Ulta 2014 Annual Report Download - page 4

Deliver exceptional services in three core areas: hair, skin health, and brows฀A significant
dierentiator for ULTA Beauty, our services business focuses on the key pillars of hair, skin health and brows. In 2014,
the salon business grew 20.4% and comparable sales increased 9.5%. Fewer than 7% of our active loyalty members
are salon customers today, providing us with a great opportunity to introduce salon services to many more of our
customers through our CRM capabilities. During the year, we were able to acquire thousands of new salon customers
through targeted oers. This focus on new customer acquisition, in conjunction with an elevated presentation of our
salon business in our marketing materials and on our website, contributed to a significant increase in new salon guests
and an acceleration in our salon sales performance. During 2014, we also launched on-line appointment booking,
which has proven to be an excellent tool for acquiring new guests. In partnership with Benefit, we continue to grow
our brow services oering, and ended the year with almost 600 brow boutiques. Benefit boutiques continue to
perform extremely well from both a product and services perspective.
Grow stores and e-commerce to reach and serve more guests฀Square footage expansion
continues to be a major source of ULTA Beauty’s growth. We opened 99 net new stores in 2014, increasing square
footage by 14%. We ended the year with 774 stores in 47 states, progressing toward our goal of more than 1,200
stores in the U.S. We are pleased with the quality of our real estate and the productivity of our new stores. We opened
two 5,000 square foot stores in 2014 to test a smaller format in rural markets, and these two stores are beating their
sales plan and generating a strong return on investment. We continue to evaluate performance and guest behavior,
to glean operational insights and to assess the scalability of this format. We expect to open additional small format
stores in the future.
On the e-commerce side, we grew ULTA.com by 56%, representing 180 basis points of our total company comparable
sales of 9.9%. E-commerce represented approximately 5% of total company sales in 2014, progressing towards our
goal of becoming 10% of our business over the next five years. From a product perspective, the prestige cosmetics
category remains very strong online. We also drove excellent growth in professional haircare and mass cosmetics by
adding new brands and elevating ULTA Beauty private label products on our website.
Invest in infrastructure to support our guest experience and growth, and capture scale
eciencies฀To support our rapid growth, both in stores and on-line, we need to improve enterprise inventory
capabilities to better anticipate and respond to our guests’ demand across all channels. This includes optimizing our
distribution network and enhancing inventory visibility, forecast accuracy, and product life cycle through investments
in people, process, and technology. Phase I of this project is the construction of a new distribution center in the
Midwest. In 2014, we broke ground on this new facility in Greenwood, Indiana, designed with best in class systems
and operating model. Greenwood is on track to begin operations in the third quarter of 2015. We are also planning to
open another distribution center in Dallas in 2016. Successfully executing our multi-year supply chain project is a top
priority across the organization.
2014 Financial Position
ULTA Beauty’s financial position is very strong. We generated $148 million in free cash flow in fiscal 2014 after
investing $249 million in capital. At year end, our debt free balance sheet included $539 million of cash and short-
term investments. During 2014, we authorized a $300 million share repurchase program, and repurchased 321,113
shares for approximately $40 million.
I am exceptionally proud of all that our team accomplished in 2014, and I would like to thank our 22,000 passionate ULTA
Beauty associates who love what they do and are excited to bring more beauty into the lives of our guests. I would also
like to thank our shareholders, guests, vendor partners, and our Board of Directors for their continued support.
Sincerely,
Mary Dillon
Chief Executive Ocer
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