Ulta 2015 Annual Report Download - page 11

expect to capture operational efficiencies in new enterprise inventory capabilities to help fund those investments
in-store labor and tools. We will also pursue opportunities to optimize our marketing spend to maximize
effectiveness. Finally, we plan to drive scale and cost efficiencies across the enterprise.
Our market
We operate within the large and growing U.S. beauty products and salon services industry. This market
represents approximately $127 billion in sales, according to Euromonitor International and IBIS World Inc. The
approximately $74 billion beauty products industry includes cosmetics, haircare, fragrance, bath and body,
skincare, salon styling tools and other toiletries. Within this market, we compete across all major categories as
well as a range of price points by offering prestige, mass and salon products. The approximately $53 billion salon
services industry consists of hair, skin and nail services.
Competition
Our major competitors for prestige and mass products include traditional department stores, specialty stores, drug
stores, mass merchandisers and the online businesses of national retailers as well as pure-play e-commerce
businesses. The market for salon services and products is highly fragmented. Our competitors for salon services
and products include chain and independent salons.
Stores
Our stores are predominantly located in convenient, high-traffic locations such as power centers. Our typical
store is approximately 10,000 square feet, including approximately 950 square feet dedicated to our full-service
salon. We opened 103 (100 net of closings) stores in fiscal 2015 and the average investment required to open a
new Ulta Beauty store is approximately $1.2 million, which includes capital investments, net of landlord
contributions, pre-opening expenses and initial inventory, net of payables. 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. Our retail store concept, including physical layout, displays, lighting and quality of finishes,
has evolved over time to match the rising expectations of our guests and to keep pace with our merchandising
and operating strategies. Approximately 98% of our stores feature our most current store design. We expect the
net investment to open a new store in 2016 will increase due to store enhancements and boutique additions. As of
January 30, 2016, we operated 874 stores in 48 states.
Salon
We offer a full range of services in all of our stores, focusing on the three key pillars of hair, skin health and
brow services. Our current Ulta Beauty store format includes an open and modern salon area with approximately
eight to ten stations and the majority of our stores offer brow services. The entire salon area is approximately 950
square feet with a concierge desk, skin treatment room or dedicated skin treatment area, semi-private shampoo
and hair color processing area. We employ licensed professional stylists and estheticians who offer highly skilled
services as well as an educational experience, including consultations, styling lessons, skincare regimens and at-
home care recommendations.
Ulta.com
Our e-commerce business represented approximately 6% of our total sales and grew 47.5% in fiscal 2015. We
offer more than 20,000 beauty products from hundreds of brands. Ulta.com is also an important resource for our
guests to access product and store information, beauty trends and techniques. We continue to enhance the site
with a collection of tips, tutorials and social content. We expect Ulta.com to maintain rapid growth with the long-
term goal of 10% of total sales. We are in the process of significantly improving our e-commerce fulfillment
capabilities through new distribution centers and systems.
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