Ulta Beauty, Inc. (NASDAQ:ULTA) Q2 2023 Earnings Call Trans…


Ulta Beauty, Inc. (NASDAQ:ULTA) Q2 2023 Earnings Call Transcript August 24, 2023

Ulta Beauty, Inc. beats earnings expectations. Reported EPS is $6.02, expectations were $5.87.

Operator: Good afternoon and welcome to Ulta Beauty’s Conference Call to discuss Results for the Second Quarter of Fiscal 2023. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kiley Rawlins, Vice President of Investor Relations. Ms. Rawlins, you may proceed.

Kiley Rawlins: Thanks, Paul. Good afternoon, everyone, and thank you for joining us for a discussion of Ulta Beauty’s results for the second quarter of fiscal 2023. Hosting our call today are Dave Kimbell, Chief Executive Officer; and Scott Settersten, Chief Financial Officer; Kecia Steelman, Chief Operating Officer, will join us for the Q&A session. Before we begin, I’d like to remind you of the company’s Safe Harbor language. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company’s filings with the SEC.

We caution you not to place undue reliance on these forward-looking statements, which speak only as of today, August 24th, 2023. We have no obligation to update or revise our forward-looking statements except as required by law, and you should not expect us to do so. We’ll begin this afternoon with prepared remarks from Dave and Scott. Following our comments, we’ll open up the call for questions. To allow us to accommodate as many questions as possible during the hour scheduled for this call, we respectfully ask that you limit your time to one question. If you have additional questions, please re-queue. As always, the IR team will be available for any follow-up questions after the call. Now I’ll turn the call over to Dave. Dave?

Dave Kimbell: Thank you, Kiley, and good afternoon. We appreciate your interest in Ulta Beauty. The Ulta Beauty team delivered strong performance again this quarter with sales, gross profit and SG&A expenses all better than planned. Net sales increased 10.1% to $2.5 billion and comparable sales increased 8%. Operating profit was 15.5% of sales and diluted EPS increased 5.6% to $6.02 per share. In addition to delivering great financial results, our teams executed against our operational priorities. During the quarter, we drove growth across all major categories, increased the number of loyalty members, strengthened our brand engagement and achieved important milestones within our multiyear transformation initiatives. Through the first half, our financial results are ahead of our internal expectations and I remain confident we can deliver against our updated guidance for fiscal 2023.

I want to express my sincere appreciation to all Ulta Beauty associates for their continued commitment to delivering great guest experiences while working collaboratively to execute our ambitious transformational agenda. Starting with the discussion of our operational results, we saw strong solid sales performance across both our store and digital channels, driven by double-digit traffic growth. All major categories delivered comp growth for the quarter, supported by strong engagement with the overall beauty category, compelling product newness and innovation and successful execution of cross-category promotional events, including our reimagined Big Summer Beauty Sale. Building on last year’s promotional events, we consolidated key summer events like our popular Jumbo Love and Mix and Match Minis into a broader, more cohesive event with holistic storytelling and impactful messaging.

The three-week long Big Summer Beauty Sale drove market disruption, member conversion and strong sales across our Hair Care, Makeup and Skin Care categories. Turning to performance by category. Skin Care continues to be one of our strongest categories even as we lap unprecedented growth during the pandemic. For the quarter, both Prestige and Mass skin care delivered double-digit growth. Newer brands, including Bubble, BYOMA and Beautycounter and innovation from existing brands like The Ordinary, Drunk Elephant and Supergoop! contributed to the strong sales results. Reflecting consumer interest in dermatologist recommended brands, La Roche-Posay and CeraVe continued to perform well and brands like Good Molecules, Hero Cosmetics and Peach Slices continue to benefit from social virality.

The Fragrance and Bath category delivered double-digit comp growth again this quarter. Layering and wardrobing scents as a form of self-expression especially among Gen Z consumers, continues to drive category engagement. Newness from Ariana Grande, Valentino and Burberry contributed to the category’s performance and key gift-giving events like Mother’s Day and Father’s Day drove growth for luxury brands like Carolina Herrera, Chanel and YSL. The Hair Care category delivered mid-single-digit comp growth driven by newness and guest engagement with our strategic events. Hair Care focused on bonding, scalp treatments and other repair solutions as well as products that offer healthy heat styling options continue to drive consumer engagement. Trend-relevant products from professional brands of Redken, Biolage and Matrix as well as newness from prestige brands Way and IGK resonated strongly.

New brands, including exclusive brands LolaVie created by Jennifer Anderson, and Donna’s Recipe also contributed to growth this quarter. While still challenged as we lap several years of strong growth, sales trends in hair tools improved from the first quarter, driven by compelling newness from Dyson and innovation from Bio Ionic. Finally, makeup delivered low single-digit comp growth, driven by strong performance in mass cosmetics. New brands like Dior, NATASHA DENONA and Beautycounter drove growth during the quarter, while new and exclusive products from a wide range of brands, including e.l.f, NYX and OPI also contributed positively. Compelling events, including our Big Summer Beauty Sale, National Lipstick Week and our foundation event as well as successful Barbie and Little Mermaid collaborations drove guest engagement.

While the performance of mass cosmetics benefited from engaging newness in social content, our prestige makeup business was challenged as we lapped the significant impact of the Fenty launch last year. Our Services business delivered double-digit comp growth again this quarter, primarily driven by increased appointments. Guests are engaging in core cut, color and blowout services as well as newer services, including extensions and scalp and hair treatments. We continue to enhance our service offering, and this quarter, we launched ear piercings chain-wide and introduced a new Keratin Express treatment. The Beauty category growth remains healthy across both Prestige and Mass price tiers as consumers maintain their post-pandemic routines and expand their definition of beauty.

When we look at the total beauty market, our analysis demonstrates we continue to gain market share. In Mass Beauty, we gained share this quarter across all major categories. In Prestige, we continue to drive solid gains in skin and fragrance but saw pressure in makeup and hair based on Circana’s beauty sales data. Our proprietary insights suggest consumers are becoming less focused on product pricing tiers and are trading around, choosing to engage with brands that offer on-trend newness and compelling social media content. As the only beauty retailer to offer a curated assortment of products from entry-level mass to luxury and everything in between, we are uniquely positioned to capture share of the total beauty market as consumers shift.

We remain confident in the resilience of beauty. Our strategic framework guides our priorities and positions us to expand our market leadership and drive long-term profitable growth. Let me share some highlights of the progress we made against this framework in the second quarter. Starting with our efforts to drive growth with an expanded definition of All Things Beauty. Newness and Innovation are critical growth drivers for Beauty. Newness comes to life in the form of new brands, products and product lines, shade extensions and reformulations, and fuels discovery and drive trips and engagement. As we seek to continuously delight guests with All Things Beauty, we continue to expand our assortment and innovate — with innovative and emerging brands.

Building on newness introduced in the first half, we have several exciting launches planned for the third quarter, including Half Magic, a vegan and cruelty-free makeup brand created by Euphoria makeup artist Donni Davy exclusive to Ulta Beauty. Polite Society, a prestige makeup brand exclusive to Ulta Beauty created by the founders of Too Faced Cosmetics. Rabanne, a contemporary and relevant Spanish fashion brand launching cosmetics exclusively at Ulta Beauty. Hair styling tools at accessible price points from Shark Beauty. PanOxyl, a dermatologist recommended brand popular with Gen Z and Sniph, an emerging fragrance band offering gender neutral sense available only at Ulta Beauty. Reflecting the growth and popularity of luxury products with younger generations, last quarter, we launched Luxury at Ulta Beauty in 200 stores and on

The program has exceeded our expectations and we continue to see strong guest engagement with our offerings across all categories. Building on this success, we are excited to launch Pat McGrath Labs, a BIPOC, LUXE Artistry makeup brand. Pat McGrath is a trusted expert who has shaped and disrupted the cosmetic category. Now let me share an update on our key cross-category platforms which lean into broader emerging trends in beauty, products that are good for the world, inclusivity and wellness. As we seek to provide guests with a diverse assortment that reflects their personal values and individual needs, we continue to expand our assortment of brands featuring clean, cruelty-free and vegan ingredients, leveraging sustainable packaging and driving positive impact through our Conscious Beauty platform.

At the end of the quarter, 314 brands were certified in at least one pillar, with more than 270 brands certified in multiple pillars. To ensure all guests feel connected and reflected at Ulta Beauty, we continue our important efforts to drive inclusivity. In addition to amplifying our portfolio of BIPOC brands through informative marketing and in-store presentations, this quarter, we hosted a summit for our BIPOC brands, providing them with opportunities to network with peers while learning more about the beauty industry and operational best practices. Lastly, as the importance of beauty as a form of self-care and wellness continues to build, we enhanced the wellness shop assortment with the launch of two exciting supplements. Lemme Gummies created by Kourtney Kardashian and the introduction of Big Brain Probiotics from Love Wellness.

Turning now to our second strategic pillar, All in Your World. We are enhancing guest experiences across all of our touch points. Guests continue to shift effortlessly between physical and digital channels, depending on their individual needs, and we are committed to meeting them wherever they are in their beauty journey. Reflecting our efforts to enhance our Buy Anywhere, Bill Anywhere capabilities, we have expanded our same-day delivery option to essentially every store and improved our store fulfilment process to drive greater efficiency and speed. Between BOPIS, same-day delivery and ship from store capabilities, 31% of our e-commerce sales and 39% of our digital orders were fulfilled by our store teams this quarter. Our consumer insights and member data confirm the importance of physical shopping in beauty.

More than 75% of our members choose to transact with us only in stores, and yet we know many of these members use our digital platforms for discovery, try-on and inspiration. Converting these members to omni-channel members is a meaningful opportunity to increase engagement and spend per member as omni-channel shoppers spend 2.5 times to 3 times more than single channel shoppers. Importantly, the increase in spend is largely incremental. Expanded engagement with our mobile app is one way we are driving omni-channel conversion. Through our digital store refresh, we enhanced the user search and discovery experience, seamlessly blending commerce and content for a more personalized experience. We also continue to expand and enhance our digital try-on capabilities.

This quarter, we launched a virtual try-on tool that enables guests to try multiple nail looks simultaneously, and we upgraded our virtual hair try-on experience with expanded color options and enhanced transfer quality and speed. These enhancements, combined with awareness campaigns, unique offers to drive utilization and increased associate education have delivered meaningful growth. Over the last 12 months, 9 million active members have engaged with our mobile app, double the number of members who engaged with the app before the pandemic. And we’re seeing stronger engagement, with more than 55% of e-commerce sales coming through our mobile app. Turning to our partnership with Target. We opened 62 Ulta Beauty at Target shops during the quarter, ending the quarter with 421 shops.

Our marketing teams work closely with our target partners to build awareness for newer brands, including Billie Eilish and Ariana Grande Fragrances, Glamnetic and Living Proof, while also amplifying Summer Prestige must-haves and minis. As the partnership scales, we are learning more about the Ulta Beauty at Target guests and the role this touchpoint plays in their beauty journey and we will continue to leverage our expertise to develop unique assortments that reflect the preferences of the Ulta Beauty at Target guests. Moving to our third strategic pillar, operating at the Heart of the Beauty community, we are focused on driving greater love, loyalty and emotional connection with Ulta Beauty. We began this quarter with a Mother’s Day campaign that highlighted exclusive cross-category gifts, including our luxury assortment and hero fragrances.

Moving into June, we positioned Ulta Beauty as the destination for Summer Beauty, driving top-of-mind awareness and traffic with compelling points offers and special deals across the assortment to celebrate our members. Finally, we closed the quarter with our Big Summer Beauty Sale, a bold and disruptive event that offered opportunities to save on fan favourite beauty items across all categories and price points from a variety of established and emerging brands. These key events, paired with our culturally-relevant content amplifications, drove record-level highs in unaided awareness, with our greatest gains among Gen Z consumers. Turning to our loyalty program. We ended the quarter with 41.7 million active members, 9% higher than last year, driven by strong member acquisition and reactivation combined with healthy retention of existing members.

Spend per member also increased, driven by greater shopper frequency. The strength of our loyalty program continues to be a powerful and differentiated strategic asset for Ulta Beauty and we are pleased with its elevated growth and performance. Our continued efforts to nurture the member life cycle is driving results. We accelerated new member acquisition and continue to engage and retain members with meaningful events, compelling points offers, personalized content and special guests. These strategies also delivered growth in our Diamond and Platinum tiers, which increased nearly 30% compared to the same period last year, reflecting strong loyalty and engagement with all Ulta Beauty offers. Turning now to our efforts to drive operational excellence and optimization.

We are executing an ambitious multiyear road map of transformation initiatives intended to unlock new capabilities and efficiencies to fuel our future growth. As we have discussed on previous calls, we are expanding and optimizing our supply chain, upgrading our enterprise resource planning platform, transitioning our digital store to a new platform, enhancing our data management systems and upgrading store POS systems. I am pleased to share that our teams have delivered several key milestones. Our new Greer, South Carolina market fulfillment center began receiving inventory last month, and we expect to start shipping to stores next week. We completed the installation of a new automated storage and retrieval system in our Greenwood distribution center, which will increase capacity and enable greater productivity.

We expanded our ship-from-store capabilities to an additional 276 stores. Today, we fulfill e-commerce orders from 400 strategically-located stores, enabling faster, more cost-effective delivery to the guest. We successfully transitioned two distribution centers, Jacksonville and Greer, to our new ERP platform. As part of our digital store transformation, we successfully completed a large-scale upgrade of our end-to-end e-commerce platform and migrated to a new, modernized platform that includes a new promotion engine, guest account, cart and checkout. This is a significant milestone in our multiyear effort to elevate our digital experience in a way that positions us for long-term growth in this critical channel. Finally, we completed the POS upgrade in all stores.

While our transformation agenda is not finished, we have made significant progress, and I am proud of how our teams have worked to execute our plans while limiting disruption to guests and associates. Looking forward, we continue to operate in a dynamic environment. While consumer confidence has strengthened, there are signs pointing to moderating growth going forward. Many consumers have begun to reduce overall spending, credit card debt remains high and the restart of student loan repayments is approaching. It is unclear how these factors will impact consumer behavior in the near term, but despite these factors, Beauty has remained a bright spot. Based on Circana’s beauty sales data, total US beauty sales for the first half of 2023 increased double-digits compared to the same period last year with Prestige beauty channels delivering higher growth than Mass beauty channels.

Looking to the rest of the year, we believe growth for the US beauty market will remain healthy but normalize into the mid-single digits as we lap two years of strong growth, experience less impact from pricing and face more economic uncertainty. As category growth normalizes, we continue to expect promotional activity within the category will also normalize. Over the last two years, unprecedented category growth and strong demand limited promotional activity. As a result, the promotional environment in 2021 and 2022 was unsustainably low. Reflecting these factors, we planned for higher promotional activity this year but continue to expect promotions will remain well below 2019 levels. In closing, we operate in an attractive and growing category.

We have a strong, proven business model and a winning culture and outstanding teams. Through the first half of fiscal 2023, we have exceeded our internal financial expectations and we remain confident we can deliver our updated expectations for the rest of the year. And now I will turn the call over to Scott for a discussion of the financial results. Scott?

Scott Settersten: Thanks, Dave, and good afternoon, everyone. As Dave shared, we delivered second quarter financial results that were ahead of our expectations. Strong sales growth supported by healthy guest engagement and strong in-store sales performance drove better-than-expected gross margin. SG&A spend was also lower than planned, resulting in an operating margin of 15.5%. Turning to the P&L. Net sales for the quarter increased 10.1%, driven by 8% growth in comp sales, strong new store performance and solid growth in other revenues. Transactions for the quarter increased 9%, primarily driven by healthy traffic across both channels. Average ticket decreased 1% as the decline in average units per transaction more than offset the impact of higher average selling price.

The increase in average selling price was primarily driven by the impact of retail price increases, many of which were executed last year. We estimate price increases contributed about 300 basis points to the overall comp. During the quarter, we opened three new stores and relocated two stores. In addition, we re-modeled three stores. Second quarter gross margin decreased 110 basis points to 39.3% compared to 40.4% last year. The decrease was driven by lower merchandise margin, an increase in inventory shrink and higher supply chain costs. Overall merchandise margin was lower due primarily to increased promotional activity, unfavorable category mix and less benefit from the timing of retail price changes. While promotional activity continues to normalize, it is important to note that overall promotions remain well below 2019 levels.

Inventory shrink continued to be a headwind this quarter. Our efforts to address shrink are having an impact, but the overall environment remains challenging. Today, we have the new fragrance fixtures in more than 50% of our stores and expect to have these installed in 70% of the fleet by year-end. We remain focused on taking action in areas we can control, including continued investment in fixtures, associate training, staffing as well as operational improvements and leveraging our influence to enact broader changes that will disincentivize unlawful behavior. Supply chain costs were higher, primarily driven by ongoing investments in our supply chain transformation, as we made progress on the retrofit of our Dallas and Greenwood distribution centers and prepared to open our new market fulfillment center in Greer, South Carolina.

These gross margin pressures were partially offset by strong growth in other revenue and leverage of store fixed costs due to top line sales growth. SG&A increased 12.4% to $600.7 million. SG&A increased 40 basis points to 23.7% compared to 23.3% last year. The increase in SG&A as a percentage of sales was driven by deleverage of corporate overhead due to strategic investments, planned increases in store payroll and benefits and higher store expenses, which more than offset lower incentive compensation. Corporate overhead expense deleveraged in the quarter primarily due to investments related to our strategic priorities, including Project SOAR, other IT capabilities and UB Media. Year-to-date through the second quarter, we have invested a little less than half of our planned $60 million to $70 million of incremental spend to support our strategic initiatives.

The increase in store payroll and benefits was primarily due to the impact of planned growth in average wage rates and increased staffing levels compared to the same period last year. Incentive compensation was a tailwind in the quarter, reflecting operational performance that is more in line with our internal targets compared to last year’s significant outperformance. Operating income for the quarter was $391.6 million, flat to last year. As a percentage of sales, operating margin decreased 150 basis points to 15.5% compared to 17% last year. Diluted GAAP earnings per share increased 5.6% to $6.02 per share compared to $5.70 per share last year. Turning to the balance sheet and cash flow statement. Total inventory increased 9% to $1.82 billion compared to $1.67 billion last year.

In addition to the impact of 37 additional stores, the increase reflects inventory to support higher demand, increases in product costs and new brand launches. Capital expenditures were $95 million for the quarter compared to $49.4 million last year. The increase in capital expenditures was primarily related to investments in IT and supply chain to support our transformational agenda as well as merchandising investments to support the rollout of our luxury assortment and brand expansions. Depreciation was $61.9 million in the quarter compared to $60.9 million last year. We ended the quarter with $388.6 million in cash and cash equivalents. During the quarter, we repurchased approximately 594,000 shares at a cost of $275.5 million. Year-to-date, we have repurchased 1.1 million shares at a cost of $559 million.

At the end of the second quarter, we had $541 million remaining under our current $2 billion repurchase authorization. Moving to our outlook. We are updating our guidance for fiscal 2023 to reflect our better-than-expected second quarter performance. We have raised our top line expectations and now project net sales will be between $11.05 billion and $11.15 billion, with comp sales growth between 4.5% and 5.5%. Our updated outlook reflects our strong first half performance while continuing to consider risks and uncertainties that could impact demand in the second half of the year, including rising consumer debt levels and the expected resumption of student loan repayments. We continue to expect comps will moderate to the low single-digits in the second half of the year, and we remain on track to open 25 to 30 new stores and renovate or relocate 20 to 30 stores this year.

Reflecting our year-to-date performance, we’ve raised the low end of the range of operating margin and now expect operating margins for the year will be between 14.6% and 14.8% of sales, with deleverage to come fairly evenly from both gross margin and SG&A. Our expectations reflect the continuation of the trends we experienced through the first half of the year around shrink, promotional activity and supply chain costs, as well as greater headwind from lapping the merchandise margin benefits from the timing of retail price increases last year. For modeling purposes, we expect third quarter operating margin will be meaningfully more pressured than what we saw in the second quarter as we lap greater pricing benefits in the third quarter last year, as well as a shift of investment spending from Q2 to Q3.

As a result, we expect earnings per share for the third quarter will be lower than last year. Reflecting these updated assumptions, we now expect diluted earnings per share for the year will be between $25.10 and $25.60. As a reminder, fiscal 2023 is a 53-week year. We anticipate the additional week will add between $165 million to $175 million in sales and approximately $0.40 of earnings per share. In closing, our results through the first six months of fiscal 2023 highlights the ongoing power and resilience of our business model. I’d like to thank our associates for their dedication and commitment to keeping our guests at the center of all we do and giving them more reasons to shop Ulta Beauty. As we look to the future, we are focused on capitalizing on the growth opportunities in the beauty category and executing our strategic framework to deliver long-term sustainable growth for all our stakeholders.

And now I’ll turn the call back over to our operator to moderate the Q&A session.

See also Wall Street Analysts See Upside Potential for 10 Stocks and 11 Most Undervalued REIT Stocks to Buy.

Q&A Session

Follow Ulta Beauty Inc. (NASDAQ:ULTA)

Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Ashley Helgans with Jefferies. Please proceed with your question.

Ashley Helgans: Hi. Thanks for taking my question. To start, maybe any details you can share on how traffic progressed throughout the quarter and what you’re seeing now in August? And then also on the fragrances being locked up, have you seen any adverse effects on sales? Thanks.

Dave Kimbell: Yes. Ashley, for the quarter, we saw strong traffic throughout the quarter with double-digit traffic. And we continue to be pleased with the engagement that we’re seeing, and we saw actual comp performance sequentially accelerate through the quarter as well. And all of those trends are reflected into our updated and elevated guidance for the full year. On Fragrance, the — I’ll let Kecia kind of discuss what we’re doing in Fragrance and how that’s impacting our business.

Kecia Steelman: Yes. Actually, we’ve locked up about 50% of our stores right now. And what we’re seeing is in the initial stores that we rolled out the locked fragrance cases for, we actually saw sales improvement because we were in stock with the product and we had it available to the guests. So we’re staying very close to that. We’re also investing in labor because we don’t want to be sales preventative from the guests being able to purchase. So that’s a little bit of the investment in labor that you heard earlier from Scott, is that in these stores, we are upping our labor a bit because we want to make sure that we’re able to take care of the guests. So we’re staying close to it. The bottom line is that we’re pleased that we’re able to maintain our in-stock for our guests, and quite frankly, keep the bad actors from coming into our stores.

Ashley Helgans: Okay. Thanks.

Operator: Thank you. Our next question is from Michael Baker with D.A. Davidson. Please proceed with your question.

Michael Baker: Thanks. I’m just curious, you said you expect the beauty industry to grow mid-single digits, yet you’re only expecting comps to be up low single digits. And even if you add in store growth, you’re still expecting to grow maybe up, but seemingly below the industry. I don’t suppose you guys think you’re losing share, so I’m just wondering if you can help flesh that out a little bit?

Dave Kimbell: Yes, I’d say, yes, we do anticipate continuing to gain share. We’ve done so through the first half of the year, and that is our outlook. The commentary is really as we look into the second half of the year, we see some strength. Engagement continues to be high. Certainly, our business is performing very well. We’re attracting new members. We’re growing across all key categories, both and then in both e-com and stores. But we also see some uncertainty as we get in later into the year. So while we’re confident in the category, we’re just incorporating into our outlook some full — some of that. And for the full year, we’re looking at revenue in the plus 8% to 9% range, so we anticipate gaining share for the year being ahead of the total category growth. That will be our plan.

Michael Baker: Thank you.

Operator: Thank you. Our next question is from Olivia Tong with Raymond James. Please proceed with your question.

Olivia Tong: Thank you. My first question is around Prestige versus Mass breakout, because you mentioned in Skin that you’re still seeing strong growth in both Prestige and Mass. But only in Mass from makeup, but you mentioned that the launch of Fenty a year ago was a big contributor. So if you exclude that, are you seeing anything different there? And then going forward, as you think about your expectations on growth in Mass versus Prestige, what implications may that have on comp, in your view? Thank you.

Dave Kimbell: What was the last part of that question? What was — could you repeat the last?

Olivia Tong: Yes. Just the implication on comp, if what you’re thinking in terms of growth of Mass versus Prestige across your stores? And what implications that might have in terms of comp if Mass becomes a bigger piece of the driver of growth?

Dave Kimbell: Well, yes, we — as I discussed, we’ve seen strong performance really across our entire assortment as we look at it, but Mass has been a bit stronger for a couple of quarters now in — across our business. And that’s driven largely by strong consumer engagement across some key brands in Makeup, Health, Mix and some others are really hitting the market with great innovation, great marketing, great consumer engagement. And the fact that we offer the full assortment from Mass to Prestige is a real benefit. We’re able to capitalize on strong trends and strong engagements across all aspects of that. In Skin Care, we’re seeing brands, particularly in the dermatologist recommended area driving strong growth, and that’s great.

We — strong player for us. As we look forward, it’s always our intent to continue to adapt and adjust and lean into the areas that are driving growth, find ways to strengthen those that may be more challenged, but we’re confident in the outlook going forward. And the fact that we have both is unique. Of course you know that, but the fact that we’re the only ones that offer Mass, Masstige, Prestige and a growing established now business in luxury. We’re seeing strong points across all. We’ll continue to flex and adapt and incorporate it into our comp guidance is our ability to continue to drive growth. But through the first half of the year, we’re really pleased with the Mass performance and several brands driving strong growth, and continue to lean in and bring innovation into the Prestige side of the business.

And collectively, it’s working to allow us to gain share across Ulta Beauty.

Operator: Thank you. Our next question is from Kate McShane with Goldman Sachs. Please proceed with your question. Kate, is your line on mute.

Dave Kimbell: We go to the next person.

Operator: Thank you. Our next question is from Anthony Chukumba with Loop Capital Markets. Please proceed with your question.

Anthony Chukumba: Good afternoon. Congrats on the solid results and thanks for taking my question. So just a real quick one. You mentioned Luxury, and in fact, it’s exceeding your expectations. You mentioned launching Pat McGrath Labs. It’s all one related question in just two parts. First off, what — is Luxury — what percentage of your assortment, I guess, is Luxury in the stores that it’s in? And is it big enough at this point to be a comp driver?

Source link

Comments are closed.