Financial Data and Key Metrics Changes - Net sales for the fourth quarter decreased 1.9% to $3.5 billion compared to $3.6 billion in the previous year [29] - Comparable net sales increased 1.5%, driven by a 3% increase in average ticket, partially offset by a 1.4% decrease in transactions [30] - For the full year, net sales increased 0.8% to $11.3 billion, with comparable sales increasing 0.7% [36] Business Line Data and Key Metrics Changes - Fragrance was the strongest category with double-digit comp growth, driven by men's fragrance and multi-branded gift sets [33] - Skincare category comp sales increased in the mid-single digit range, while hair category comp sales increased in the low single digit range [33] - Makeup category experienced a mid-single digit decrease, largely driven by mass makeup [33] Market Data and Key Metrics Changes - The beauty category is expected to grow in the low to mid-single digit range over the next few years [14] - The competitive environment in beauty has intensified, with the company losing market share for the first time in 2024 [10][11] Company Strategy and Development Direction - The company is focusing on three main priorities: driving core business growth, scaling new accretive businesses, and realigning the foundation for the future under the "Ulta Beauty Unleashed" plan [17][20] - The company plans to enhance its assortment through investments in brand building and accelerate digital efforts [19][20] - The company aims to expand its wellness category and introduce new brands, with a focus on nutrition and mindfulness [70] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by a dynamic macro environment but remains optimistic about consumer engagement in beauty [14][39] - The company expects 2025 to be a transition year, with net sales projected between $11.5 billion and $11.6 billion and comp sales growth in the range of flat to up 1% [40][41] - Operating profit is expected to decrease in the low double-digit range due to inflationary pressures and investments in the Ulta Beauty Unleashed plan [41][42] Other Important Information - The company plans to spend between $425 million and $500 million in CapEx for new stores, remodels, and IT [43] - The company has a target for cost optimization of $200 million to $250 million over the next three years [27] Q&A Session Summary Question: How is the company thinking about the in-store experience and guest presentation? - Management emphasizes the importance of simplifying focus and prioritizing core business growth, brand building, and operational excellence [47][48] Question: Can you provide an update on the store fleet and new openings? - The company has a robust process for real estate site selection and anticipates strong performance from new stores [56][58] Question: What are the critical pieces to rebuild the business moat? - Management believes a balanced approach focusing on brand building, personalization, and marketplace expansion is essential [62][64] Question: How does the company plan to address the competitive landscape? - The company is focused on controlling what it can control and optimizing its business model to maintain its competitive edge [96][92] Question: What is the company's exposure to tariffs and how does it plan to navigate this? - The company has limited exposure to direct imports and is closely monitoring the evolving tariff landscape [104][105]

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 were $938 million, an increase of 0.7% year-over-year, despite a $6 million headwind from foreign currency translation [26] - Consolidated comparable sales grew by 1.6%, reflecting continued momentum across both Sally Beauty and BSG segments [26] - Gross margin expanded by 60 basis points to 50.8%, primarily due to reduced shrink and lower distribution and freight costs [27] - Adjusted operating margin increased by 50 basis points to 8.4%, and adjusted diluted EPS rose by 10% to $0.43 compared to the previous year [28] Business Line Data and Key Metrics Changes - Sally Beauty segment net sales increased by 0.4% to $525 million, with comparable sales up 1.7%, driven by strong growth in hair color and digital marketplaces [29] - BSG segment net sales rose by 1.1% to $412 million, with comparable sales increasing by 1.4%, supported by expanded distribution and product innovation [32] - Gross margin for Sally Beauty improved by 100 basis points to 59.6%, while BSG's gross margin increased by 30 basis points to 39.7% [31][33] Market Data and Key Metrics Changes - Global e-commerce sales reached $99 million, up 9% year-over-year, representing 11% of total net sales [26] - Sally e-commerce sales grew by 18% year-over-year, while BSG e-commerce sales were up 14% [29][32] Company Strategy and Development Direction - The company is focused on enhancing customer centricity, growing high-margin own brands, and amplifying innovation [8] - A brand refresh for Sally is underway, with a pilot store refresh in Orlando showing positive initial customer responses [9] - The Fuel for Growth program is expected to generate cumulative gross margin and SG&A benefits of approximately $70 million in fiscal 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management noted a choppy start to Q2 due to factors like flu season and weather, leading to guidance of approximately flat comparable sales [7] - Confidence remains in achieving full-year comps in the range of flat to up 2% [8] - The company is optimistic about the trajectory of the business, with strong customer loyalty in the color segment [66] Other Important Information - The company ended the quarter with $106 million in cash and no outstanding borrowings under its revolving credit line [34] - Inventory levels remained healthy at slightly over $1 billion, essentially flat compared to last year [35] Q&A Session Summary Question: Dynamics of Sally relative to DSG and comp trajectory - Management acknowledged known headwinds for BSG and noted that traffic trends have been uneven, but they remain optimistic about the overall trajectory of the business [40][41] Question: Full year guidance and operating margin cadence - Management confirmed they are within the guidance range and highlighted the potential for upside due to ongoing strategic initiatives [48][50] Question: Promotional environment and gross margins - Management indicated that promotional levels were relatively flat year-over-year and that they are strategically managing promotions to drive volume [56][58] Question: Innovation in the market and traffic pacing - Management reported robust innovation in the hair and health space and noted that demand remains healthy, particularly in the color business [61][66] Question: Macroeconomic pressures and tariff exposure - Management discussed the impact of macro pressures and confirmed limited exposure to tariffs, with strategies in place to mitigate potential impacts [80][81]