ULTA XChange 2012 Conference

download ULTA XChange 2012 Conference

of 24

Transcript of ULTA XChange 2012 Conference

  • 8/2/2019 ULTA XChange 2012 Conference

    1/24

    Conference

    Miami Beach, Florida

    ,

    June 15, 2011

    ,

  • 8/2/2019 ULTA XChange 2012 Conference

    2/24

  • 8/2/2019 ULTA XChange 2012 Conference

    3/24

    Chuck Rubin

    President & Chief Executive Officer

  • 8/2/2019 ULTA XChange 2012 Conference

    4/24

    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

    4

  • 8/2/2019 ULTA XChange 2012 Conference

    5/24

    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

    5

  • 8/2/2019 ULTA XChange 2012 Conference

    6/24

    Guest Proposition:Beaut Su erstoreAttributes

    One-Stop Shopping for Beauty Compelling Value Proposition

    Loyalty Program Private LabelPrestigeMass Salon Promotions

    - -

    6

  • 8/2/2019 ULTA XChange 2012 Conference

    7/24

    Guest Proposition:. . . With a S ecialt StoreEx erience

    Excitin Modern Store Desi n

    Friendly, Trained,

    Non-Commission Sales Associates

    7

    Experiential Boutiques & Testers

  • 8/2/2019 ULTA XChange 2012 Conference

    8/24

    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 (%)

    8

    *Q4 2011 Comparable Store Sales and Sales Growth represent the mid-point of guidance given on January 5, 2012.

  • 8/2/2019 ULTA XChange 2012 Conference

    9/24

    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

    39

    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%

    9

    2011E64.8%

    * Note: FY 2011 Comparable Store Sales, Sales Growth and Net Income represent the mid-point of guidance given on January 5, 2012.

  • 8/2/2019 ULTA XChange 2012 Conference

    10/24

    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

  • 8/2/2019 ULTA XChange 2012 Conference

    11/24

    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

    11

  • 8/2/2019 ULTA XChange 2012 Conference

    12/24

    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

  • 8/2/2019 ULTA XChange 2012 Conference

    13/24

    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.

    13

  • 8/2/2019 ULTA XChange 2012 Conference

    14/24

    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

    14

  • 8/2/2019 ULTA XChange 2012 Conference

    15/24

    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

    ,

    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

    15

  • 8/2/2019 ULTA XChange 2012 Conference

    16/24

    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

    16

  • 8/2/2019 ULTA XChange 2012 Conference

    17/24

    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

    17

  • 8/2/2019 ULTA XChange 2012 Conference

    18/24

    Gregg Bodnar

    Chief Financial Officer

    C ti d St P f

  • 8/2/2019 ULTA XChange 2012 Conference

    19/24

    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

  • 8/2/2019 ULTA XChange 2012 Conference

    20/24

    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%

    20

  • 8/2/2019 ULTA XChange 2012 Conference

    21/24

    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

    21

    Incremental Earnings Growth

  • 8/2/2019 ULTA XChange 2012 Conference

    22/24

    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%

    22

    Increasing Returns & Self Funded

  • 8/2/2019 ULTA XChange 2012 Conference

    23/24

    Increasing Returns & Self-FundedGrowth

    Proven Disciplined Investment Strategy forNew Store ProgramNew Store

    Model

    Cumulative Cash-on-Cash Return (1)

    -

    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

    -

    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.

    23

  • 8/2/2019 ULTA XChange 2012 Conference

    24/24

    Thank You