Positive momentum from H1 for Ulta

07 Dec '09

5 min read

• Operating income increased to $33.9 million compared to $24.9 million in the first nine months of fiscal 2008;
• Net income increased to $19.1 million compared to $13.0 million in the first nine months of fiscal 2008;
• Income per diluted share increased to $0.32 compared to $0.22 in the first nine months of fiscal 2008, which included $0.01 per share of severance costs for the management change in March 2008.

Balance Sheet and Cash Flow

Merchandise inventories at the end of the third quarter totaled $274.0 million, compared to $268.9 million at the end of third quarter fiscal 2008, representing an increase of $5.1 million due to the addition of 41 new stores opened since November 1, 2008. Average inventory per store decreased 10.2%.

For the first nine months of fiscal 2009, the Company generated free cash flow of $65.5 million through a combination of increased earnings, working capital management and reduced new store program. Free cash flow is defined as net cash provided by operating activities less purchases of property and equipment. A reconciliation of free cash flow, a non-GAAP measure, is included at Exhibit 5.

Store Expansion

During the third quarter, the Company opened 12 stores, 1 each in D'lberville, MS; Tupelo, MS; Maywood, NJ; Camillus, NY; Strongsville, OH; Allentown, PA; Collegeville, PA; Anderson, SC; Midland, TX; Longview, TX; Spokane, WA; and Pleasant Prairie, WI. The Company ended the third quarter with 345 stores and square footage of 3,593,256, which represents a 14% increase compared to the third quarter of fiscal 2008.

Outlook

For the fourth quarter of fiscal 2009, the Company currently expects net sales in the range of $362 million to $376 million, compared to actual net sales of $341.4 million in the fourth quarter of fiscal 2008. This assumes comparable stores sales range from a decrease of 3% to an increase of 1%, compared to a decrease of 5.5% in the fourth quarter last year.

Income per diluted share for the fourth quarter of fiscal 2009 is estimated to be in the range of $0.22 to $0.26. This compares to income per diluted share for fourth quarter fiscal 2008 of $0.21.

For fiscal 2009, the Company plans to:

• generate free cash flow of approximately $75 million, compared to a $35.7 million net cash out flow in fiscal 2008;
• permanently reduce expenses by approximately $18 million including supply chain, store and other operating costs;
• open 37 new stores;
• incur capital expenditures of approximately $71 million, compared to $110.9 million in capital expenditures reported in fiscal 2008; and
• reduce inventory by approximately 9% on an average per store basis by year end 2009.

Ulta Salon Cosmetics & Fragrance Inc

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