Ulta 2010 Annual Report Download - page 12

merchandisers, Generation X has grown up shopping in specialty stores and we believe seeks a retail
environment that combines a compelling experience, functionality, variety and location.
• Generation Y (born between 1977 and 1994): According to the United States Census Bureau data, the
20 to 34 year-old age group is expected to grow by approximately 10% from 2003 to 2015. As Generation
Y continues to enter the workforce, they will have increased disposable income to spend on beauty
products.
We believe we are well positioned to capitalize on these trends and capture additional market share in the
industry. We believe we have demonstrated an ability to provide a differentiated store experience for customers
as well as offer a breadth and depth of merchandise previously unavailable from more traditional beauty
retailers.
Stores
We are conveniently located in high-traffic, primarily off-mall locations such as power centers and lifestyle
centers with other destination retailers. Our typical store is approximately 10,000 square feet, including
approximately 950 square feet dedicated to our full-service salon. We opened 47 stores in fiscal 2010 and the
average investment required to open a new Ulta store is approximately $0.9 million, which includes capital
investments, net of landlord contributions, pre-opening expenses, and initial inventory, net of payables.
However, our net investment required to open new stores and the net sales generated by new stores may vary
depending on a number of factors, including geographic location. As of January 29, 2011, we operated 389
stores in 40 states.
Store remodel program
Our retail store concept, including physical layout, displays, lighting and quality of finishes, has continued to
evolve over time to match the rising expectations of our customers and to keep pace with our merchandising
and operating strategies. In recent years, our strategic focus has been on refining our new store model,
improving our real estate selection process and executing on our new store opening program. As a result, we
decided to limit the investments made in our existing store base from fiscal 2000 to fiscal 2005. In fiscal
2006, we developed and initiated a store remodel program to update our oldest stores to provide a consistent
shopping experience across all of our locations. We remodeled 13 stores in fiscal 2010. Our newest store
prototype, including new stores and remodels after 2005, represents approximately 75% of our store base. We
continue to evolve this program to update older stores with a consistent look and experience to drive additional
customer traffic and increase our sales and profitability. The remodel store selection process is subject to the
same discipline as our new store real estate decision process. Our focus is to remodel the oldest, highest
performing stores first, subject to criteria such as rate of return, lease terms, market performance and quality
of real estate. The average investment to remodel a store in fiscal 2010 was approximately $0.9 million. Each
remodel takes approximately three months to complete, during which time we typically keep the store open.
Salon
We operate full-service salons in all of our stores. Our current Ulta store format includes an open and modern
salon area with eight to ten stations. The entire salon area is approximately 950 square feet with a concierge
desk, esthetics room, semi-private shampoo and hair color processing areas. Each salon is a full-service salon
offering hair cuts, hair coloring and permanent texture, with most salons also providing facials and waxing.
We employ licensed professional stylists and estheticians that offer highly skilled services as well as an
educational experience, including consultations, styling lessons, skincare regimens, and at-home care
recommendations.
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