Ulta Beauty, Inc. Q1 FY2025 earnings call

• Core business growth: Focused on excellence in operations, strengthened go-to-market approach, with improved in-store conversion and guest satisfaction. Key events like 21-day beauty campaign, Valentine's Day, and Easter were successful.
• Marketing: Evolving go-to-market strategy with bold campaigns, Super Bowl campaign with record social impressions, 21 days of beauty event, and Ulta Beauty, Inc. World experiential event.
• Brand building: Launched 19 new brands, many exclusive, with brands like Tatcha, Milk Makeup, Ilia performing well.
• Digital and personalization: Accelerating capabilities with expanded automation, real-time content delivery, new features like split cart and shop my store app functionality.
• Scaling new businesses: Launched 9 new wellness brands online, enhanced retail media network UV Media, progressing with international store openings and online marketplace initiative.
• Realigning foundation: Streamlining cost structure, optimizing ways of working, leveraging AI/machine learning for supply chain efficiencies, and announcing new leadership.

For the first quarter, fragrance was the strongest performing category with double-digit growth, driven by newness in women's and gender-neutral fragrance brands, Spring and Valentine's Day sets, and strength in men's fragrance. Sales in the skincare and wellness category increased in the high single-digit range, with body care, sun care, and wellness driving growth; prestige skincare was flat, while mass skincare decreased modestly. The hair care category was roughly flat, with growth in hair color and accessories offset by decreases in hair care tools and mass hair care. Comp sales in the makeup category decreased slightly, with mass makeup impacted, but prestige makeup was flat. Services delivered low single-digit comp driven by salon and specialty services.

• Net sales expected to be between $11.5 billion and $11.7 billion with comp sales growth in the range of flat to up 1.5%.
• Operating profit is expected to deleverage in the low double-digit range with operating margin between 11.7% and 11.8% of sales.
• Diluted EPS for the year is anticipated to be between $22.65 and $23.20 per share.

• Macro uncertainty and consumer wallet pressures impacting spending.
• Potential impacts of higher tariffs on merchandise.
• ERP disruption affecting in-stocks and operations.

Q: Just curious if there's anything surprising with the efforts under the Ulta Beauty, Inc. Unleashed plan versus initial expectations A: Kecia Steelman mentioned pride in the team's execution, improved in-store execution, in-stocks, and marketing efforts resonating with guests Q: Around the full-year outlook of flat to 1.5% deceleration after strong quarter, key drivers and cadence A: Paula Oyibo said comp growth in first half low single digits, second half down low single digits to up modest; focus on promo optimization and profitable growth Q: Newness and innovation pipeline heading into summer and back half of year A: Kecia Steelman said balanced cross-category newness with exclusivity, pleased with pipeline and brand building efforts Q: Improvements in demand and attribution to consumer environment, initiatives, competitive impact A: Kecia Steelman talked about controlling what can be controlled, lapping of distribution impacts, and operational efforts contributing to performance Q: Sephora at Kohl's headwind fade vs better execution, ERP disruption impact A: Kecia Steelman said hard to quantify, but operational efforts and lapping of distribution impacts are contributing; ERP disruption affected in-stocks, focusing on guest experience and product availability Q: Thinking about ticket versus transactions in full-year guide, corporate overhead expense timing shift A: Paula Oyibo said average ticket driven by selling price and lower promotionality; corporate overhead timing shift due to investment pacing and prioritization Q: Brand curation, personalization with loyalty, UB Media impact A: Kecia Steelman talked about targeting high potential exclusive brands, personalization through Adobe partnership, and UB Media focus on better reporting, enhanced products, and expanded reach Q: 10% growth in e-commerce, drivers and margin implications A: Kecia Steelman mentioned app engagement, split cart, BOPIS, and upcoming subscribe and save; Paula Oyibo said channel mix not largest driver of margin pressure Q: Momentum into current quarter, what causes comps to go negative outside macro, flow through if better than guidance A: Kecia Steelman said dynamic environment, limited visibility, consumer caution; prudent outlook reflecting risk-adjusted macro expectations Q: Competition context, more or less competitive A: Kecia Steelman said competitive intensity consistent, but cycling through brick and mortar expansion impacts, expertise and exclusivities set them apart Q: Prestige vs masks in skin and makeup trend A: Kecia Steelman talked about makeup category trends, partnership with brands, and no indication of trading down, spend per member consistent across income cohorts