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Beauty Beat: Ulta Profits Increase 16 Percent

Beauty retailer Ulta Salon, Cosmetics & Fragrance Inc., which reported financial results for the first time as a public company Tuesday, posted robust...

Beauty retailer Ulta Salon, Cosmetics & Fragrance Inc., which reported financial results for the first time as a public company Tuesday, posted robust earnings and a 6.7 percent rise in comparable-store sales for the third quarter ended Nov. 3.

Quarterly profits increased 16.3 percent to $4.2 million from $3.6 million during the quarter ended Oct. 28 of last year as sales rose 25.4 percent to $208.2 million from $166.1 million.

The 237-store chain, which raised $123.9 million during an initial public offering on Oct. 30, attributed comp-store sales growth to “solid gains” in customer traffic, average ticket growth, double-digit comps in the prestige category and strength in its salon business.

Ulta’s president and chief executive officer, Lyn Kirby, expressed optimism during a conference call with Wall Street analysts Tuesday by saying that, despite a softer economy, the beauty category would continue to perform.

Women “will let go of some things” during a slower economic cycle, said Kirby, with the exception of shampoo and lipstick. “[Beauty] is a necessity for her in many instances and not just a luxury experience. We’ll see resiliency as we have historically in a soft economy.”

Kirby said she is keeping a close eye on “overall traffic to the store” rather than shifts in individual beauty categories like fragrance, color cosmetics, hair care, skin care and salon products. “There is a lot of competition from all [of retail],” she said. “There is a lot of promotional activity going on. We are far more cognizant of being competitive in the marketplace.”

She added, however, that she anticipates fragrance sales coming later in the selling season and that her biggest concern is a weather-related disruption in store traffic right before Christmas.

During the third quarter, Ulta opened 26 new stores, remodeled seven stores and entered Alabama, Ohio, Tennessee and Massachusetts, bringing the number of states it operates in to 30. The firm plans to open 12 more stores in the fourth quarter and to end the 2007 fiscal year with 249 stores, which would amount to a 28 percent increase in total square footage to 2,589,794 square feet.

The aim, according to Kirby, is to grow Ulta’s store base to 1,000 locations within the next 10 years.


The retailer, which relaunched its Web site on Nov. 16, has begun carrying brands like Dermalogica, Juicy Couture and Jessica Simpson’s Hair Do hair extensions. The Stila color cosmetics brand, which is being tested in 30 Ulta stores, is to be rolled out next year, said Kirby.

For the first nine months of the fiscal year, profits were down 8.9 percent to $11.7 million from $12.9 million a year ago on higher selling, general, administrative and pre-opening expenses. Revenues for the first nine months reached $602.8 million, a 23.5 percent increase from $488.1 million in the prior year.

The retailer is forecasting fourth-quarter comp-store growth of 4 to 6 percent on sales of $304 million to $310 million and expects diluted earnings per share to be 22 cents to 24 cents.

For the full year, Ulta estimates comp-store gains of 6.2 to 6.9 percent on sales of $907 million to $913 million. Profits are expected to be in the range of 47 cents to 49 cents a share.