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Category: Stock Market and Ulta Beauty Inc
Date: 16 March 2020 Stock Price: $207.06 We take a look at the 4th quarter of their 2019 fiscal year earnings report of Ulta Beauty, the largest U.S. beauty retailer. Question is how will Coronavirus and self isolation and social distancing hurt their earnings? As their stock price has been hammered in the recent market sell off, as has most stocks.
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About Ulta Beauty Inc
At Ulta Beauty (NASDAQ: ULTA), the possibilities are beautiful. Ulta Beauty is the largest U.S. beauty retailer and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products and salon services. In 1990, the Company reinvented the beauty retail experience by offering a new way to shop for beauty – bringing together all things beauty, all in one place. Today, Ulta Beauty has grown to become the top national retailer offering the complete beauty experience.
Ulta Beauty brings possibilities to life through the power of beauty each and every day in our stores and online with more than 25,000 products from approximately 500 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label. Ulta Beauty also offers a full-service salon in every store featuring hair, skin, brow, and make-up services.
Ulta Beauty is recognized for its commitment to personalized service, fun and inviting stores and our industry-leading Ultamate Rewards loyalty program. As of August 3, 2019, Ulta Beauty operates 1,213 retail stores across 50 states and also distributes its products through its website, which includes a collection of tips, tutorials and social content. For more information, visit www.ulta.com.
Ulta Beauty brings possibilities to life through the power of beauty each and every day in our stores and online with more than 25,000 products from approximately 500 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label. Ulta Beauty also offers a full-service salon in every store featuring hair, skin, brow, and make-up services.
Ulta Beauty is recognized for its commitment to personalized service, fun and inviting stores and our industry-leading Ultamate Rewards loyalty program. As of August 3, 2019, Ulta Beauty operates 1,213 retail stores across 50 states and also distributes its products through its website, which includes a collection of tips, tutorials and social content. For more information, visit www.ulta.com.
Overview of Ulta's 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Net sales: $2.305 billion (up 12% from $2.124 million in the same quarter of the previous year)
- Ulta Beauty net sales increased by 8.5% over the last 12 months
- Cost of sales: $1.499 billion (up from $1.383 billion in the same quarter of the previous year)
- Ulta Beauty cost of sales increased by 8.4% over the last 12 months
- Some margin gains for Ulta Beauty as their sales increased a bit faster than their cost of sales
- Net income: $222.729 million (up from $214.674 million in the same quarter of the previous year)
- Net income per share: $3.89 (up from $3.61 in the same quarter of the previous year)
- Diluted number of shares outstanding: 57.195 million (down from 59.431 million due to their share repurchase program)
- Cash and cash equivalents: $392.325 million (down from $409.251 million for the same quarter of the previous year)
- Cash and cash equivalents per share: $6.85
- Cash and cash equivalents makes up 3.3% of Ulta Beauty's market capital
- Cash and cash equivalents makes up 3.76% of Ulta Beauty's total assets
- Receivables: $139.337 million
- Receivables makes up 2.86% of Ulta Beauty's total assets
- Merchandise inventories: $1.293 billion (up from $1.214 billion for the same quarter of the previous year)
- Merchandise inventories makes up 26.6% of Ulta Beauty's total assets (and we see anything more than 20% as a concern. So we are a little worried about their high inventory levels. These levels are fine as long as they can move stock quickly. If they cant they will have to mark down price to move stock faster which will affect their margins
- Ulta Beauty's inventories grew by 6.5% over the last 12 months
- Stockholders equity: $1.902 billion (up from $1.820 billion for the same quarter of last year)
- Stockholders equity per share: $33.25
- Ulta Beauty is trading at 6.2 times its stockholders equity per share, which is well outside the expected range of between 2 and 4 times that most firms tend to trade at.
- To put it in perspective the S&P500 trades at a Price to book of 3.34 (Click here to find out other interesting facts regarding the S&P 500)
- Cash generated from operations (for the full fiscal 2019) :$1.101 billion
- Cash generated from operations per share (for the full fiscal 2019): $19.24
Ulta beauty's management commentary on the results and earnings guidance
BOLINGBROOK, Ill.--(BUSINESS WIRE)-- Ulta Beauty, Inc. (NASDAQ: ULTA) today announced financial results for the thirteen-week period (“Fourth Quarter”) and fifty-two week period (“Fiscal Year”) ended February 1, 2020 compared to the same periods ended February 2, 2019.
“The Ulta Beauty team delivered results for the fourth quarter at the high end of our expectations, and I am proud of how our teams worked together to serve our guests this holiday season,” said Mary Dillon, Chief Executive Officer. “Our enhanced omnichannel capabilities, combined with our merchandise exclusives, cross-category marketing events, and great execution by our store teams, enabled us to expand our market share and deliver a successful quarter.”
“The Ulta Beauty team delivered results for the fourth quarter at the high end of our expectations, and I am proud of how our teams worked together to serve our guests this holiday season,” said Mary Dillon, Chief Executive Officer. “Our enhanced omnichannel capabilities, combined with our merchandise exclusives, cross-category marketing events, and great execution by our store teams, enabled us to expand our market share and deliver a successful quarter.”
Share Repurchase Program
During the fourth quarter of 2019, the Company repurchased 681,458 shares of its common stock at a cost of $174.1 million. During fiscal 2019, the Company repurchased 2,320,896 shares of its common stock at a cost of $681.0 million. As of February 1, 2020, $214.6 million remained available under the $875.0 million share repurchase program announced in March 2019.
On March 10, 2020, the Company’s board of directors approved a new share repurchase authorization of $1.6 billion, which replaces the prior authorization implemented in March 2019. Under the new program, as under the previous program, the Company may repurchase outstanding shares of the Company's common stock from time to time through accelerated share repurchases, privately negotiated transactions, or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934. The new program has no expiration date but may be terminated by the Board at any time. Since 2014, Ulta Beauty has returned $2.2 billion to shareholders through its share repurchase program, while continuing to make strategic growth investments.
Store Expansion
During the fourth quarter of 2019, the Company opened 13 stores located in Allen, TX; Blaine, MN; Dallas, TX; Gonzalez, LA; Houston, TX; Louisville, KY; Madison, AL; Meridian, MS; Moore, OK; Phoenix, AZ (2); Sioux Falls, SD; and Wentzville, MO. The Company ended fiscal 2019 with 1,254 stores and square footage of 13,193,076, representing a 6.9% increase in square footage compared to fiscal 2018.
Outlook
For fiscal 2020, the Company plans to:
The Company’s guidance does not include assumptions for any impact related to Coronavirus.
During the fourth quarter of 2019, the Company repurchased 681,458 shares of its common stock at a cost of $174.1 million. During fiscal 2019, the Company repurchased 2,320,896 shares of its common stock at a cost of $681.0 million. As of February 1, 2020, $214.6 million remained available under the $875.0 million share repurchase program announced in March 2019.
On March 10, 2020, the Company’s board of directors approved a new share repurchase authorization of $1.6 billion, which replaces the prior authorization implemented in March 2019. Under the new program, as under the previous program, the Company may repurchase outstanding shares of the Company's common stock from time to time through accelerated share repurchases, privately negotiated transactions, or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934. The new program has no expiration date but may be terminated by the Board at any time. Since 2014, Ulta Beauty has returned $2.2 billion to shareholders through its share repurchase program, while continuing to make strategic growth investments.
Store Expansion
During the fourth quarter of 2019, the Company opened 13 stores located in Allen, TX; Blaine, MN; Dallas, TX; Gonzalez, LA; Houston, TX; Louisville, KY; Madison, AL; Meridian, MS; Moore, OK; Phoenix, AZ (2); Sioux Falls, SD; and Wentzville, MO. The Company ended fiscal 2019 with 1,254 stores and square footage of 13,193,076, representing a 6.9% increase in square footage compared to fiscal 2018.
Outlook
For fiscal 2020, the Company plans to:
- open approximately 75 net new stores, execute approximately 15 remodel or relocation projects, and complete approximately 42 store refreshes;
- increase total sales by approximately 7.0% to 8.0%;
- achieve comparable sales growth of approximately 3.0% to 4.0%;
- deleverage operating income margin rate in the range of 70 to 80 basis points;
- deliver diluted earnings per share in the range of $12.55 to $12.75, including the impact of approximately $1.3 billion in share repurchases and assuming an effective tax rate of between 24% and 24.5%;
- incur capital expenditures between $280 million and $300 million;
- incur depreciation and amortization expense between $310 million and $320 million; and
- incur net interest expense of approximately $9.0 million.
The Company’s guidance does not include assumptions for any impact related to Coronavirus.
Ulta Beauty Inc (NASDAQ: ULTA) stock price history
The image below, obtained from Google, shows the stock price history of Ulta Beauty Inc over the last 5 years. Ulta Beauty's stock price has seen extraordinary growth over the last 5 years. 5 years ago the stock was trading at $99 a share. It is currently trading at $337.45 a share. That is very handsome returns offered to shareholders over the last 5 years.
Recent coverage of Ulta Beauty
The extract below discusses the latest regarding Ulta as obtained from Fool.com
Shares of Ulta Beauty (NASDAQ:ULTA) rose on Friday after the company reported fourth-quarter earnings, although so did most stocks after last Thursday's historic rout. In the quarter, Ulta's results came in slightly better than analysts anticipated for revenue, earnings per share, and comparable store sales.
Nevertheless, the outlook for the current year obviously matters more than the past. That goes not only for the impact of the coronavirus, but also the declining prestige makeup category, which had already begun decelerating last summer after a multi-year upcycle. That caused a precipitous fall in Ulta's stock last September, from the high-$300 range all the way down to the mid-$200 range.
Even after Friday's gains, Ulta shares sit just around $207 per share -- not only well below the level where insiders made large buys last September, but just above the level where one director also bought big all the way back in 2017.
Read the full article here
Shares of Ulta Beauty (NASDAQ:ULTA) rose on Friday after the company reported fourth-quarter earnings, although so did most stocks after last Thursday's historic rout. In the quarter, Ulta's results came in slightly better than analysts anticipated for revenue, earnings per share, and comparable store sales.
Nevertheless, the outlook for the current year obviously matters more than the past. That goes not only for the impact of the coronavirus, but also the declining prestige makeup category, which had already begun decelerating last summer after a multi-year upcycle. That caused a precipitous fall in Ulta's stock last September, from the high-$300 range all the way down to the mid-$200 range.
Even after Friday's gains, Ulta shares sit just around $207 per share -- not only well below the level where insiders made large buys last September, but just above the level where one director also bought big all the way back in 2017.
Read the full article here
Ulta Beauty Inc. (NASDAQ: ULTA) latest stock valuation
Based on Ulta Beauty's latest earnings report and the outlook provided what do we value the stock of Ulta Beauty's at? Based onUlta Beauty's 4th quarter 2019 earnings report and the outlook provided our valuation model provides a target price (full value price) for Ulta Beauty at $200.80 a stock (down slightly from our 2nd quarter 2019 earnings valuation of Ulta Beauty). We therefore believe the stock of Hanger Inc. is close to fully valued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $200.80. A good entry point into Ulta Beauty would therefore be at $180.70 or below. We expect the stock of Ulta Beauty to trade in a narrow range around its current price in coming weeks and months.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $200.80. A good entry point into Ulta Beauty would therefore be at $180.70 or below. We expect the stock of Ulta Beauty to trade in a narrow range around its current price in coming weeks and months.
Next earnings release of Ulta Beauty Inc (NASDAQ:ULTA)
It is expected that Ulta Beauty Inc will release their 1st quarter 2020 earnings report in late June 2020