Ulta Salon, Cosmetics & Fragrance Inc. posted third-quarter earnings growth of 68.6 percent, a sign that the beauty retailer’s strategy of selling mass and prestige brands under one roof is resonating with value-driven shoppers.

This story first appeared in the December 4, 2009 issue of WWD. Subscribe Today.

To keep foot traffic robust throughout the holiday season, Ulta’s president and chief executive officer Lyn Kirby said the retailer will launch a TV marketing campaign for the first time.

The hybrid retailer reported net income for the quarter ended Oct. 31 was $8.5 million, or 14 cents a diluted share, compared with $5 million, or 9 cents, in the prior year period. Net sales increased 11.5 percent to $284 million, up from $254.8 million a year earlier, with comparable-store sales ticking up 1.5 percent, compared with an increase of 2 percent the prior year. During an after-market call with analysts Thursday, Kirby said prestige skin care and cosmetics, as well as improved sales of fragrance and hair styling tools, helped drive the sales gains.

In a statement late Thursday afternoon, Kirby said, “Our strong third-quarter performance has helped us deliver over $65 million of free cash flow year to date, which was well ahead of our expectations. In addition, our 2009 new stores continue to perform on model, which helped to drive a double-digit total sales increase.” During the quarter, Ulta opened 12 stores, ending the quarter with 345 doors.

For the nine-month period, net income increased to $19.1 million, or 32 cents a diluted share, up from $13 million, or 22 cents, in the year-earlier period. Sales increased 11.2 percent to $826.4 million, up from $743.3 million, while same-store sales declined 0.8 percent.

Looking to the fourth quarter, Ulta forecasted net sales between $362 million and $376 million, assuming a comparable- store sales decline of 3 percent to an increase of 1 percent.

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