ULTA XChange 2012 Conference
Transcript of ULTA XChange 2012 Conference
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Conference
Miami Beach, Florida
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June 15, 2011
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Chuck Rubin
President & Chief Executive Officer
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Why Invest in ULTA?
Fast Growth Retailer with 45% Penetration into 1 000 U.S. Store Plan
Proven Concept Growing Profitability at a 38% 5-Year Net Income CAGR
Strong Performance Through Economic Cycles with over 10 Consecutive Yearsof Positive Comp Store Sales
Customers Continuing to Choose ULTA Shopping Experience, Driving MarketShare Gains
Talented, Experienced Team in Place to Continue to Deliver Strategies
Strong Operating Cash Flow Enabling Self-Funded Growth and Free CashFlow Generation
Well Defined Growth Strategies Targeting 25-30% Annual Net Income Growth
and Mid-Teen Operating Margin
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Who We Are
Largest Beauty Retailer of Prestige, Stores Are Approximately 10,000 Square
ass an a on ro uc s an
Services Under One Roof in the U.S.
ee an arry ver , s
449 Stores in 43 States as of December
31 2011
and Specialty Retail Experience
Over 8.5 Million Active Loyalty
Core Marketing Strategies Drive Traffic
and Excitement; Communicate Value
Program Membersropos t on
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Guest Proposition:Beaut Su erstoreAttributes
One-Stop Shopping for Beauty Compelling Value Proposition
Loyalty Program Private LabelPrestigeMass Salon Promotions
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Guest Proposition:. . . With a S ecialt StoreEx erience
Excitin Modern Store Desi n
Friendly, Trained,
Non-Commission Sales Associates
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Experiential Boutiques & Testers
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Recent Trends
Holiday Sales Results
Increased net sales 24.4%
Grew comparable store sales 12.6%, on top of a 9.5% gain last year
Strong traffic growth of 12.1% Strong broad based category performance
Pleased with margins and inventory coming out of the holiday period
Comparable Store Sales (%) Sales Growth (%)
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*Q4 2011 Comparable Store Sales and Sales Growth represent the mid-point of guidance given on January 5, 2012.
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Demonstrated Track Record of Growth
311
346389 449
Number ofStores at
Year End
196 CAGR+18%
20072006 2008
1 085$1,223
2009 2010
$1,455
2011
$1,770 *
Sales andComp Store
Sales Growth
Sales
+19%$755
$912
Comps
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14.5% 6.4% 0.2% 1.4% 11.0%
$71
10.6%
$117 *
NetIncome
CAGR+38%
$25$23 $25
20072006 2008 2009Growth 41.2% 12.4% (0.3%) 55.8%
201080.5%
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2011E64.8%
* Note: FY 2011 Comparable Store Sales, Sales Growth and Net Income represent the mid-point of guidance given on January 5, 2012.
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Large Addressable Beauty Market
$93 Billion U.S. Market
$40 BillionSalon Services Market
$53 BillionBeauty Products Market
Hair Care
SkinCare
11%
a r are
Services39%
Cosmetics
10%
NailSalons
Fragrance
6%
Other(1)
4%
ULTA Is the ONLY Retailer That Offers Products and
Source: 2010A data from Euromonitor (May 2011) and IBIS World (August 2011).(1) Other includes: baby care, bath and shower, deodorants, depilatories, oral care, sun care. 10
erv ces cross egmen s o e eau y ar e
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Experienced & DisciplinedManagement Team
Name Title Previous Experience
Years of Retail /
Beauty Experience
Year Joined
ULTA
Chuck Rubin President & CEO Office Depot, Accenture, Federated Stores 29 2010
regg o nar or ers, oopers y ran
Janet Taake SVP, Merchandising Babies R Us, Sears, Mervyns/Target 31 2008
Kimberley Grayson Chief Marketing Officer The Childrens Place, Gap, Aerosoles,Bloomingdales 28 2010
Cindy Payne SVP, Store Operations Davids Bridal, Casual Corner, Disney 31 2010
Robert Guttman SVP, General Counsel Reynolds & Reynolds, Sears 18 2007
Alex Lelli SVP Growth & Dev. Borders Mei er K-Mart 28 2005
Rob Mills CIO Sears 11 2011
Dennis MullahySVP, MerchandiseOperations
Meijer, Accenture 23 2011
Jim Scarfone SVP, Human Resources Duane Reade, Toys R Us 25 2011
Bill Miller VP, Supply Chain The Childrens Place, Davids Bridal, Target 29 2011
JP Stevens/Ralph Lauren Home,
Furnishings, Coach
Mary Bolyard SVP, Prestige Cosmetics Johnson & Johnson 26 2002
Barbara Zamudio VP, Mass Sears, K-Mart 13 2007
Holly Schmidt VP, Fragrance & Skincare Sears, Mercantile Stores 22 2008
Phil Horvath VP, Salon Calco Hair, Regis Corp. 21 1999
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Well Defined Growth Strategies
Accelerate Pace of New Store Expansion 1,000 Store Plan in the U.S.
Continue Offering Expansion with New Products, Services and Brands
Enhance Successful Loyalty Program
Increase Focus On ULTA.Com to Support Multi Channel
Long-Term Target
Annual Square Footage Growth: 15% - 20%
Annual Comparable Store Sales Growth: 3% - 5%12
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1,000 U.S. Store Plan withProven National Conce t
Few Geographic Barriers
Established Presence in
Large Metro Markets
449 Stores in 43 States
Successful Single-StoreMarkets
Store Expansion
Expanded square footage by 16%
Expect to grow square footage at
the high end of our 15% to 20%
Note: Store data as of December 31, 2011.
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Continue Offering Expansion
20092008
Proven Ability to Add New Brands
2010 2011
Fragrance
Pioneering Innovative In-Store Brand Boutique
Bare Escentuals Benefit Philosophy
Mens Shop Dermalo ica
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Enhance Successful Loyalty Program
Over 8.5 Million Active Customer Loyalty Program Members
Re resents Over 50% of Sales
Higher Shopping Frequency and Spend Than Non-Members
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Customer Can Redeem Points In-Store and Online for Cash Discounts on Purchases
Provides a Robust Database of Customer Information and Shopping Behavior for CRMApplications
rov es gn can ppor un y or egmen a on ase on us omer e av ors
Facilitates Tailored, One-On-One Marketing Initiatives to Customers
Long Term O ortunity
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Broaden Marketing Reach
Primarily Have Utilized Print Advertising
Attractive Opportunity to Continue to Evolve Into New Marketing Channels
Customized One-on-One Marketing, Facilitated by Enhanced CRM Capabilities
Direct Mail /
Newspaper Inserts
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Increase Focus on Ulta.Com to SupportM l i h nn l
Dual Purpose: Drive Online RevenueandSupport Store Business
Extension of Marketing andProspecting Strategies
Engagement
Expand E-Commerce SalesLow Sin le Di it Penetration
Investment in ULTA.ComDevelopment:
e very o nterta nment anEducational Functionality On
Site o e ommerce
Assortment Expansion
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Gregg Bodnar
Chief Financial Officer
C ti d St P f
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Continued Strong Performance
Est. FY 11 Net Sales Growth of 22%* Double Digit Operating Margin*
Hi hli hts of 2011Earnin s Per Share Growth of 59%*
Operating IncomeMargin 8.2% 10.9%
1-Yr Comp 11.1% 11.3% 9.6% 10.5%*
2-Yr Comp(1) 21.9% 22.1% 21.8% 20.9%
Consistent revenue growth
Significant operating margin expansion
Delivered double digit operating margin
Accelerating square footage growth
Note: $ in millions, except per share data.(1)2-Yr Comp equals the 1-Yr Comp plus the prior year comparative period.* Q4 2011 Comparable Store Sales and Sales Growth and Fiscal 2011 Earnings Per Share Growth represent the mid-point of guidance given on January 5, 2012. 19
Delivered Free Cash Flow
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Long-Term Financial Targets
Annual Square Footage Growth: 15% 20%
Annual Comparable Store Sales Growth: 3% - 5%
Operating Margins: Mid Teens
Annual Net Income Growth: 25% 30%
Return on Equity: 26% - 27%
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Compelling New Store Economics
Store Size 10,000 Square Feet
Current Model
Leasehold and Fixtures, Net $0.3
Investment
Inventory, Net of Payables 0.4
Pre-Opening Expenses 0.2
.
Year One Year ThreeYear Five(Maturity)
Unit
a es . . .
Sales Growth(1) 13% 3%
Sales as % of Year 5 Sales 67% 88% 100%
Store-Level Cash Flow $0.4 $0.7 $0.8
Sales Per Square Foot $260 $350 $400
Cumulative Cash-on-Cash Return 40% 168% 340%
Note: $ millions except for sales per square foot data.(1) Sales growth from preceding year.
ay ac er o . ears
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Incremental Earnings Growth
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Incremental Earnings GrowthThrough Margin Expansion
Supply Chain Efficiencies Automated MaterialHandling Technology and Equipment, LaborManagement Tools and Network Design
5.6% 8.2%10.9%
Operating Margin
Merchandising Productivity Improvements Demand Planning and Forecasting,Promotion/Management and Business PlanningTools
Gross Margin 2009 2010 2011E
Store Sales Growth
Leverage Corporate Operations
SG&A
Increased Use of Process Automation Technology
Expanding Store Base
Marketing Program Leverage
More Efficient One-to-One Marketing
Store Operations Engineered Processes and Labor Management Tools
Operating Margin Expansion: 270 bps Mid Teens Annual Net Income Growth: 65% 25% - 30%
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Increasing Returns & Self Funded
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Increasing Returns & Self-FundedGrowth
Proven Disciplined Investment Strategy forNew Store ProgramNew Store
Model
Cumulative Cash-on-Cash Return (1)
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Shorter Payback PeriodEconomics
Reduced Avera e Inventor er Store b 6.1% NWC as % of Net Sales (2)
NetWorkingCapital
in 2010 Without Impacting Customer Experience
Projected 1% to 3% Average Inventory per StoreReduction in 2011
Self-
Increasing Use of Technology
Debt-Free Balance SheetFree Cash Flow ($ in millions)(3)
FundedGrowth
No Need for Additional Equity
$200M Credit Facility Through 2016
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Return on Equity: 14.6% 20.4% 26% - 27%(1) Cumulative store level EBITDA divided by total new store investment.
(2) Average networking capital / sales. Networking capital defined as current assets (excluding cash and cash equivalents) less current liabilities.
(3) Cash provided by operating activities less purchases of property and equipment.
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Thank You