Ulta Beauty, Inc. (NASDAQ:ULTA) Q4 2022 Earnings Call Transcript

Dave Kimbell: Let’s see. So, a few things in that. First of all, yes, January was elevated, as Scott said there. And there were multiple factors. It’s hard to nail down exact drivers, the exact elements of the contribution, but you mentioned a few, omicron, lapping omicron being one of those. The underlying consumer engagement was strong as we emerged out of holiday. There’s no doubt about that. The importance of the category, the elevated connection between beauty and wellness is showing up in January and gives us confidence as we go into the year. We are lapping some major launches, OLAPLEX in January. Fenty, actually, the launch happened in Q1 of last year, so that launch was not lapped in January but will be lapped here in the first quarter.

And as we look into the year, again, the outlook that we have is 4% to 5% comp growth, stronger in the first half — higher in the first half, a double-digit — I’m sorry, high single digits — excuse me, high single digit in the first half of the year, lower single digit in the second half of the year leading to the 4% to 5% comp guidance for the full year. The drivers, again, of that are import pricing, some continued momentum coming out of the strength we saw in January, and other factors that lead to a bit stronger in the first half of the year.

Operator: Our next question is from Adrienne Yih with Barclays.

Adrienne Yih: Great. Thank you very much, and congratulations on the quarter and the year and the great start to the new year. David, I guess — well, actually — so I’ll start with kind of a question about the model itself. So, pre-COVID, sales per gross square foot was kind of averaging in the $500 a square foot and at that time, sort of the potential margin at 15%. We’re now kind of post COVID in that $800 a square foot range. And it looks like these are new TAM bolt-on services, BIPOC, Conscious Beauty. It doesn’t look skin care — it doesn’t seem like there’s kind of a replacement or a shift going on. So, I’m just wondering if you can kind of talk about the 15% sustainable margin and how we should think about sort of that on a longer-term basis after you get through the investment phase.

Scott Settersten: Yes. Adrienne, maybe I’ll just give that a slightly different spin. So, again, as we said, we’re confident that we can deliver now adjusted 14% to 15% operating margin on a 3% to 5% comp for the next few years. Again, we came — at our Analyst Day back in late fall 2021, we were giving our point of view on the financial model through the end of 2024. So, since then, a lot of things have changed. I think less so on the sales drivers because there’s a lot — again, this category provides a lot of opportunities for us to drive the top line through various means. Really, the change is versus 2019, a lot are in the infrastructure, the cost infrastructure of the business overall. So, you’ve probably heard us refer to some of this in the past.