Ulta 2011 Annual Report Download - page 3

Dear Stakeholder,
2011 marked another year of record sales and profits for Ulta Beauty.
Ulta’s financial success stems from the passion our guests have for our store experience, the focus and discipline of our
management team, and the dedication of our associates throughout every level of our company.
Together we have built Ulta into the only national beauty retailer that provides one-stop shopping for prestige, mass and salon
products along with salon services. Our goal is to provide a place where our guests can find the latest trends, the newest
products and the finest service, all to make her feel and look more beautiful. We do this within a fun, exciting, attentive
experience that encourages her to shop, try new products and learn something new. By providing an affordable indulgence to
our guests throughout a unique array of over 20,000 beauty products, Ulta Beauty has established its position as a premiere
beauty destination.
Ulta’s 2011 strong performance was the result of our five clearly defined growth objectives being well executed by Ulta
associates across our stores, distribution centers and home office. Importantly, we also continued to strengthen our business
model by prudently investing in the infrastructure and people necessary for Ulta to continue its market leading growth in future
years.
I am proud of what our team has achieved this past year and equally excited about our opportunities long term.
Highlights of Our Fiscal Year Performance
Net sales rose 22% to $1.8 billion driven by a 10.9% increase in comparable store sales, representing our second consecutive
year of double digit comparable store growth. We grew our market share across all major categories with our comparable store
sales growth led by prestige color and skincare. Operating profit climbed 65% outpacing our sales increase, as we continued
to expand product margins and realize operating efficiencies as we grow. As a result, our operating margin increased 280
basis points to 11% of net sales representing our first year delivering a double digit operating margin and bringing us closer to
our long term mid-teens operating margin goal. Earnings increased 64% to $1.90 per diluted share.
Our Five Targeted Growth Initiatives
The year included the advancement of our five growth objectives: expansion of our store base, enhancement of our guest
offering, expansion of our loyalty base, creation of exciting marketing programs and growth of our e-commerce business.
Our store expansion included the opening of 61 new stores in fiscal 2011, thereby expanding square footage by 16%. We
ended the year with 449 locations with significant runway remaining toward our 1,000 U.S. store plan. During the year we
remodeled 17 existing locations to our latest prototype, generating an attractive return.
The beauty category presents us with a continuous opportunity to deliver excitement to our guests in the form
of newness. We successfully capitalized on innovation and emerging trends with newness across our offering. Notable
standouts included innovation in mascara with They’re Real Mascara by Benefit, which led to our highest weekly sales
volume ever in mascara; in nail with Shatter and Crackle styles; and in the hair category as we demonstrated to our guests
how to achieve the perfect curl with newness in hair appliances. These efforts were further complemented by new brand
introductions from Laura Geller cosmetics, Art of Shaving, Ouidad and Living Proof and an abundance of new fragrance
launches during the year. We elevated our expansive fragrance offering with the introduction of a new fragrance shop. In
addition, we introduced a men’s shop to house all of our men’s offerings in one location with great results. At the same time,
we continued to provide strong value to our guests with the expansion of our Ulta brand to include bath products and through
the development of exclusive offerings across brands. Our salon also enhanced its services to include a new hair straightening
treatment and a new nail gel service that provides a longer lasting manicure.
We leveraged our powerful loyalty member base with exciting direct marketing, which led to increased customer traffic
and contributed to our double digit comparable store sales growth. During the year we increased our loyalty membership by
one million members to nine million strong. Our fun and inviting store experience and our team’s commitment to satisfy our
guests’ wants and needs, as well as the expansion in our store base, led to this sizeable growth.
We built upon our successful print marketing efforts by adding greater use of social media, in-store eventing and radio
advertising to highlight customer-focused marketing events with great results. Some examples included our Love Your Hair
event, 21 Days of Beauty, and Donate with a Kiss in support of the Breast Cancer Research Foundation.
We saw strong growth in our e-commerce sales on Ulta.com with expanded product offerings, greater editorial content
and events while also supporting our brick and mortar stores.
At the same time, we invested in support of our future growth preparing our company to open our third distribution center in
2012.