Ulta 2015 Annual Report Download - page 3

Dear Stakeholder,
Ulta Beauty delivered exceptional performance in 2015. We made significant progress against our strategic imperatives,
while achieving outstanding sales and earnings growth. New brands and product innovation, growth in our loyalty
program, great in-store execution, a better mix of marketing strategies and investments in infrastructure are fueling
industry leading growth across our stores and Ulta.com. We continue to benefit from the powerful combination of
strong consumer demand in the beauty category and Ulta Beauty’s highly dierentiated product and service oering
that is clearly resonating with our guests.
2015 Financial Performance Highlights
Sales increased 21.1% to $3.9 billion. Our 11.8% increase in comparable sales was driven by a very healthy mix of 70%
transaction growth and 30% ticket growth. This was our best comparable sales performance since 2010, with double
digit growth in each of the three operating segments: retail stores, salon services and e-commerce. Operating profit
rose 23.4%, and operating margin increased 20 basis points to 12.9% of sales. Earnings per share grew 25.1% to $4.98
per diluted share.
Productive New Store Growth
We opened 100 net new stores in 2015, increasing square footage by 13% and ending the year with 874 stores in 48
states. New store productivity was very strong, reflecting growing awareness of the Ulta Beauty brand, continuous
improvements in our portfolio of brands and high quality real estate. During 2015, we entered Alaska with three stores
and achieved the strongest grand openings in our company’s history.
Vibrant E-Commerce Platform
Ulta.com sales grew 47.5% to $221.1 million from $149.9 million in fiscal 2014, representing 180 basis points of the total
company comparable sales increase of 11.8%. Ulta.com accounted for 5.6% of total company sales in 2015, progressing
towards our goal of reaching 10% of our business. During the year, we added several major professional haircare brands
to the website, as well as prestige brands Clinique and Lancôme, making our online assortment at parity with our
stores’ portfolio of products. Our sampling programs continue to be very successful and we are driving strong trac to
Ulta.com through investments in diverse digital marketing channels. With increased supply chain capacity, due to our
new Greenwood, Indiana, distribution center along with process improvements in our existing distribution centers, we
significantly improved the guest experience as well as the profitability of our e-commerce business.
Differentiated Salon Services Offering
Oering hair, skin and brow services in every store is a substantial dierentiator for Ulta Beauty. Salon sales increased
19.2% to $209.2 million, representing 5.4% of total company sales. The salon business achieved comparable sales growth
of 10.1%, with continued strength in cut and color services. Blowouts, hair treatments and makeup services were the
highest growth categories. Our hand-picked artistic team works to develop haircut, color and finishing techniques that
are reflective of current trends, then creates and delivers high impact training programs integrating hair and make-up
looks straight from the runway to all of our salon professionals. The Benefit boutiques continue to deliver excellent
performance with double digit comparable sales. Brow services were available in more than 700 stores at year-end.
Exciting New Products to Enhance our Portfolio
Core to our success is oering relevant, innovative and often exclusive products that excite our guests. We brought
significant newness and exclusivity to the merchandise assortment and added 26 significant new brands during
the year, demonstrating increased traction with our brand partners. We continue to gain share in all categories, with
particular strength in mass and prestige cosmetics. Urban Decay, IT Cosmetics, NYX, Redken, Too Faced, Tarte,
Clinique, Lancôme, Benefit and the Ulta Beauty Collection were among the best performing brands for the year.
We are making significant improvements to the Ulta Beauty Collection, including better formulations and packaging
as well as an enhanced presentation in hundreds of our stores.
Growing Brand Awareness
Our marketing strategy is designed to position Ulta Beauty in a meaningful and dierentiated way, and every piece
of communication reinforces our brand personality and elevates our beauty authority. We continue to evolve our
marketing strategy to include investments in national TV, radio and digital advertising. A recent survey showed that
aided brand awareness rose to 84% vs. 77% a year ago, and unaided brand awareness improved to 39% vs. 36%.
We believe this increase in awareness was supported by our national advertising campaigns and is helping us to
acquire new guests and reactivate guests who have not shopped recently.