Ulta 2014 Annual Report Download - page 42

Pre-opening expenses
Pre-opening expenses decreased $2.9 million, or 16.8%, to $14.4 million in fiscal 2014 compared to $17.3
million in fiscal 2013. During fiscal 2014, we opened 100 new stores, remodeled 9 stores and relocated 2 stores.
During fiscal 2013, we opened 127 new stores and remodeled 7 stores and relocated 4 stores.
Interest income and expense
Net interest income was $0.9 million in fiscal 2014, compared to $0.1 million in fiscal 2013. Interest income
results from short-term investments with maturities of twelve months or less from the date of purchase. Interest
expense represents various fees related to the credit facility. We did not utilize our credit facility during fiscal
2014 or 2013.
Income tax expense
Income tax expense of $154.2 million in fiscal 2014 represents an effective tax rate of 37.5%, compared to fiscal
2013 tax expense of $124.9 million and an effective tax rate of 38.1%. The lower tax rate in fiscal 2014 is
primarily due to a decrease in state taxes compared to fiscal 2013.
Net income
Net income increased $54.3 million, or 26.8%, to $257.1 million in fiscal 2014 compared to $202.8 million in
fiscal 2013. The increase in net income was primarily due to an increase in gross profit of $195.6 million, which
was offset by a $115.6 million increase in SG&A expenses and a $29.3 million increase in income tax expense.
Fiscal year 2013 versus fiscal year 2012
Net sales
Net sales increased $450.3 million, or 20.3%, to $2,670.6 million in fiscal 2013 compared to $2,220.3 million in
fiscal 2012. Salon service sales increased $24.4 million, or 20.1% to $145.8 million compared to $121.4 million
in fiscal 2012. E-commerce sales increased $40.7 million, or 73.9%, to $95.8 million compared to $55.1 million
in fiscal 2012. The net sales increases are due to the opening of 125 net new stores in 2013 and a 7.9% increase
in comparable store sales. Non-comparable stores, which include stores opened in fiscal 2013 as well as stores
opened in fiscal 2012 which have not yet turned comparable, contributed $283.0 million of the net sales increase
while comparable stores contributed $167.3 million of the total net sales increase. The sales for the 53rd week of
fiscal 2012 were approximately $55 million.
The 7.9% comparable store sales increase consisted of a 6.1% increase at the Company’s retail and salon stores
and a 76.6% increase in the Company’s e-commerce business. The salon business contributed 10 basis points to
the retail and salon comp of 6.1%. The inclusion of the e-commerce business resulted in an increase of
approximately 180 basis points to the Company’s consolidated same store sales calculation for fiscal 2013
compared to 50 basis points for fiscal 2012. The total comparable store sales increase included a 6.9% increase in
average ticket and a 1.0% increase in traffic. We attribute the increase in comparable store sales to our successful
marketing and merchandising strategies.
Gross profit
Gross profit increased $157.5 million, or 20.1%, to $941.2 million in fiscal 2013, compared to $783.7 million, in
fiscal 2012. Gross profit as a percentage of net sales decreased 10 basis points to 35.2% in fiscal 2013 compared
to 35.3% in fiscal 2012. The decrease in gross profit margin in fiscal 2013 was primarily driven by:
‰40 basis points deleverage in merchandise margins due mainly to changes in marketing and merchandising
strategies; offset by
‰20 basis point leverage in supply chain due to operating efficiencies; and
‰10 basis points of leverage in fixed store costs attributed to the impact of higher sales levels in fiscal 2013.
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