Ulta Beauty Reveals Big Results in the First Quarter

Consumers are choosing Ulta stores and salons over those of competitor Regis, and the proof is in the latest quarterly results.

Jun 18, 2014 at 7:00AM

Shareholders of ULTA Salon (NASDAQ:ULTA), the largest beauty product retailer in the United States, could not be more excited following its first-quarter earnings release on Tuesday, June 10, as investors bid the stock up nearly 14% the next day. Based on this quarter's financial results, cosmetics, fragrances, and skin and hair care products saw high demand from consumers. However, competitor Regis (NYSE:RGS) did not experience this high demand, and it reported less favorable earnings. Let's take a closer look at just how well Ulta performed in its first quarter of the new fiscal year.

Going the distance
Diamonds may be a girl's best friend a majority of the time, but for the three months ended May 3, 2014, it seems that beauty products were a girl's favorite. For Ulta's retail and e-commerce business, the fiscal year is off to a fantastic start with net sales jumping 22.5% to $713.8 million from $582.7 million in the first quarter of fiscal 2013. In addition, comparable-store sales, which includes all Ulta stores open for at least 14 months along with e-commerce sales, increased 8.7% with e-commerce sales increasing a whopping 72.3% over last year's first quarter.

Ulta's Chief Executive Officer, Mary Dillon, commented on the company's successes in the first quarter with this statement:

The team's accomplishments included improving retail transactions which turned positive, driving continued momentum in our online business, successfully rolling out new brands, completing a smooth conversion of our loyalty program members onto one platform, and managing inventory very well. 

By taking these steps, Ulta was able to increase its net profit by 19.4% to $50.0 million compared to the first quarter of fiscal 2013 when Ulta achieved a profit of $41.8 million. In addition, earnings per diluted share increased 19.5% to $0.77. Furthermore, while Ulta was not able to reduce its selling, general, and administrative, or SG&A, expenses, it did manage to maintain its costs. For instance, SG&A expenses in the first quarter of fiscal 2013 represented 22.8% of net sales, which was also the case in the first quarter of fiscal 2014. If this wasn't enough, Ulta opened 21 stores in the first quarter, which brought its total store count to 696 stores, and it increased its total square footage by 20% from the same period a year ago.

Ulta expects the second quarter to be another winner
Looking ahead to the second quarter, Ulta executives expect their company's brand to remain strong. For starters, Ulta expects net sales in the second quarter of fiscal 2014 to increase by at least 17.5% to $706 million, and at best, increase to $717 million compared to the second quarter in fiscal 2013 when net sales totaled $601 million. On the other hand, Ulta expects comparable-store sales to slip somewhat, but still increase between 5%-7% despite increasing 8.4% in the second quarter of fiscal 2013. Ulta expects that earnings per diluted share will fall between $0.78-$0.83 in the second quarter compared to last year's second quarter when earnings per share totaled $0.70.

For the full year, Ulta has stated that it expects its success to continue as it plans to open 100 net new stores by the fiscal year's end; it will thereby increase its total square footage by 15%. In addition, Ulta hopes to increase both net sales and net profit "in the mid-teens percentile range". Last but not least, Ulta plans to renovate 12 of its current 696 locations to drive foot traffic and sales even higher. With these goals in mind, is it possible for Ulta to deliver despite competition from Regis Corporation?

Consumers are choosing Ulta hair salons over Regis salons
Ulta Beauty is doing exceptionally well in its industry, especially in the face of Regis Corporation, which primarily operates its 7,000 hair salons and sells hair care products to customers. Despite its recent efforts to improve its POS technologies, restructure its organization, and increase merchandise sales in order to turn around its business, Regis is still struggling to get back on its feet. Unlike Ulta, Regis performed quite poorly in its most recent quarter ended March 29, 2014. Not only did revenue drop in both its service and product divisions, but same-store sales fell as well from the first quarter in fiscal 2013.

Regis Trailing Three Months

Financial Results

March 31, 2013

March 29, 2014


$504.9 million

$471.6 million

Same-store sales



ULTA Salons, Cosmetics, & Fragrance Trailing Three Months

Financial Results

May 4, 2013

May 3, 2014

Net Sales

$582.7 million

$713.8 million

Comparable store sales



Based on the figures in the charts above, it is quite obvious that Ulta had a much stronger performance following the holiday season with net sales up 22.5% whereas revenue at Regis declined 6.6%. Furthermore, same-store sales at Regis fell even further from the same period a year earlier, declining 5.7%. At Ulta comparable-store sales increased 8.7%. While Regis's turnaround strategy may pay off for the company in the long run, its business at this time is inferior to that of Ulta, which effectively manages a hair salon in each of its stores while selling a multitude of beauty products for both men and women.

Foolish takeaway
Foolish investors should consider making Ulta part of their portfolios after this latest earnings release as Ulta is likely to perform increasingly well in both the short term and long term. Not only do customers love the products that Ulta carries in each of its stores and online, they enjoy the benefits that come with being a member of Ulta's rewards program. In the meantime, investors would be wise to keep an eye on Ulta and whether it meets or exceeds its second-quarter expectations. On the other hand, investors should hold off on buying into Regis Corporation until it showcases positive growth in both sales and profit. For now, Ulta's year is off to a great start.

Warren Buffett's biggest fear is about to come true
Warren Buffett just called this emerging technology a "real threat" to his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. It won't be long before everyone on Wall Street wises up, that's why The Motley Fool is releasing this timely investor alert. Click here to learn more about what's keeping Buffett up at night and the one public company we're calling the "brains behind" the technology.

Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Ulta Salon, Cosmetics & Fragrance. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers