Ulta Beauty(ULTA) - 2024 Q4 - Annual Report

Market Overview - In 2023, the U.S. beauty products and salon services market represented approximately $181 billion, with Ulta Beauty holding a 9% share of the$ 112 billion beauty products industry and less than 1% of the $69 billion salon services industry[35]. - As of February 3, 2024, Ulta Beauty operated 1,385 stores, having opened 33 new stores and remodeled 18 stores during the fiscal year[40]. - The company aims to expand its store footprint to between 1,500 to 1,700 freestanding stores in the U.S. over the long term[40]. Customer Engagement and Loyalty - 76% of Ulta Beauty's loyalty members transacted solely in physical stores, highlighting the preference for in-person shopping experiences[38]. - The Ulta Beauty Rewards loyalty program enhances customer retention, with loyalty members spending more per visit compared to non-members[64]. - The e-commerce platform accounted for 18% of loyalty members who shopped both in stores and online, with omnichannel guests historically spending nearly three times as much as retail-only guests[45]. Product Offering and Diversity - The company offers approximately 25,000 products from around 600 beauty brands, including its private label, the Ulta Beauty Collection, ensuring a diverse and extensive product assortment[48]. - The number of Black-owned and Black-founded brands in the assortment increased to 50, a 92% rise since the commitment to allocate 15% of the brand assortment to these brands[52]. - In fiscal 2023, the percentage of net sales by category was: Cosmetics 41%, Skincare 19%, Haircare 19%, Fragrance and Bath 15%, Services 3%, Accessories and Other 3%[56]. Financial Performance - Total net sales for the fiscal year ended February 3, 2024, reached$ 11,207.3 million, an increase of 9.8% compared to $10,208.6 million in the previous year[311]. - Net income for the fiscal year was$ 1,291.0 million, representing a year-over-year increase of 3.9% from $1,242.4 million[311]. - Basic net income per share increased to$ 26.18, up from $24.17 in the prior year, marking a growth of 8.3%[311]. Sustainability and Social Responsibility - The company is committed to enhancing its environmental and social impact, promoting sustainable product choices through its Conscious Beauty platform[34]. - By 2025, Ulta Beauty aims for 50% of packaging from products sold to be recyclable, refillable, or made from recycled materials[62]. - As of February 3, 2024, more than 300 brands are participating in the Conscious Beauty program, with over 50% certified in multiple pillars[50]. Technology and Infrastructure - The company is upgrading its enterprise resource planning platform to increase efficiency and support future growth amid persistent cost pressures from macroeconomic trends[32]. - The company has initiated a multi-year strategic investment agenda to upgrade its technology infrastructure, including enhancing its enterprise resource planning platform and refreshing its POS system across all stores[87]. Employee Engagement and Benefits - As of February 3, 2024, Ulta Beauty employed approximately 56,000 associates, including 20,000 full-time and 36,000 part-time[75]. - The company provides a suite of benefits for associates, including a 401(k) plan with up to a 4% company match and tuition reimbursement programs[88]. - The board of directors consists of 55% women and 36% people of color, reflecting the company's commitment to diversity and inclusion[79]. Debt and Financial Health - The company had no outstanding debt as of February 3, 2024, and January 28, 2023, maintaining a debt-free status[334]. - The company has no outstanding borrowings on its credit facility as of February 3, 2024, January 28, 2023, or January 29, 2022[285]. - The company actively monitors market risks, particularly interest rate risks associated with its credit facility[284]. Seasonal Trends - The company’s business is subject to seasonal fluctuations, with significant portions of net sales and profits realized during the fourth quarter due to the holiday selling season[95].