %* FY 12 Net Sales Growth Improved Operating Margin $759 $280 $474 $482 $506 $196 Q1 '12 Q2 '12 Q3 '12 Q4 '12 FY 12 FY '11 FY '12 1-Yr Comp 10.1% 9.3% 8.4% 8.0% 8.8% 2-Yr Comp 21.2% 20.6% 18.0% 19.5% 19.7% Operating Income Margin 11.0% 12.6% 41% Earnings Per Share Growth 23% Square Footage Growth $1.90 $ FY '11 FY '12* FY '11 FY '12 Note: $ in millions, except per share data. Square footage in millions. * FY 12 includes 53 rd week. 17

19 Q Financial Performance Total Sales Growth of 22.9% Comparable Store Sales Increase of 6.7% Two-Year Comparable Store Sales Increase of 16.8% Earnings Per Share Growth of 20.4% Opened 28 New Stores 18

20 2013 Guidance as of June 11, 2013 Guidance for Q Guidance for FY %-6% comp store sales growth* Total revenue growth of ~22% Diluted EPS of $ $ new stores 4%-6% comp store sales growth* Diluted EPS growth at the low end of the long-range plan (25%-30%) Capital expenditures of $225 million 22% square footage growth 125 new stores 7 remodels Generate free cash flow * Comp store sales includes e-commerce. 19

21 2013 Incremental Investments of $0.13 EPS Supporting Long-Term Sustainable Growth New Store Program (2013 impact: $0.05 EPS) 125 store openings planned for 2013, vs. 101 in 2012 Pre-opening expense impact: $ $0.03 EPS Larger proportion of immature stores deleverages fixed costs: $ $0.03 EPS Supply Chain (2013 impact: $0.03 EPS) Planning to add an additional DC in 2014 Upgrading Warehouse Management and Control Systems Expanding e-commerce order fulfillment capabilities Digital Strategy (2013 impact: $0.03 EPS) Ulta.com site redesign People Marketing Guest Experience (2013 impact: $0.02 EPS) Investing in store labor to optimize guest experience Supporting growth of prestige brands with more highly skilled and trained labor 20

22 Long-Term Financial Targets Annual Square Footage Growth: 15% - 20% Annual Comparable Store Sales Growth*: 4% - 6% Operating Margins: Mid Teens Annual Net Income Growth: 25% - 30% Return on Equity: 26% - 27% * Comp store sales includes e-commerce. 21

23 Compelling New Store Economics Store Size 10,000 Square Feet Current Model Leasehold and Fixtures, Net $0.4 New Store Investment Inventory, Net of Payables 0.5 Pre-Opening Expenses 0.1 Total Initial Investment $1.0 Year One Year Three Year Five (Maturity) Sales $2.8 $3.5 $4.0 Sales Growth (1) 11% 6% Unit Economics Sales as % of Year 5 Sales 70% 87% 100% Store-Level Cash Flow $0.4 $0.9 $1.0 Sales Per Square Foot $280 $350 $400 Cumulative Cash-on-Cash Return 40% 168% 340% Payback Period 2.0 Years Note: $ millions except for sales per square foot data. (1) Sales growth from preceding year. 22

24 Drivers of Sustainable Margin Expansion Benefits from increasing scale, especially as portfolio of stores matures Corporate overhead Merchandise planning and allocation E-commerce profit leverage 8.2% Operating Margin 11.0% 12.6% Mid-Teens Supply chain efficiencies 5.6% More efficient marketing channels Digital marketing, CRM Product mix trending towards prestige products Medium-Term Goal More sophisticated store labor planning tools Increased emphasis on corporate procurement function 23

25 Debt-Free Balance Sheet & Strong Cash Flow Generation Annual Capital Expenditure Free Cash Flow* $189 $105 $92 $129 $79 $111 $68 $97 $ Strong Financial Position Growth in capital expenditures primarily driven by acceleration in new store growth Net cash position of $320 million as of fiscal 2012 year-end, no debt Strong liquidity supported by undrawn revolving credit facility of $200 million Paid $1 per share special dividend to shareholders of record in May, 2012 Authorized $150 million share repurchase program in March, 2013 Expect to continue to organically fund growth needs and generate free cash flow Note: $ in millions. * Cash provided by operating activities less purchases of property and equipment. Free cash flow is a non-gaap measure and is not intended to supersede or replace the Company s GAAP results. For GAAP reconciliation to free cash flow, refer to statement of cash flow included in financial statements included on Form 10K. 24

26 Q&A 25