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What changed in Ulta Beauty's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Ulta Beauty's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+233 added−246 removedSource: 10-K (2024-03-26) vs 10-K (2023-03-24)

Top changes in Ulta Beauty's 2024 10-K

233 paragraphs added · 246 removed · 204 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe following table sets forth the approximate percentage of net sales attributed to each category for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ ​ January 28, ​ January 29, ​ January 30, (Percentage of net sales) ​ ​ 2023 ​ 2022 ​ 2021 Cosmetics ​ ​ 42% ​ 43% ​ 45% Haircare products and styling tools ​ ​ 21% ​ 20% ​ 20% Skincare ​ ​ 17% ​ 17% ​ 16% Fragrance and bath ​ ​ 14% ​ 14% ​ 12% Services ​ ​ 3% ​ 3% ​ 3% Accessories and other ​ ​ 3% ​ 3% ​ 4% ​ ​ ​ 100% ​ 100% ​ 100% ​ 7 Table of Contents Organization ​ Our merchandising team consists of a Chief Merchandising Officer who oversees the Senior Vice President of Cosmetics and category Vice Presidents who in turn oversee Divisional Merchandise Managers and their teams of buyers.
Biggest changeCategories We offer a balanced portfolio across six primary categories: (1) cosmetics; (2) skincare; (3) haircare products and styling tools; (4) fragrance and bath; (5) services; and (6) accessories and other, which includes other revenue sources such as the private label and co-branded credit card programs, royalties derived from the partnership with Target, and deferred revenue related to the loyalty program and gift card breakage. 10 Table of Contents ​ The following table sets forth the approximate percentage of net sales attributed to each category for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ February 3, ​ January 28, ​ January 29, (Percentage of net sales) ​ 2024 ​ 2023 ​ 2022 Cosmetics ​ 41% ​ 42% ​ 43% Skincare ​ 19% ​ 17% ​ 17% Haircare products and styling tools ​ 19% ​ 21% ​ 20% Fragrance and bath ​ 15% ​ 14% ​ 14% Services ​ 3% ​ 3% ​ 3% Accessories and other ​ 3% ​ 3% ​ 3% ​ ​ 100% ​ 100% ​ 100% ​ Organization ​ Our merchandising team consists of a Chief Merchandising Officer who oversees the Senior Vice President of Cosmetics and category Vice Presidents who in turn oversee Divisional Merchandise Managers and their teams of buyers.
Our leadership team also hosts roundtable sessions to dive deeper on specific topics as well as additional forums, including department town halls, store and distribution center visits, and other small group gatherings. Training and development Our success is dependent, in part, on our ability to attract, train, retain, and motivate qualified associates at all levels of the organization.
Our leadership team also hosts roundtable sessions, as well as additional forums, including department town halls, store and distribution center visits, and other small group gatherings, to dive deeper on specific topics. Training and development Our success is dependent, in part, on our ability to attract, train, retain, and motivate qualified associates at all levels of the organization.
UB Media offers brands a suite of media capabilities that aim to personalize guest engagement and drive the acquisition of new guests. ​ Staffing and operations Retail stores Our current Ulta Beauty store format is typically staffed with a general manager, a services manager, and three associate managers, along with approximately 28 full- and part-time associates, including approximately four to eight prestige consultants and five to ten licensed salon professionals.
UB Media offers brands a suite of media and advertising capabilities that aim to personalize guest engagement and drive the acquisition of new guests. ​ Staffing and operations Retail stores Our current Ulta Beauty store format is typically staffed with a general manager, a services manager, and three associate managers, along with approximately 28 full- and part-time associates, including approximately four to eight prestige consultants and five to ten licensed salon professionals.
In addition, we believe wellness, like beauty, is more than skin deep, so we offer mental health resources, such as counseling services and access to mobile applications, financial wellness planning and guidance, and health mobile applications and educational resources for soon-to-be parents. The Ulta Beauty Charitable Foundation (UBCF) supports the Associate Relief Program to assist associates facing unforeseen financial hardship.
In addition, we believe wellness, like beauty, is more than skin deep, so we offer mental health resources, such as counseling services and access to mobile applications, financial wellness planning and guidance, and health mobile applications and educational resources for soon-to-be parents. The Ulta Beauty Charitable Foundation supports the Associate Relief Program to assist associates facing unforeseen financial hardship.
Store Footprint. We operate more than 1,350 stores predominantly located in convenient, high-traffic locations. With a bright and open store environment, we make it easy for guests to discover new products and services. Our store design, fixtures, and open layout provide the flexibility to respond to consumer trends and changes in our merchandising strategy.
We operate more than 1,350 stores predominantly located in convenient, high-traffic locations. With a bright and open store environment, we make it easy for guests to discover new products and services. Our store design, fixtures, and open layout provide the flexibility to respond to consumer trends and changes in our merchandising strategy.
The salon features a concierge desk, approximately five to ten stations, and a shampoo and hair color processing area. We employ highly skilled, licensed professional stylists and estheticians who offer services as well as educational experiences, including consultations, styling lessons, makeup applications, skincare regimens, and at-home care recommendations.
The salon features a concierge desk, approximately five to ten stations, and a shampoo and hair color processing area. We employ highly skilled, licensed professional stylists and estheticians who offer services as well as educational experiences, including consultations, styling lessons, makeup applications, skincare services, and at-home care recommendations.
The shop is staffed by Target team members who are trained by Ulta Beauty to provide recommendations and answer product questions. Members in our loyalty program, Ultamate Rewards, can earn points (but not redeem) for purchases made in the Ulta Beauty at Target shop.
The shop is staffed by Target team members who are trained by Ulta Beauty to provide recommendations and answer product questions. Members in our loyalty program, Ulta Beauty Rewards, can earn points (but not redeem) for purchases made in the Ulta Beauty at Target shop.
Evolve the omnichannel experience through connected physical and digital ecosystems, All In Your World. Our guest insights and member data confirm that beauty enthusiasts prefer to transact in physical stores, where they can discover and interact with products and other beauty enthusiasts. At the same time, digital channels offer convenience, product reviews, and price transparency.
Evolve the omnichannel experience through connected physical and digital ecosystems, All In Your World. Our guest insights and member data confirm that beauty enthusiasts prefer to transact in physical stores, where they can discover and engage with products and other beauty enthusiasts. At the same time, digital channels offer convenience, product reviews, and price transparency.
We estimate that Ulta Beauty had less than 1% share of this industry. We have full-service hair salons in substantially every store and operate brow bars in most of our stores, as well as makeup services through our salons. In addition, we offer skin services in approximately 150 locations.
We estimate that Ulta Beauty had less than 1% share of this industry. We have full-service hair salons in substantially every store and operate brow bars in most of our stores, as well as makeup and ear piercing services through our salons. In addition, we offer skin services in approximately 150 locations.
We offer comprehensive medical plans that empower associates to choose the coverage that best suits them. ● 401(k) plan with up to a 4% company match. ● Disability and life insurance. ● Company-paid short-term disability pay at 80% of pay. 11 Table of Contents ● Additional insurance options, including legal, pet, home, and auto. ● Tuition reimbursement program. ● Paid time off, including an extended illness bank. ● Discounts on retail products and salon services.
We offer comprehensive medical plans that empower associates to choose the coverage that best suits them. ● 401(k) plan with up to a 4% company match. ● Disability and life insurance. ● Company-paid short-term disability pay at 80% of pay. ● Additional insurance options, including legal, pet, home, and auto. ● Tuition reimbursement program. ● Paid time off, including an extended illness bank. ● Discounts on retail products and salon services.
Our objective is to deliver a cohesive, industry-leading omnichannel experience that drives breakthrough engagement with our guests and unlocks the combined potential of our physical and digital channels. Expand and deepen our presence across the beauty journey, solidifying Ulta Beauty at the Heart of the Beauty Community.
Our objective is to deliver a cohesive, industry-leading omnichannel experience that drives breakthrough engagement with our guests and unlocks the combined potential of our physical and digital channels. Expand and deepen our presence across the beauty journey, positioning Ulta Beauty at the Heart of the Beauty Community.
Our current Ulta Beauty store format includes an open and modern salon area, with most of our stores offering brow services on the salon floor. In addition, stores offering skin services include a skin treatment room or dedicated skin treatment area on the sales floor.
Our current Ulta Beauty store prototype includes an open and modern salon area, with most of our stores offering brow services on the salon floor. In addition, stores offering skin services include a skin treatment room or dedicated skin treatment area on the sales floor.
Retail media network We have a deep understanding of our Ultamate Rewards loyalty members and their preferences. This unique understanding combined with our ongoing investment in data analytics and CRM capabilities enables us to create personalized experiences and value for our guests and has unlocked new ways for us to support our brand partners and drive additional vendor income.
Retail media network We have a deep understanding of our Ulta Beauty Rewards loyalty members and their preferences. This unique understanding combined with our ongoing investment in data analytics and CRM capabilities enables us to create personalized experiences and value for our guests and has unlocked new ways for us to support our brand partners and drive additional vendor income.
Through our learning management system and our digital workplace system, we provide continuing education to associates throughout their careers at Ulta Beauty. Additionally, our leadership development program prepares promising future leaders for new levels of responsibility. Compensation and benefits Our commitment to our associates and their well-being is one of our highest priorities.
Through our learning management system and our digital workplace system, we provide continuing education to associates throughout their careers at Ulta Beauty. Additionally, our leadership development program prepares promising future leaders for new levels of responsibility. 14 Table of Contents Compensation and benefits Our commitment to our associates and their well-being is one of our highest priorities.
In addition to ship to home order fulfillment, we offer guests “Buy Online, Pick-up in Store,” “Curbside Pickup,” and “Store 2 Door,” which provides the ability for customers to order in-store and have products delivered to their homes. In addition, we offer same-day delivery for e-commerce orders in select markets.
In addition to ship to home order fulfillment, we offer guests “Buy Online, Pick-up in Store,” “Curbside Pickup,” and “Store 2 Door,” which provides the ability for customers to order in-store and have products delivered to their homes. In addition, we offer same-day delivery for e-commerce orders in virtually all markets.
Significant portions of our net sales and profits are realized during the fourth quarter of the fiscal year due to the holiday selling season. To a lesser extent, our business is also affected by Mother’s Day and Valentine’s Day. 13 Table of Contents Available information Our principal website address is www.ulta.com.
Significant portions of our net sales and profits are realized during the fourth quarter of the fiscal year due to the holiday selling season. To a lesser extent, our business is also affected by Mother’s Day and Valentine’s Day. Available information Our principal website address is www.ulta.com.
A critical way we achieve this is by educating all associates on the lived experiences of their peers and key moments in time that have cultural or heritage significance, as well as the unconscious beliefs and biases that shape our behavior today.
A critical way we achieve this is by educating all associates on the lived 13 Table of Contents experiences of their peers and key moments in time that have cultural or heritage significance, as well as the unconscious beliefs and biases that shape our behavior today.
We believe this new layout better reflects how our guests shop and will simplify exploration and shopping. ​ 5 Table of Contents Digital platform In addition to store expansion, we continue to expand our digital capabilities as more of our guests choose to engage with us across physical and digital platforms.
We believe this new layout better reflects how our guests shop and will simplify exploration and shopping. ​ Digital platform In addition to store expansion, we continue to expand our digital capabilities as more of our guests choose to engage with us across physical and digital platforms.
In fiscal 2022, 17% of our loyalty members shopped both in Ulta Beauty stores and through our digital platforms. Our e-commerce platform has two key roles: generating direct channel sales and profits by communicating with our guests in an interactive, enjoyable way that reinforces the Ulta Beauty brand; and driving traffic to our stores, website, and native applications.
In fiscal 2023, 18% of our loyalty members shopped both in Ulta Beauty stores and through our digital platforms. Our e-commerce platform has two key roles: generating direct channel sales and profits by communicating with our guests in an interactive, enjoyable way that reinforces the Ulta Beauty brand; and driving traffic to our stores, website, and native applications.
Our vision is to expand and deepen our presence across the beauty journey to increase consumer acquisition and drive guest engagement, loyalty, and share of wallet. Drive operational excellence and optimization. Similar to other retailers, we are experiencing persistent cost pressures from macroeconomic trends, including rising wage rates and higher transportation and shipping costs.
Our vision is to 6 Table of Contents expand and deepen our presence across the beauty journey to drive consumer acquisition and increase guest engagement, loyalty, and share of wallet. Drive operational excellence and optimization. Similar to other retailers, we are experiencing persistent cost pressures from macroeconomic trends, including higher wage rates and transportation and shipping costs.
This insight-led, analytical approach to site selection has resulted in a high performing real estate portfolio. The average investment required to open a new Ulta Beauty store is approximately $1.7 million, which includes capital investments, net of landlord contributions, pre-opening expenses, and initial inventory, net of payables.
This insight-led, analytical approach to site selection has resulted in a high performing real estate portfolio. The average investment required to open a new Ulta Beauty store is approximately $2.0 million, which includes capital investments, net of landlord contributions, pre-opening expenses, and initial inventory, net of payables.
In addition to complying with Ulta Vendor Standards, many brand partners have committed to help advance our mission to maintain the beauty of our environment and minimize our impact on the world around us by offering sustainable packaging.
In addition to complying with Ulta Vendor Standards, many brand partners have committed to help advance our mission to 11 Table of Contents maintain the beauty of our environment and minimize our impact on the world around us by offering sustainable packaging.
Information available on our website is not incorporated by reference in and is not deemed a part of this Form 10-K. In addition, our filings with the SEC may be accessed through the SEC’s website at www.sec.gov.
Information available on our website is not incorporated by reference in and is not deemed a part of this Form 10-K. In addition, our filings with 16 Table of Contents the SEC may be accessed through the SEC’s website at www.sec.gov.
Through this initiative, we certify brands and products across four key pillars, Clean Ingredients, Cruelty Free, Vegan, and Sustainable Packaging, and recognize brands for their positive impact on our 6 Table of Contents community. Displayed in stores on an endcap constructed of recycled and recyclable materials, the program launched with 187 brands.
Through this initiative, we certify brands and products across four key pillars, Clean Ingredients, Cruelty Free, Vegan, and Sustainable Packaging, and recognize brands for their positive impact on our community. Displayed in stores on an endcap constructed of recycled and recyclable materials, the program launched in 2020 with 187 brands.
All marks that are deemed material to our business have been applied for or registered in the United States and select foreign countries, including Canada, Mexico and other countries in Latin America, Europe, and Asia. We believe our trademarks, especially those related to the Ulta Beauty brand, “All Things Beauty.
All marks that are deemed material to our business have been applied for or registered in the United States and select foreign countries, including Canada, Mexico and other countries in Latin America, Europe, and Asia. 15 Table of Contents We believe our trademarks, especially those related to the Ulta Beauty brand, “All Things Beauty.
Across our stores, Ulta.com and our mobile applications, we offer more than 25,000 products from more than 600 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.
Across our stores, Ulta.com and our mobile applications, we offer approximately 25,000 products from approximately 600 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.
Competition Our major competitors for prestige and mass products include traditional department stores, specialty stores, grocery stores, drug stores, mass merchandisers, and the online capabilities of national retailers and brands, as well as pure-play e-commerce companies. The market for salon services and products is highly fragmented. Our competitors for salon services and products include chain and independent salons.
Competition Our major competitors for prestige and mass products include traditional department stores, specialty stores, grocery stores, drug stores, mass merchandisers, and the online capabilities of national retailers and brands, as well as pure-play e-commerce companies and online marketplaces. The market for salon services and products is highly fragmented.
The Ulta Beauty Collection has been certified in the Clean Ingredients and Cruelty Free pillars within the Conscious Beauty at Ulta Beauty ® program. We also offer products such as Tarte Double Duty Beauty cosmetics, IT Brushes for Ulta Beauty, and CHI for Ulta Beauty hair care appliances that are permanently exclusive to Ulta Beauty.
The Ulta Beauty Collection has been certified in the Clean Ingredients and Cruelty Free pillars within the Conscious Beauty at Ulta Beauty ® program. We also offer products such as Tarte Double Duty Beauty cosmetics and IT Brushes for Ulta Beauty that are permanently exclusive to Ulta Beauty.
We believe open and honest two-way communication is critical to maintaining strong associate engagement. We regularly conduct an associate engagement survey to take the pulse of associates’ satisfaction with their roles, their leaders, and the Company as a whole, which our executive team reviews and monitors.
We believe open and honest two-way communication is critical to maintaining strong associate engagement. We regularly conduct an associate engagement survey to determine associates’ satisfaction with their roles, their leaders, and the Company as a whole, which our executive team reviews and monitors.
In addition to our free-standing locations we have more than 350 Ulta Beauty at Target shop-in-shops which provide guests with a highly-curated, prestige beauty assortment in a unique and elevated presentation in 1,000 square feet of dedicated space within certain Target locations. Leading Digital Experiences.
In addition to our free-standing locations, through our partnership with Target Corporation we have more than 500 Ulta Beauty at Target shop-in-shops which provide guests with a highly-curated, prestige beauty assortment in a unique and elevated presentation in 1,000 square feet of dedicated space within certain Target locations. Leading Digital Experiences.
As we continue to promote and develop from within, we are building a bench of associates and leaders who know our business inside and out and support our values-driven culture. All of our associates participate in an interactive new-hire orientation through which each associate becomes acquainted with Ulta Beauty’s mission, vision, and values.
As we continue to promote and develop from within, we are building a bench of associates and leaders who understand our business well and support our values-driven culture. All of our associates participate in an interactive new-hire orientation through which each associate becomes acquainted with Ulta Beauty’s mission, vision, and values.
We estimate that Ulta Beauty had only a 9% share of the $104 billion beauty product industry. Within this market, we compete across all major categories as well as a range of price points by offering prestige, mass, and salon products. In 2022, the salon services industry totaled approximately $68 billion and included hair, skin, and nail services.
We estimate that Ulta Beauty had only a 9% share of the $112 billion beauty product industry. Within this market, we compete across all major categories as well as a range of price points by offering prestige, mass, and salon products. In 2023, the salon services industry totaled approximately $69 billion and included hair, skin, and nail services.
As a result, the guest journey is increasingly blurring across physical and digital channels. To drive greater guest engagement across all channels, we intend to expand our physical footprint, continue to differentiate our service offerings, and grow our buy anywhere, fill anywhere capabilities while further enhancing our digital and mobile experiences and driving competitive advantage through digital innovation.
As a result, the guest journey is increasingly blurring across physical and digital channels. To drive greater guest engagement across all channels, we intend to expand our physical footprint, continue to differentiate our service offerings, and expand our order fulfillment capabilities while further enhancing our digital and mobile experiences and driving competitive advantage through digital innovation.
To understand longer-term shifts in consumer values, perceptions, and behaviors, as well as of-the-moment insights, we have developed a robust consumer research capability. In addition, with more than 95% of total sales coming from our 40.2 million active Ultamate Rewards loyalty program members, we have unique insights about customer preferences and behavior.
To understand longer-term shifts in consumer values, perceptions, and behaviors, as well as of-the-moment insights, we have developed a robust consumer research capability. In addition, with more than 95% of total sales coming from our 43.3 million active Ulta Beauty Rewards loyalty program members, we have unique insights about customer preferences and behavior.
We continue to improve our order fulfillment capabilities with increased speed of delivery through existing distribution centers, fast fulfillment centers (e-commerce only), and select retail stores, through more efficient processes designed for e-commerce order fulfillment, and starting in 2023, our first market fulfillment center.
We continue to improve our order fulfillment capabilities with increased speed of delivery through existing distribution centers, fast fulfillment centers (e-commerce only), market fulfillment centers, and select retail stores, through more efficient processes designed for e-commerce order fulfillment.
In 2022, this market represented approximately $172 billion in sales, according to forecasted Euromonitor International and IBIS World Inc. In 2022, the beauty products industry totaled approximately $104 billion and included cosmetics, haircare, fragrance, bath and body, skincare, salon styling tools, and other toiletries.
In 2023, this market represented approximately $181 billion in sales, according to forecasted Euromonitor International and IBIS World Inc. In 2023, the beauty products industry totaled approximately $112 billion and included cosmetics, haircare, fragrance, bath and body, skincare, salon styling tools, and other toiletries.
Our retail store concept, including physical layout, displays, lighting, and quality of finishes, has changed over time to reflect the rising expectations of our guests and our evolving merchandising and operating strategies. We offer a full range of beauty services in our stores, focusing on hair, makeup, brow, and skin services.
Our retail store concept, including physical layout, displays, lighting, and quality of finishes, has changed over time to reflect the evolution of guest preferences and our merchandising and operating strategies. We offer a full range of beauty services in our stores, focusing on hair, makeup, brow, and skin services.
Partnerships To expand our reach and introduce new guests to Ulta Beauty, we have formed a long-term partnership with Target Corporation to create Ulta Beauty at Target, a “shop-in-shop” concept that offers a curated assortment of more than 60 established and emerging prestige brands across a variety of categories.
Partnerships To expand loyalty member engagement and introduce new guests to Ulta Beauty, we have formed a partnership with Target Corporation to create Ulta Beauty at Target, a “shop-in-shop” concept that offers a curated assortment of more than 60 established and emerging prestige brands across a variety of categories.
In addition to opening new stores, we also remodeled and relocated certain stores, as shown in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ January 28, January 29, January 30, ​ ​ 2023 ​ 2022 ​ 2021 Total stores beginning of period ​ 1,308 ​ 1,264 ​ 1,254 Stores opened ​ 47 ​ 48 ​ 30 Stores closed ​ – ​ (4) ​ (20) Total stores end of period ​ 1,355 ​ 1,308 ​ 1,264 ​ ​ ​ ​ ​ ​ ​ Total square footage ​ 14,200,403 ​ 13,770,438 ​ 13,291,838 Average square footage per store ​ 10,480 ​ 10,528 ​ 10,516 ​ ​ ​ ​ ​ ​ ​ Stores remodeled ​ 20 ​ 9 ​ – Stores relocated ​ 12 ​ 7 ​ 5 ​ Our real estate vision is to make Ulta Beauty accessible and convenient to more consumers across a variety of markets, and is a key driver of how we plan to expand our market share over time.
In addition to opening new stores, we also remodeled and relocated certain stores, as shown in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ February 3, January 28, January 29, ​ ​ 2024 ​ 2023 ​ 2022 Total stores beginning of period ​ 1,355 ​ 1,308 ​ 1,264 Stores opened ​ 33 ​ 47 ​ 48 Stores closed ​ (3) ​ – ​ (4) Total stores end of period ​ 1,385 ​ 1,355 ​ 1,308 ​ ​ ​ ​ ​ ​ ​ Total square footage ​ 14,515,593 ​ 14,200,403 ​ 13,770,438 Average square footage per store ​ 10,481 ​ 10,480 ​ 10,528 ​ ​ ​ ​ ​ ​ ​ Stores remodeled ​ 18 ​ 20 ​ 9 Stores relocated ​ 7 ​ 12 ​ 7 ​ Our real estate vision is to make Ulta Beauty accessible and convenient to more consumers across a variety of markets and is a key driver of how we plan to expand our market share over time.
We offer guests a differentiated assortment of more than 25,000 products from more than 600 well-established and emerging beauty brands across a variety of categories and price points. We believe we offer the widest selection of beauty categories, including prestige and mass cosmetics, fragrance, haircare, prestige and mass skincare, bath and body products, professional hair products, and salon styling tools.
We offer guests a differentiated assortment of approximately 25,000 products from approximately 600 established and emerging beauty brands across a variety of categories and price points. We believe we offer the widest selection of beauty categories, from mass to prestige price points, across cosmetics, fragrance, haircare, skincare, bath and body products, professional hair products, and salon styling tools. Store Footprint.
Our top ten brand partners, such as L’Oréal and Estée Lauder Companies, among others, represented 56% and 54% of our total net sales in fiscal 2022 and our fiscal year ended January 29, 2022 (fiscal 2021), respectively.
Our top ten brand partners, such as L’Oréal and Estée Lauder Companies, among others, represented 55% and 56% of our total net sales in fiscal 2023 and our fiscal year ended January 28, 2023 (fiscal 2022), respectively.
Each General Manager reports to a District Manager, who in turn reports to a Regional Vice President of Operations, who in turn reports to a Senior Vice President of Stores, who in turn reports to the Chief Operating Officer, who in turn reports to the Chief Executive Officer.
Each General Manager reports to a District Manager, who in turn reports to a Regional Vice President of Operations, who in turn reports to a Senior Vice President 12 Table of Contents of Stores, who in turn reports to the Chief Store Operations Officer, who in turn reports to the President and Chief Operating Officer, who in turn reports to the Chief Executive Officer.
With the help of our Advisory Council, we will ensure that Conscious Beauty at Ulta Beauty ® will continue to evolve and grow as expectations and standards for clean beauty continue to change. During the past few years consumers have increased their focus on self-care.
With the help of our Advisory Council, we will ensure that Conscious Beauty at Ulta Beauty ® will continue to evolve and grow as expectations and standards for clean beauty continue to change. In the years following the COVID-19 pandemic, consumers have increased their focus on self-care.
Loyalty points can only be redeemed in Ulta Beauty stores, on Ulta.com or through our mobile applications. As of January 28, 2023, Ulta Beauty at Target was available in over 350 Target locations and on target.com. Over time, we expect Ulta Beauty at Target to be in up to 800 Target locations, in addition to our freestanding Ulta Beauty stores.
Loyalty points can only be redeemed in Ulta Beauty stores, on Ulta.com or through our mobile applications. As of February 3, 2024, Ulta Beauty at Target was available in over 500 Target locations and on target.com. Over time, we expect Ulta Beauty at Target to be in up to 800 Target locations, in addition to our freestanding Ulta Beauty stores.
Similarly, we offer a number of brands and products that are exclusive for a limited period of time or are offered in advance of our competitors, such as Morphe, Colourpop, Juvia’s Place, Chanel and Florence. The Ulta Beauty Collection and permanent Ulta Beauty exclusive products represented approximately 4% of our total net sales in fiscal 2022.
Similarly, we offer a number of brands and products that are exclusive for a limited period of time or are offered in advance of our competitors, such as Morphe, Juvia’s Place, and Good Molecules. The Ulta Beauty Collection and permanent Ulta Beauty exclusive products represented approximately 3% of our total net sales in fiscal 2023.
While our traditional layout is organized by price point, with prestige makeup and skincare on one side of the store and mass makeup and skincare on the other, our new layout brings together like categories with intuitive adjacencies to magnify our differentiated assortment. In the new layout, categories flow from prestige to mass with delineated fixturing showcasing each segment.
While our traditional layout is organized by price point, with prestige makeup and skincare on one side of the store and mass makeup and skincare on the other, our new layout brings together like categories with intuitive adjacencies to magnify our differentiated assortment.
Both permanent and temporary exclusive products represented approximately 10% of our total net sales in fiscal 2022.
Both permanent and temporary exclusive products represented approximately 8% of our total net sales in fiscal 2023.
To mitigate the impact of these pressures and 3 Table of Contents support our future growth, we have developed a continuous improvement capability to identify and activate meaningful, cross-functional process optimization opportunities; we are upgrading our enterprise resource planning platform to increase efficiency and support future growth; and we are enhancing our supply chain network to increase agility, speed and cost-efficiency.
To mitigate the impact of these pressures and support our future growth, we have developed a continuous improvement capability to identify and activate meaningful, cross-functional process optimization opportunities; we are upgrading our enterprise resource planning platform to increase efficiency and support future growth; we are building a modern ecosystem for future analytics and data-driven decisioning capabilities; and we are enhancing our supply chain network to increase agility, speed and cost-efficiency.
To expand Ulta Beauty’s reach, relevancy, and guest engagement, we intend to amplify our brand purpose; build a creator and content ecosystem to deliver compelling, relevant beauty entertainment; drive further innovation in our Ultamate Rewards program; and use our member data to increase personalization, drive conversion, and support our brands.
To expand Ulta Beauty’s reach, relevancy, and guest engagement, we are amplifying our brand purpose; building a creator and content ecosystem to deliver compelling, relevant beauty entertainment; using our member data to increase personalization, drive conversion, and support our brands; and recently introduced further innovation in our Ulta Beauty Rewards program.
Inventory is shipped from our suppliers to our distribution centers and fast fulfillment centers. We replenish our stores with such products primarily in eaches (i.e., less-than-case quantities), which allows us to ship less than an entire case when only one or two of a particular product is required.
We replenish our stores with such products primarily in eaches (i.e., less-than-case quantities), which allows us to ship less than an entire case when only one or two of a particular product is required. Our distribution centers, fast fulfillment centers, and market fulfillment centers use warehouse management software systems to manage inventory to support product purchase decisions.
The following table sets forth key metrics as of January 28, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Board of ​ ​ ​ All Other ​ ​ Directors ​ Leadership ​ Associates Women ​ 55% ​ 66% ​ 91% Men ​ 45% ​ 34% ​ 9% People of color ​ 36% ​ 27% ​ 53% ​ Oversight and management We strive to make sure that our associates are at the heart of every decision we make.
The following table sets forth key metrics as of February 3, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Board of ​ ​ ​ All Other ​ ​ Directors ​ Leadership ​ Associates Women ​ 55% ​ 65% ​ 91% Men ​ 45% ​ 35% ​ 9% People of color ​ 36% ​ 26% ​ 55% ​ Oversight and management We strive to make sure that our associates are at the heart of every decision we make.
As we look to elevate our position as the premier beauty retailer, in May 2022 we launched our retail media network, UB Media, to transform the way our brand partners can connect with beauty enthusiasts.
In 2022 we launched our retail media network, UB Media, to transform the way our brand partners can connect with beauty enthusiasts.
Our best-in-class loyalty program, Ultamate Rewards, enables members to earn points for every dollar spent on products and beauty services at Ulta Beauty, through purchases on our private label and co-branded credit cards, and purchases at Ulta Beauty at Target. In addition to unique membership benefits, members can redeem points for discounts on any product or service at Ulta Beauty.
Our best-in-class loyalty program, Ulta Beauty Rewards, enables members to earn points for every dollar spent on products and beauty services at Ulta Beauty, through purchases on our private label and co-branded credit cards, and purchases at Ulta Beauty at Target.
As of January 28, 2023, more than 300 brands participated in the program, with more than half certified in more than one pillar.
As of February 3, 2024, more than 300 brands participated in the program, with more than half certified in more than one pillar.
We believe we have good relationships with our associates. Diversity, equity, and inclusion Our goal is to create an inclusive environment where every associate feels he or she can be his or her authentic self and every guest is optimally served, regardless of differences .
We believe we have good relationships with our associates. Diversity, equity, and inclusion Our goal is to create an inclusive environment where associates feel they can be their authentic selves and every guest is optimally served, regardless of differences .
In response to this trend, we launched The Wellness Shop in select stores and online that offers an assortment of products across six platforms: everyday care, supplements and ingestibles, relax and renew, down there care, spa at home, and intimate wellness (online only). ​ We have a long tradition of being a diversity-forward company.
In response to this trend, we created The Wellness Shop, dedicated space in our store and online that offers a curated assortment of products to support guests wellness journey across six pillars: everyday care, supplements and ingestibles, relax and renew, down there care, spa at home, and intimate wellness. ​ We have a long tradition of being a diversity-forward company.
The majority of our trademark registrations contain the ULTA mark, including Ulta Beauty and two related designs, Ulta.com and Ulta Salon, Cosmetics & 12 Table of Contents Fragrance (and design). We maintain our marks and monitor filing deadlines for renewal and continued validity.
Intellectual property We have registered trademarks in the United States and other countries. The majority of our trademark registrations contain the ULTA mark, including Ulta Beauty and two related designs, Ulta.com and Ulta Salon, Cosmetics & Fragrance (and design). We maintain our marks and monitor filing deadlines for renewal and continued validity.
The following table sets forth the approximate number of associates employed as of January 28, 2023: ​ ​ ​ ​ ​ ​ ​ ​ Full-time ​ ​ ​ ​ ​ 18,500 Part-time ​ ​ ​ ​ ​ 34,500 Total associates ​ ​ ​ ​ ​ 53,000 ​ ​ ​ ​ ​ ​ ​ We have no collective bargaining agreements and have not experienced any work stoppages.
The following table sets forth the approximate number of associates employed as of February 3, 2024: ​ ​ ​ ​ ​ ​ ​ ​ Full-time ​ ​ ​ ​ ​ 20,000 Part-time ​ ​ ​ ​ ​ 36,000 Total associates ​ ​ ​ ​ ​ 56,000 ​ ​ ​ ​ ​ ​ ​ We have no collective bargaining agreements and have not experienced any work stoppages.
During fiscal 2022, we increased our assortment of Black-owned and Black-founded brands by 34% with the addition of 12 Black-owned and Black-founded brands, supporting our progress towards our commitment to dedicate 15% of our brand assortment to Black-owned, Black-founded and Black-led brands over time. ​ We believe our private label, the Ulta Beauty Collection, is a strategically important opportunity for growth and profit contribution.
During fiscal 2023, we increased the number of Black-owned and Black-founded brands in our assortment to 50 brands, up 92% since making our commitment to dedicate 15% of our brand assortment to Black-owned, Black-founded and Black-led brands over time. ​ We believe our private label, the Ulta Beauty Collection, is a strategically important opportunity for growth and profit contribution.
We accomplish this through inclusive recruitment strategies, dedicating time to celebrate intersectionality and types of diversity that are not otherwise formally recognized, encouraging associates to build personal habits through everyday inclusive actions, and managing a diverse leaders program to empower, inspire, and educate high-potential diverse associates.
We accomplish this through inclusive recruitment strategies, dedicating time to celebrate intersectionality and diversity, encouraging associates to build personal habits through everyday inclusive actions, and managing a diverse leaders program to empower, inspire, and educate high-potential diverse associates. In addition, we aim to ensure that all in-store experiences are equitable, fair, and unbiased.
In our fiscal year ended January, 28, 2023 (fiscal 2022), 76% of our loyalty members transacted with us solely in one of our stores. Our retail stores are predominantly located in convenient, high-traffic locations such as power strip centers. Our typical store is approximately 10,000 square feet, including approximately 950 square feet dedicated to our full-service salon.
Our retail stores are predominantly located in convenient, high-traffic locations such as power strip centers. Our typical store is approximately 10,000 square feet, including approximately 950 square feet dedicated to our full-service salon.
Our comprehensive public relations strategy enhances Ulta Beauty’s reputation as a beauty destination, increases brand awareness, supports our charitable efforts related to the Ulta Beauty Charitable Foundation, and drives awareness of new products, in-store events, and new store openings. 8 Table of Contents The Ultamate Rewards loyalty program is an important tool to increase retention of existing guests and to enhance their loyalty to the Ulta Beauty brand.
Our comprehensive public relations strategy enhances Ulta Beauty’s reputation as a beauty destination, increases brand awareness, supports our charitable efforts related to the Ulta Beauty Charitable Foundation, and drives awareness of new products, in-store events, and new store openings.
Human capital management We believe our associates, with their combined skills, knowledge, experiences, and commitment to serving our guests, are among our most important resources and are critical to our continued success.
Product is delivered to stores using a broad network of contract and local pool (final mile) carriers. Human capital management We believe our associates, with their combined skills, knowledge, experiences, and commitment to serving our guests, are among our most important resources and are critical to our continued success.
We estimate beauty enthusiasts represent approximately 65% of shoppers and account for more than 80% of beauty products and services spend in the U.S. 2 Table of Contents The following description of our business should be read in conjunction with the information contained in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 and our Financial Statements and Supplementary Data included in Item 8 of this Annual Report on Form 10-K.
The following description of our business should be read in conjunction with the information contained in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 and our Financial Statements and Supplementary Data included in Item 8 of this Annual Report on Form 10-K.
Beauty enthusiasts enjoy the experience of discovering and trying new products and increasingly include beauty as part of their self-care and wellness journey. Reflecting these insights, our objective is to engage and continuously delight beauty enthusiasts with a curated, differentiated, inclusive assortment focused on leading beauty and self-care trends.
Reflecting these insights, our objective is to engage and continuously delight beauty enthusiasts with a curated, differentiated, inclusive assortment focused on leading beauty and self-care trends.
Ultamate Rewards enables customers to earn points based on their purchases at Ulta Beauty stores, through our digital platforms, and at Ulta Beauty at Target. Points earned are valid for at least one year and may be redeemed on any product we sell or service we provide in Ulta Beauty stores or through our digital platforms.
Points earned are valid for at least one year and may be redeemed on any product we sell or service we provide in Ulta Beauty stores or through our digital platforms. To enhance our loyalty program, we offer co-branded and private label credit cards.
Certain beauty enthusiasts are growing more interested in choosing products that support their own personal well-being and the well-being of workers, animals, communities, and the environment, and they are increasingly supporting brands whose products and actions align with their own values.
We believe our broad selection of merchandise, from moderately-priced brands to higher-end luxury brands, creates a unique shopping experience for our guests. 9 Table of Contents Certain beauty enthusiasts are growing more interested in choosing products that support their own personal well-being and the well-being of workers, animals, communities, and the environment, and they are increasingly supporting brands whose products and actions align with their own values.
Our merchandising team continually monitors beauty and fashion trends, historical sales trends, and new product launches to keep Ulta Beauty’s product assortment fresh and relevant and to ensure that our assortment reflects the diversity of our guests. We believe our broad selection of merchandise, from moderately-priced brands to higher-end prestige brands, creates a unique shopping experience for our guests.
Our merchandising team continually monitors beauty and fashion trends, sales trends, and new product launches to keep Ulta Beauty’s product assortment fresh and relevant and to ensure that our assortment reflects the diversity of our guests.
We developed a unique specialty retail concept that offers a broad range of brands and price points, select beauty services, and a convenient and welcoming shopping environment. We define our target consumer as a beauty enthusiast, a consumer who is passionate about the beauty category, uses beauty for self-expression, experimentation, and self-investment, and has high expectations for the shopping experience.
We define our target consumer as a beauty enthusiast, a consumer who is passionate about the beauty category, uses beauty for self-expression, experimentation, and self-investment, and has high expectations for the 5 Table of Contents shopping experience.
We believe these channels are highly effective in communicating with existing guests, as well as driving consideration amongst those who have not yet shopped with us. Our marketing program has been effective in communicating with our existing online, mobile, and retail guests in a targeted and relevant way.
We are directing a growing percentage of our marketing expense towards digital, social media, and streaming advertising. We believe these channels are highly effective in communicating with existing guests, as well as driving consideration amongst those who have not yet shopped with us.
Our omnichannel guests are extremely valuable, historically spending nearly three times as much as retail-only guests. We continue to develop and add new website and mobile features and functionality, marketing programs, new products and brands, and omnichannel integration points.
We continue to develop and add new website and mobile features and functionality, marketing programs, new products and brands, and omnichannel integration points.
Starting in fiscal 2023, we are introducing a fourth type of facility, a market fulfillment center, which will focus on our most productive products and support ecommerce sales and store demand, enabling us to improve service and responsiveness, especially in markets with high store and population density.
In fiscal 2023, we opened our first market fulfillment center, which is smaller than our regional distribution centers, and focuses on our most productive products and supports e-commerce sales and store demand, enabling us to improve service and responsiveness, especially in markets with high store and population density.
To enhance our loyalty program, we offer co-branded and private label credit cards. The credit cards drive higher wallet share and greater loyalty from our rewards members, provide increased consumer insights, and offer attractive economics.
The credit cards drive higher wallet share and greater loyalty from our rewards members, provide increased consumer insights, and offer attractive economics. Furthermore, we continue to expand our gift card program through increased distribution in our store and online channels and through partnerships with third parties.
We offer similar training across the organization to help key decision-makers and associates in their own learning journeys and support our Champion Diversity value and inclusion competency. In fiscal 2022, associates participated in our Inclusion in Action training to reinforce inclusivity and address unconscious bias.
We take action to support this goal by conducting quarterly trainings for in-store associates and providing weekly learning opportunities to focus on guest perspectives and reinforce key takeaways. We offer similar training across the organization to help key decision-makers and associates in their own learning journeys and support our Champion Diversity value and inclusion competency.
Our retail channels We are committed to meeting guests where and how they want to shop and strive to offer guests a compelling, personalized shopping experience through our stores, digital platform, and partnerships. 4 Table of Contents Stores Our member data suggests our guests prefer to transact in physical stores, where they can discover and interact with products and other beauty enthusiasts.
Our competitors for salon services and products include chain and independent salons. 7 Table of Contents Our retail channels We are committed to meeting guests where and how they want to shop and strive to offer guests a compelling, personalized shopping experience through our stores, digital platforms, and partnerships.
Our stores have extended hours during the holiday season. ​ 9 Table of Contents Salon services A typical salon is staffed with five to ten licensed salon professionals, including six or more stylists, and select stores have an esthetician. Our most productive salons have a guest coordinator and an assistant manager.
Ulta Beauty stores are open seven days a week, typically eleven hours a day, Monday through Saturday, and seven hours on Sunday. Our stores have extended hours during the holiday season. Salon services A typical salon is staffed with five to ten licensed salon professionals, including six or more stylists, and select stores have an esthetician.
Our CRM platform enables sophisticated analysis of the customer data in our loyalty member database as well as greater personalization of our marketing campaigns and day-to-day communications. Our data demonstrates that loyalty members spend more per visit as compared to non-members.
The Ulta Beauty Rewards loyalty program is an important tool to increase retention of existing guests and to enhance their loyalty to the Ulta Beauty brand. Our CRM platform enables sophisticated analysis of the customer data in our loyalty member database as well as greater personalization of our marketing campaigns and day-to-day communications.
Reflecting our understanding about how the consumer and beauty category are evolving, in 2021 we refreshed our strategic framework to position Ulta Beauty for continued success. We are focused on six key strategic pillars designed to expand our market leadership and drive longer-term profitable growth. Drive breakthrough and disruptive growth through an expanded definition of All Things Beauty.
We are focused on six key strategic pillars designed to expand our market leadership and drive longer-term profitable growth. Drive breakthrough and disruptive growth through an expanded definition of All Things Beauty. Beauty enthusiasts enjoy the experience of discovering and trying new products and increasingly include beauty as part of their self-care and wellness journey.
In addition, we are adding several features including elevated gondolas to showcase key, iconic, and service brands and new Beauty Bars that offer our brow and makeup services as well as supporting in-store events and highlight beauty-in-action.
In the new layout, categories 8 Table of Contents flow from prestige to mass with delineated fixturing showcasing each segment. In addition, this new layout features elevated gondolas to showcase key, iconic, and service brands and new Beauty Bars that offer our brow and makeup services, support in-store events, and highlight beauty-in-action.
We intend to leverage our technology infrastructure and systems where appropriate to gain operational efficiencies through more effective use of our systems, people, and processes. In fiscal 2021, we began a multi-year upgrade of our enterprise resource planning platform which will provide a flexible and scalable operating environment allowing for greater business efficiency.
We intend to leverage our technology infrastructure and systems to gain operational efficiencies through more effective use of our systems, people, and processes.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, damage our reputation, and cause a loss of confidence in our business, products, and services, which could adversely affect our business, financial condition, profitability, and cash flows.
Biggest changeAny such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, damage our reputation, and cause a loss of confidence in our business, products, and services, which could adversely affect our business, financial condition, profitability, and cash flows. 23 Table of Contents We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems, successfully upgrade our information technology systems, or any material disruption of our information systems could negatively impact financial results and materially adversely affect our business operations, particularly during the holiday season.
The capacity of our distribution and order fulfillment infrastructure and the performance of our distribution centers and fast fulfillment centers may not be adequate to support our future growth, which could prevent the successful implementation of these plans or cause us to incur excess costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
The capacity of our distribution and order fulfillment infrastructure and the performance of our distribution centers, fast fulfillment centers, and market fulfillment centers may not be adequate to support our future growth, which could prevent the successful implementation of these plans or cause us to incur excess costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Any such new requirements could increase our operating costs for things like energy or packaging, as well as our product supply chain and distribution costs. ​ There is also increased focus, including by investors, guests, and other stakeholders, on climate change and other environmental, social, governance (ESG) and sustainability matters, including single use plastic, energy, waste and worker safety.
Any such new requirements could increase our operating costs for things like energy or packaging, as well as our product supply chain and distribution costs. ​ There is also increased focus, including by investors, guests, and other stakeholders, on climate change and other environmental, social, governance and sustainability matters, including single use plastic, energy, waste and worker safety.
We compete against a diverse group of retailers, both small and large, including regional and national department stores, specialty retailers, drug stores, mass merchandisers, high-end and discount salon chains, locally owned beauty retailers and salons, online capabilities of national retailers, pure-play e-commerce companies, catalog retailers, and direct response television, including television home shopping retailers and infomercials.
We compete against a diverse group of retailers, both small and large, including regional and national department stores, specialty retailers, drug stores, mass merchandisers, high-end and discount salon chains, locally owned beauty retailers and salons, online capabilities of national retailers, pure-play e-commerce companies, online marketplaces, catalog retailers, and direct response television, including television home shopping retailers and infomercials.
Future epidemics, pandemics, natural disasters, or other catastrophes or crises could have a material adverse effect on our business, financial condition, profitability, and cash flows. ​ Epidemics, pandemics, or other public health crises, natural disasters, such as hurricanes, tornados, wildfires, earthquakes, and mudslides, as well as acts of violence or terrorism, have resulted in the temporary closure of our stores and, in the future, could also result in physical damage to our properties, the temporary reclosing of our stores, the temporary closing of our distribution and fast fulfillment centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods both to and from our distribution and fast fulfillment centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers.
Epidemics, pandemics, natural disasters, or other catastrophes or crises could have a material adverse effect on our business, financial condition, profitability, and cash flows. ​ Epidemics, pandemics, or other public health crises, natural disasters, such as hurricanes, tornados, wildfires, earthquakes, and mudslides, as well as acts of violence or terrorism, have resulted in the temporary closure of our stores and, in the future, could also result in physical damage to our properties, the temporary closing of our stores, the temporary closing of our distribution, fast fulfillment, and market fulfillment centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods both to and from our distribution, fast fulfillment, and market fulfillment centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers.
A variety of factors affect our comparable sales and quarterly financial performance, including: ● general U.S. economic conditions and, in particular, the retail sales environment; ● changes in our merchandising strategy or mix; ● performance of our new and remodeled stores; ● the effectiveness of our inventory management; ● timing and concentration of new store openings, including additional human resource requirements and related pre-opening and other start-up costs; ● cannibalization of existing store sales by new store openings; ● timing and effectiveness of our marketing activities; ● seasonal fluctuations due to weather conditions; ● actions by our existing or new competitors; and ● hurricanes, tornadoes, wildfires, earthquakes, mudslides, other natural disasters, epidemics or pandemics, and geopolitical events. ​ Accordingly, our results for any one fiscal quarter are not necessarily indicative of the results to be expected for any other quarter, and comparable sales for any particular future period may decrease.
A variety of factors affect our comparable sales and quarterly financial performance, including: ● general U.S. economic conditions and, in particular, the retail sales environment; ● changes in our merchandising strategy or mix; ● performance of our new and remodeled stores; ● the effectiveness of our inventory management; ● timing and concentration of new store openings, including additional human resource requirements and related pre-opening and other start-up costs; 19 Table of Contents ● cannibalization of existing store sales by new store openings; ● timing and effectiveness of our marketing activities; ● seasonal fluctuations due to weather conditions; ● actions by our existing or new competitors; and ● hurricanes, tornadoes, wildfires, earthquakes, mudslides, other natural disasters, epidemics or pandemics, and geopolitical events. ​ Accordingly, our results for any one fiscal quarter are not necessarily indicative of the results to be expected for any other quarter, and comparable sales for any particular future period may decrease.
Concern about climate change might cause consumer preferences to change, including moving away from products or ingredients considered to have high climate change impact and towards products that are more sustainably made, and we expect to incur additional costs in connection with our ESG and sustainability initiatives. ​ Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to these matters and, taken together, these matters could materially and adversely affect our business, financial condition, profitability and cash flows, as well as our ability to meet the needs of our customers. ​ Information Security, Cybersecurity, Data Privacy, Regulatory and Legal Risks ​ Cybersecurity or information security breaches and other disruptions could compromise our information, result in the unauthorized disclosure of confidential guest, employee, Company and/or business partners’ information, damage our reputation, and expose us to liability, which could negatively impact our business.
Concern about climate change might cause consumer preferences to change, including moving away from products or ingredients considered to have high climate change impact and towards products that are more sustainably made, and we expect to incur additional costs in connection with our initiatives in this area. ​ Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to these matters and, taken together, these matters could materially and adversely affect our business, financial condition, profitability and cash flows, as well as our ability to meet the needs of our customers. ​ Information Security, Cybersecurity, Data Privacy, Regulatory and Legal Risks ​ Cybersecurity or information security breaches and other disruptions could compromise our information, result in the unauthorized disclosure of confidential guest, employee, Company and/or business partners’ information, damage our reputation, and expose us to liability, which could negatively impact our business.
We distribute products to our stores without supplementing such deliveries with direct-to-store arrangements from vendors or wholesalers. We are a retailer carrying over 25,000 beauty products that change on a regular basis in response to beauty trends, which makes the success of our operations particularly vulnerable to disruptions in our distribution infrastructure.
We distribute products to our stores without supplementing such deliveries with direct-to-store arrangements from vendors or wholesalers. We are a retailer carrying approximately 25,000 beauty products that change on a regular basis in response to beauty trends, which makes the success of our operations particularly vulnerable to disruptions in our distribution infrastructure.
Any significant interruption in the operation of our supply chain infrastructure, such as disruptions in our information systems, disruptions in operations due to fire, natural disasters, or other catastrophic events, labor disagreements, inventory availability, or shipping and transportation problems, could drastically reduce our ability to receive and process orders and provide products and services to our stores and guests, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Any significant interruption in the operation of our supply chain infrastructure, such as disruptions in our information systems, disruptions in operations due to fire, natural disasters, or other catastrophic 17 Table of Contents events, labor disagreements, inventory availability, or shipping and transportation problems, could drastically reduce our ability to receive and process orders and provide products and services to our stores and guests, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Accordingly, if one or more epidemics, pandemics, natural disasters, and/or acts of violence or terrorism were to occur in the future, it could have a material adverse effect on our business, financial condition, profitability, and cash flows or may require us to incur increased costs. ​ Our stock repurchase programs could affect the price of our common stock and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.
Accordingly, if one or more epidemics, pandemics, natural disasters, and/or acts of violence or terrorism were to occur in the future, it could have a material adverse effect on our business, financial condition, profitability, and cash flows or may require us to incur increased costs. ​ 22 Table of Contents Our stock repurchase programs could affect the price of our common stock and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.
Failure to protect the value of our brands, or any other harmful acts or omissions by a business partner, could have an adverse effect on our business, financial condition, profitability, cash flows and reputation. ​ Our Ulta Beauty branded products and salon services may cause unexpected and undesirable side effects that could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation, which could have a material adverse effect on our business, financial condition, profitability, and cash flows .
Failure to protect the value of our brands, or any other harmful acts or omissions by a business partner, could have an adverse effect on our business, financial condition, profitability, cash flows and reputation. ​ 26 Table of Contents Our Ulta Beauty branded products and salon services may cause unexpected and undesirable side effects that could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation, which could have a material adverse effect on our business, financial condition, profitability, and cash flows .
To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, guest experience, and results of operations. ​ 16 Table of Contents Our comparable sales and quarterly financial performance may fluctuate for a variety of reasons, which could result in a decline in the price of our common stock.
To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, guest experience, and results of operations. ​ Our comparable sales and quarterly financial performance may fluctuate for a variety of reasons, which could result in a decline in the price of our common stock.
If we were to lose the benefit of the experience, efforts, and abilities of key executive personnel, it could have a material adverse effect on our business, financial condition, profitability, and cash flows. Furthermore, our ability to manage our retail expansion requires us to continue to train, motivate, and manage our associates.
If we were to lose the benefit of the experience, efforts, and abilities of key executive personnel, it could have a material adverse effect on our business, financial condition, profitability, and cash flows. 20 Table of Contents Furthermore, our ability to manage our retail expansion requires us to continue to train, motivate, and manage our associates.
Our sourcing operations may also be hurt by health 15 Table of Contents concerns regarding infectious diseases in countries in which our merchandise is produced, adverse weather conditions or natural disasters that may occur overseas, or acts of war or terrorism, to the extent these acts affect the production, shipment, or receipt of merchandise.
Our sourcing operations may also be hurt by health concerns regarding infectious diseases in countries in which our merchandise is produced, adverse weather conditions or natural disasters that may occur overseas, or acts of war or terrorism, to the extent these acts affect the production, shipment, or receipt of merchandise.
We appeal to a wide demographic consumer profile and offer an extensive selection of beauty products sold directly to retail 18 Table of Contents consumers and premium salon services. Uncertainty in the economy could adversely impact consumer purchases of discretionary items across all of our product categories, including prestige beauty products and premium salon services.
We appeal to a wide demographic consumer profile and offer an extensive selection of beauty products sold directly to retail consumers and premium salon services. Uncertainty in the economy could adversely impact consumer purchases of discretionary items across all of our product categories, including prestige beauty products and premium salon services.
Together, these provisions of our certificate of incorporation and bylaws and of Delaware law could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Item 1B. Unresolved Staff Comments None. 25 Table of Contents
Together, these provisions of our certificate of incorporation and bylaws and of Delaware law could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Item 1B. Unresolved Staff Comments None.
As the importance of our website, mobile applications, and e-commerce operations to our business continues to grow, we are increasingly vulnerable to 21 Table of Contents downtime and other technical failures. Our failure to successfully respond to these risks could reduce e-commerce sales and damage our brand’s reputation.
As the importance of our website, mobile applications, and e-commerce operations to our business continues to grow, we are increasingly vulnerable to downtime and other technical failures. Our failure to successfully respond to these risks could reduce e-commerce sales and damage our brand’s reputation.
In addition, concern about climate change and greenhouse gases may result in new or additional legal, legislative, and/or regulatory requirements to reduce or mitigate the effects of climate change on the 20 Table of Contents environment.
In addition, concern about climate change and greenhouse gases may result in new or additional legal, legislative, and/or regulatory requirements to reduce or mitigate the effects of climate change on the environment.
Although we have sought to comply with Proposition 65 requirements, there can be no assurance that we will not be adversely affected by litigation relating to Proposition 65. ● Future changes in healthcare reform legislation could significantly impact our business.
Although we have sought to comply with Proposition 65 requirements, there can be no assurance that we will not be adversely affected by litigation relating to Proposition 65. 25 Table of Contents ● Future changes in healthcare reform legislation could significantly impact our business.
Additionally, volatility and disruption to the capital and credit markets may have a significant, adverse impact on global economic conditions, resulting in inflationary or recessionary pressures and declines in consumer confidence and economic growth, which, in turn, may lead to declines in consumer spending.
Additionally, volatility and disruption to the capital and credit markets may have a 21 Table of Contents significant, adverse impact on global economic conditions, resulting in inflationary or recessionary pressures and declines in consumer confidence and economic growth, which, in turn, may lead to declines in consumer spending.
During fiscal 2022 and fiscal 2021, merchandise supplied to Ulta Beauty by our top ten brand partners accounted for approximately 56% and 54% of our net sales, respectively. There continues to be vendor consolidation within the beauty products industry.
During fiscal 2023 and fiscal 2022, merchandise supplied to Ulta Beauty by our top ten brand partners accounted for approximately 55% and 56% of our net sales, respectively. There continues to be vendor consolidation within the beauty products industry.
The harm may be immediate without affording us an opportunity for redress or correction. 17 Table of Contents We also use social media platforms as marketing tools. For example, we maintain Facebook, Twitter, Instagram, TikTok, and Pinterest accounts.
The harm may be immediate without affording us an opportunity for redress or correction. We also use social media platforms as marketing tools. For example, we maintain Facebook, Twitter, Instagram, TikTok, and Pinterest accounts.
Our continued and future growth largely depends on our ability to implement our long-range strategic, operational and financial plans and successfully open and operate new stores on a profitable basis.
Our continued and future growth largely depends on our ability to implement our long-range strategic, operational and financial plans and successfully open and operate new stores profitably.
Customer traffic to these shopping areas may be adversely affected by the closing of such destination retailers or anchor stores, or by a reduction in traffic to such stores resulting from a regional or global economic downturn, an outbreak of flu or other viruses, a general downturn in the local area where our store is located, or a decline in the desirability of the shopping environment of a particular power center.
Customer traffic to these shopping areas may be adversely affected by the closing of such destination retailers or anchor stores, or by a reduction in traffic to such stores resulting from a regional or global economic downturn, a public health crisis, a general downturn in the local area where our store is located, or a decline in the desirability of the shopping environment of a particular power center.
These provisions include: ● dividing our Board of Directors into three classes serving staggered three-year terms; ● authorizing our Board of Directors to issue preferred stock and additional shares of our common stock without stockholder approval; ● prohibiting stockholder actions by written consent; ● prohibiting our stockholders from calling a special meeting of stockholders; and ● requiring advance notice for raising business matters or nominating directors at stockholders’ meetings.
These provisions include: ● authorizing our Board of Directors to issue preferred stock and additional shares of our common stock without stockholder approval; ● prohibiting stockholder actions by written consent; ● prohibiting our stockholders from calling a special meeting of stockholders; and ● requiring advance notice for raising business matters or nominating directors at stockholders’ meetings.
The inability to enter into licenses could harm our business significantly. 22 Table of Contents If our manufacturers are unable to produce products manufactured uniquely for Ulta Beauty, including the Ulta Beauty Collection and Ulta Beauty branded gifts with purchase and other promotional products, consistent with applicable regulatory requirements, we could suffer lost sales and be required to take costly corrective action, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
If our manufacturers are unable to produce products manufactured uniquely for Ulta Beauty, including the Ulta Beauty Collection and Ulta Beauty branded gifts with purchase and other promotional products, consistent with applicable regulatory requirements, we could suffer lost sales and be required to take costly corrective action, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Economic, Market and Other External Risks Macroeconomic conditions could have a material adverse impact on our business, financial condition, profitability, and cash flows. ​ Macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing labor cost pressures, transportation and shipping cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, profitability, and cash flows.
Economic, Market and Other External Risks Macroeconomic conditions could have a material adverse impact on our business, financial condition, profitability, and cash flows. ​ Macroeconomic conditions, including inflation, elevated interest rates and recessionary concerns, as well as continuing labor cost pressures, and transportation and shipping cost pressures, have had, and may continue to have, a negative impact on our business, financial condition, profitability, and cash flows.
We have a $1.0 billion secured revolving credit facility with a term expiring in March 2025. Substantially all of our assets are pledged as collateral for outstanding borrowings under the agreement.
We have an $800.0 million secured revolving credit facility with a term expiring in March 2029. Substantially all of our assets are pledged as collateral for outstanding borrowings under the agreement.
Our failure to comply with federal, state, or local requirements when we advertise our products (including prices) or services, or engage in other promotional activities, in digital (including social media), television, or print may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of our products. ​ 23 Table of Contents Our associates or others may engage in misconduct or other improper activities, including noncompliance with our policies and procedures.
Our failure to comply with federal, state, or local requirements when we advertise our products (including prices) or services, or engage in other promotional activities, in digital (including social media), television, or print may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of our products.
Even if we were able to obtain a license, the rights may be non-exclusive, which would give our competitors access to the same intellectual property.
Even if we were able to obtain a license, the rights may be non-exclusive, which would give our competitors access to the same intellectual property. The inability to enter into licenses could harm our business significantly.
We are exposed to the risk of misconduct or other improper activities by our associates and third parties such as independent contractors or agents.
Our associates or others may engage in misconduct or other improper activities, including noncompliance with our policies and procedures. We are exposed to the risk of misconduct or other improper activities by our associates and third parties such as independent contractors or agents.
If we are unable to anticipate and fulfill the merchandise needs of the consumer, our net sales may decrease and we may be forced to increase markdowns of slow-moving merchandise, either of which could have a material adverse effect on our business, financial condition, profitability, and cash flows. ​ 14 Table of Contents Any significant interruption in the operations of our distribution and fast fulfillment centers could disrupt our ability to deliver merchandise to our stores in a timely manner, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
If we are unable to anticipate and fulfill the merchandise needs of the consumer, our net sales may decrease and we may be forced to increase markdowns of slow-moving merchandise, either of which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Negative commentary regarding us or the products we sell may be posted on social media platforms and similar devices at any time and may be adverse to our reputation or business. Customers value readily available information and often act on such information without further investigation and without regard to its accuracy or source.
Given the pervasive use of social media platforms, including blogs, social media websites, and other forms of internet-based and mobile communications, negative commentary regarding us or the products we sell may be adverse to our reputation or business. Customers value readily available information and often act on such information without further investigation and without regard to its accuracy or source.
Although we do not have any operations outside the United States, geopolitical events, including the ongoing conflict between Russia and Ukraine and the related economic sanctions by Western governments on Russia, has caused greater uncertainty in the global economy and exacerbated the inflation situation.
Although we do not have any operations outside the United States, geopolitical events, including the ongoing conflicts in Ukraine and the Middle East, have caused greater uncertainty in the global economy and exacerbated the inflation situation.
Specifically, our technologies, promotional products purchased from third-party vendors, and/or Ulta Beauty branded products, or potential products in development may infringe rights under patents, patent applications, trademark, copyright, or other intellectual property rights of third parties in the United States and abroad.
Any resolution of litigation or other legal or regulatory proceedings or claims could materially adversely impact our business, financial condition, profitability, and cash flows. 24 Table of Contents Specifically, our technologies, promotional products purchased from third-party vendors, and/or Ulta Beauty branded products, or potential products in development may infringe rights under patents, patent applications, trademark, copyright, or other intellectual property rights of third parties in the United States and abroad.
These events could cause negative publicity regarding our Company, brand, or products, which could in turn harm our reputation and net sales, which could have a material adverse effect on our business, financial condition, profitability, and cash flows. 24 Table of Contents Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change in control, even if a sale of the Company would be beneficial to our stockholders, which could cause our stock price to decline and prevent attempts by our stockholders to replace or remove our current management.
Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change in control, even if a sale of the Company would be beneficial to our stockholders, which could cause our stock price to decline and prevent attempts by our stockholders to replace or remove our current management.
Our future operations and performance will be subject to these factors, and these factors could have a material adverse effect on our business, financial condition, profitability, and cash flows or may require us to modify our current business practices and incur increased costs.
Our future operations and performance will be subject to these factors, and these factors could have a material adverse effect on our business, financial condition, profitability, and cash flows or may require us to modify our current business practices and incur increased costs. 18 Table of Contents We rely on our good relationships with brand partners to purchase prestige, mass, and salon beauty products on reasonable terms, and to offer certain brands or products that are permanently or temporarily exclusive to us.
Competition for this type of personnel is intense, especially in light of the labor pressures resulting from the COVID-19 pandemic, and we may not be successful in attracting, assimilating, and retaining the personnel required to grow and operate our business profitably.
We also need to attract, motivate, and retain additional qualified executive, managerial, and merchandising personnel and store and distribution center associates. Competition for this type of personnel is intense, and we may not be successful in attracting, assimilating, and retaining the personnel required to grow and operate our business profitably.
We currently operate four distribution centers, which house the distribution operations for Ulta Beauty retail stores together with the order fulfillment operations of our e-commerce platform, and two fast fulfillment centers (e-commerce only). To support our expected future growth and to maintain the efficient operation of our business, it is likely additional distribution facilities will be added in the future.
We currently operate four regional distribution centers, which house the distribution operations for Ulta Beauty retail stores together with the order fulfillment operations of our e-commerce platform, two fast fulfillment centers (e-commerce only), and one market fulfillment center (with a second one expected to open in fiscal 2024), which focuses on our most productive products and supports e-commerce and retail stores.
We may respond by increasing markdowns, initiating marketing promotions, or transferring product to other stores to reduce excess inventory, which would further decrease our gross profits and net income. ​ ​ ​ 19 Table of Contents The COVID-19 pandemic continues to negatively affect our business, financial condition, profitability, cash flows and supply chain. ​ Since the first quarter of 2020, there has been a worldwide impact from the COVID 19 pandemic.
We may respond by increasing markdowns, initiating marketing promotions, or transferring product to other stores to reduce excess inventory, which would further decrease our gross profits and net income.
In addition, actual losses may be higher than the amount accrued for a certain matter, or in the aggregate. Any resolution of litigation or other legal or regulatory proceedings or claims could materially adversely impact our business, financial condition, profitability, and cash flows.
In addition, actual losses may be higher than the amount accrued for a certain matter, or in the aggregate.
Continuing or worsening inflation, recessionary concerns and/or supply chain and labor challenges, as well as the current turmoil in the banking industry, may have a material adverse impact on our business, financial condition, profitability, and/or cash flows.
We expect the impact of inflationary cost pressures to continue in 2024, and we continue to closely monitor macroeconomic conditions, including customer behavior, and the impact of these factors on customer demand. Continuing or worsening inflation, recessionary concerns and/or cost pressures, may have a material adverse impact on our business, financial condition, profitability, and/or cash flows.
Removed
We rely on our good relationships with brand partners to purchase prestige, mass, and salon beauty products on reasonable terms, and to offer certain brands or products that are permanently or temporarily exclusive to us.
Added
Any significant interruption in the operations of our distribution, fast fulfillment, and market fulfillment centers could disrupt our ability to deliver merchandise to our stores and guests in a timely manner, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Removed
There has been a substantial increase in the use of social media platforms, including blogs, social media websites, and other forms of internet-based and mobile communications, which allow individuals access to a broad audience of consumers and other interested persons.
Added
To support our expected future growth and to maintain the efficient operation of our business, it is likely additional distribution facilities will be added in the future.
Removed
We also need to attract, motivate, and retain additional qualified executive, managerial, and merchandising personnel and store and distribution center associates.
Added
These events could cause negative publicity regarding our Company, brand, or products, which could in turn harm our reputation and net sales, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Removed
For instance, we were negatively impacted in fiscal 2022 by persistent cost pressures, including supply chain and labor costs. We expect inflationary cost pressures to continue in 2023 and we continue to closely monitor macroeconomic conditions, including customer behavior, and the impact of these factors on customer demand.
Removed
Government authorities have taken measures to try to contain the virus, such as limiting or closing business activities, transportation and person-to-person interactions, resulting in the temporary closing of all of our stores across the U.S. on March 19, 2020.
Removed
As a result of this decision, we experienced a significant reduction in customer traffic and demand which resulted in our sales and results of operations being negatively impacted in fiscal 2020.
Removed
While we have reopened all stores and resumed our in-store services, the potential of temporary restrictions in operating hours, in-store services or reclosing of certain stores in the future is possible.
Removed
Global trade conditions and customer trends that originated during the pandemic continue to persist and may also have a long-lasting adverse impact on us independently of the progress on the pandemic.
Removed
For example, the COVID-19 pandemic and its various impacts changed consumer behavior and consumption of beauty products, at least temporarily, due to the closures of offices, retail stores and other businesses and the significant decline in social gatherings, and also resulted in inflationary pressures on wages, transportation and shipping costs, and wholesale costs, recessionary concerns and other evolving macroeconomic conditions.
Removed
The COVID 19 pandemic has had, and could continue to have, a negative impact on our business, financial condition, profitability, cash flows, and supply chain, although the full extent is still uncertain and cannot be predicted.
Removed
We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems, successfully upgrade our information technology systems or any material disruption of our information systems could negatively impact financial results and materially adversely affect our business operations, particularly during the holiday season.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of January 28, 2023, we operated 1,355 retail stores across 50 states, as shown in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ Number of Location stores Location stores Alabama ​ 24 ​ Montana ​ 6 Alaska ​ 3 ​ Nebraska ​ 5 Arizona ​ 33 ​ Nevada ​ 16 Arkansas ​ 11 ​ New Hampshire ​ 8 California ​ 168 ​ New Jersey ​ 44 Colorado ​ 26 ​ New Mexico ​ 7 Connecticut ​ 19 ​ New York ​ 55 Delaware ​ 4 ​ North Carolina ​ 43 Florida ​ 92 ​ North Dakota ​ 4 Georgia ​ 43 ​ Ohio ​ 45 Hawaii ​ 4 ​ Oklahoma ​ 22 Idaho ​ 9 ​ Oregon ​ 18 Illinois ​ 55 ​ Pennsylvania ​ 45 Indiana ​ 26 ​ Rhode Island ​ 4 Iowa ​ 11 ​ South Carolina ​ 24 Kansas ​ 13 ​ South Dakota ​ 3 Kentucky ​ 15 ​ Tennessee ​ 29 Louisiana ​ 18 ​ Texas ​ 126 Maine ​ 3 ​ Utah ​ 15 Maryland ​ 28 ​ Vermont ​ 1 Massachusetts ​ 25 ​ Virginia ​ 32 Michigan ​ 49 ​ Washington ​ 37 Minnesota ​ 19 ​ West Virginia ​ 7 Mississippi ​ 12 ​ Wisconsin ​ 20 Missouri ​ 25 ​ Wyoming ​ 4 ​ ​ ​ ​ Total ​ 1,355 ​ ​ 26 Table of Contents Distribution centers, fast fulfillment centers, and market fulfillment centers Our standard distribution center, fast fulfillment center, and market fulfilment center lease provides for a fixed minimum annual rent and generally has a 10 or 15-year initial term with three or four renewal options with terms of five years each.
Biggest changeAs of February 3, 2024, we operated 1,385 retail stores across 50 states, as shown in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ Number of Location stores Location stores Alabama ​ 25 ​ Montana ​ 6 Alaska ​ 3 ​ Nebraska ​ 5 Arizona ​ 35 ​ Nevada ​ 16 Arkansas ​ 11 ​ New Hampshire ​ 8 California ​ 170 ​ New Jersey ​ 45 Colorado ​ 27 ​ New Mexico ​ 7 Connecticut ​ 19 ​ New York ​ 55 Delaware ​ 4 ​ North Carolina ​ 45 Florida ​ 99 ​ North Dakota ​ 4 Georgia ​ 43 ​ Ohio ​ 46 Hawaii ​ 4 ​ Oklahoma ​ 22 Idaho ​ 9 ​ Oregon ​ 18 Illinois ​ 55 ​ Pennsylvania ​ 45 Indiana ​ 26 ​ Rhode Island ​ 4 Iowa ​ 11 ​ South Carolina ​ 24 Kansas ​ 13 ​ South Dakota ​ 3 Kentucky ​ 16 ​ Tennessee ​ 31 Louisiana ​ 18 ​ Texas ​ 131 Maine ​ 3 ​ Utah ​ 15 Maryland ​ 28 ​ Vermont ​ 1 Massachusetts ​ 27 ​ Virginia ​ 33 Michigan ​ 49 ​ Washington ​ 37 Minnesota ​ 20 ​ West Virginia ​ 7 Mississippi ​ 12 ​ Wisconsin ​ 21 Missouri ​ 25 ​ Wyoming ​ 4 ​ ​ ​ ​ Total ​ 1,385 ​ ​ 30 Table of Contents Distribution centers, fast fulfillment centers, and market fulfillment centers Our standard distribution center, fast fulfillment center, and market fulfilment center lease provides for a fixed minimum annual rent and generally has a 10 or 15-year initial term with three or four renewal options with terms of five years each.
Corporate office Our principal executive office is in Bolingbrook, Illinois. The corporate office is approximately 341,000 square feet with lease terms expiring in 2028. Additionally, we have a satellite corporate office in Chicago, Illinois. The Chicago office is approximately 23,000 square feet with lease expiration in 2026. Item 3.
Corporate office Our principal executive office is in Bolingbrook, Illinois. The corporate office is approximately 349,000 square feet with lease terms expiring in 2028. Additionally, we have a satellite corporate office in Chicago, Illinois. The Chicago office is approximately 23,000 square feet with lease expiration in 2026. Item 3.
Legal Proceedings See Note 10 to our consolidated financial statements, “Commitments and contingencies - General litigation,” for information on legal proceedings. Item 4. Mine Safety Disclosures None.
Legal Proceedings See Note 9 to our consolidated financial statements, “Commitments and contingencies - General litigation,” for information on legal proceedings. Item 4. Mine Safety Disclosures None.
The general location and approximate size, and lease expiration date for each distribution center (DC), fast fulfillment center (FFC) and market fulfillment center (MFC) at January 28, 2023, are set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ Lease Expiration Location Type Square Feet Date Chambersburg, Pennsylvania ​ DC ​ 503,605 ​ June 30, 2027 Dallas, Texas ​ DC ​ 670,680 ​ July 31, 2026 Fresno, California ​ DC ​ 670,680 ​ July 31, 2028 Greenwood, Indiana ​ DC ​ 670,680 ​ July 31, 2025 Greer, South Carolina (1) ​ MFC ​ 303,580 ​ May 31, 2033 Jacksonville, Florida ​ FFC ​ 203,463 ​ September 30, 2029 Romeoville, Illinois ​ FFC ​ 291,335 ​ May 31, 2026 (1) Expected to open in fiscal 2023.
The general location, approximate size, and lease expiration date for each distribution center (DC), fast fulfillment center (FFC) and market fulfillment center (MFC) at February 3, 2024, are set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ Lease Expiration Location Type Square Feet Date Bolingbrook, Illinois (1) ​ MFC ​ 321,132 ​ July 31, 2033 Chambersburg, Pennsylvania ​ DC ​ 503,605 ​ June 30, 2027 Dallas, Texas ​ DC ​ 670,680 ​ July 31, 2026 Fresno, California ​ DC ​ 670,680 ​ July 31, 2028 Greenwood, Indiana ​ DC ​ 670,680 ​ July 31, 2025 Greer, South Carolina ​ MFC ​ 303,580 ​ May 31, 2033 Jacksonville, Florida ​ FFC ​ 203,463 ​ September 30, 2029 Romeoville, Illinois ​ FFC ​ 291,335 ​ May 31, 2026 (1) Expected to open in fiscal 2024.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. ​ Mine Safety Disclosures ​ 27 ​ ​ ​ ​ ​ Item 4A. ​ Executive Officers ​ 27 ​ ​ ​ ​ ​ Part II ​ ​ ​ ​ ​ ​ ​ ​ ​ Item 5. ​ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 28 ​ ​ ​ ​ ​
Biggest changeItem 4. ​ Mine Safety Disclosures ​ 31 ​ ​ ​ ​ ​ Item 4A. ​ Executive Officers ​ 31 ​ ​ ​ ​ ​ Part II ​ ​ ​ ​ ​ ​ ​ ​ ​ Item 5. ​ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 33 ​ ​ ​ ​ ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(2) Includes 324,410 shares issuable pursuant to the exercise of outstanding stock options, 221,045 shares issuable pursuant to restricted stock units, and 75,759 shares issuable pursuant to performance-based units. 29 Table of Contents (3) Calculation of weighted-average exercise price of outstanding awards includes stock options but does not include shares of restricted stock units or performance-based units that convert to shares of common stock for no consideration.
Biggest change(3) Calculation of weighted-average exercise price of outstanding awards includes stock options but does not include shares of restricted stock units or performance-based units that convert to shares of common stock for no consideration. (4) Represents shares that are available for issuance pursuant to the Amended and Restated 2011 Incentive Award Plan.
The graph assumes an investment of $100 made at the closing of trading on February 3, 2018 in (i) Ulta Beauty’s common stock, (ii) the stocks comprising the S&P 500 and (iii) the stocks comprising the S&P 500 Retailing (Industry Group, SP500-2550).
The graph assumes an investment of $100 made at the closing of trading on February 2, 2019 in (i) Ulta Beauty’s common stock, (ii) the stocks comprising the S&P 500 and (iii) the stocks comprising the S&P 500 Consumer Discretionary (Industry Group, SP500-2550).
As of March 20, 2023, we had 27 holders of record of our common stock. Because many shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Because many shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Set forth below is a graph comparing the cumulative total stockholder return on Ulta Beauty’s common stock with the S&P 500 and the S&P 500 Retailing (Industry Group, SP500-2550) for the period covering February 3, 2018 through the end of Ulta Beauty’s fiscal year ended January 28, 2023.
Set forth below is a graph comparing the cumulative total stockholder return on Ulta Beauty’s common stock with the S&P 500 and the S&P 500 Consumer Discretionary (Industry Group, SP500-2550) for the period covering February 2, 2019 through the end of Ulta Beauty’s fiscal year ended February 3, 2024.
Stock performance graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
The shares available under the plan are reduced by 1.0 for each stock option awarded and by 1.5 for each restricted stock unit and performance-based unit awarded. 34 Table of Contents Stock performance graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
(2) On March 7, 2022, the Board of Directors authorized the 2022 share repurchase program pursuant to which the Company may repurchase up to $2.0 billion of the Company’s common stock. As of January 28, 2023, the amount remaining available was $1.1 billion. Recent sales of unregistered securities None.
(2) On March 7, 2022, the Board of Directors authorized the 2022 share repurchase program pursuant to which the Company may repurchase up to $2.0 billion of the Company’s common stock. As of February 3, 2024, the amount remaining available was $99.9 million. On March 12, 2024, the Board of Directors authorized the 2024 share repurchase program.
Securities authorized for issuance under equity compensation plans The following table provides information about Ulta Beauty common stock that may be issued under our equity compensation plans as of January 28, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ Number of securities ​ ​ ​ ​ remaining available ​ ​ to be issued upon ​ Weighted-average ​ for future issuance ​ ​ exercise of outstanding ​ exercise price of ​ under equity ​ ​ options, warrants ​ outstanding options, ​ compensation Plan category and rights (2) warrants and rights (3) plans (4) Equity compensation plans approved by security holders (1) 621,214 ​ $ 260.34 2,424,824 (1) Includes options issued and available for exercise and shares available for issuance in connection with past awards under the Amended and Restated 2011 Incentive Award Plan and predecessor equity incentive plans.
For additional information on the 2024 share repurchase program see Note 19 to our consolidated financial statements, “Subsequent events.” Recent sales of unregistered securities None. ​ 33 Table of Contents ​ Securities authorized for issuance under equity compensation plans The following table provides information about Ulta Beauty common stock that may be issued under our equity compensation plans as of February 3, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ Number of securities ​ ​ ​ ​ remaining available ​ ​ to be issued upon ​ Weighted-average ​ for future issuance ​ ​ exercise of outstanding ​ exercise price of ​ under equity ​ ​ options, warrants ​ outstanding options, ​ compensation Plan category and rights (2) warrants and rights (3) plans (4) Equity compensation plans approved by security holders (1) 553,051 ​ $ 303.47 2,280,721 (1) Includes options issued and available for exercise and shares available for issuance in connection with past awards under the Amended and Restated 2011 Incentive Award Plan and predecessor equity incentive plans.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market information Our common stock has traded on the NASDAQ Global Select Market under the symbol “ULTA” since October 25, 2007. 28 Table of Contents Holders of the registrant’s common stock The last reported sale price of our common stock on the NASDAQ Global Select Market on March 20, 2023 was $510.23 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market information Our common stock has traded on the NASDAQ Global Select Market under the symbol “ULTA” since October 25, 2007.
All values assume reinvestment of the full amount of all dividends, if any, into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the applicable time period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ February 3, ​ February 2, ​ February 1, ​ January 30, ​ January 29, ​ January 28, Company / Index 2018 2019 2020 2021 2022 2023 Ulta Beauty ​ $ 100.00 $ 131.44 $ 120.63 $ 125.96 $ 161.56 $ 227.68 S&P 500 ​ ​ 100.00 ​ ​ 95.76 ​ ​ 114.23 ​ ​ 131.53 ​ ​ 156.95 ​ ​ 144.15 S&P 500 Retailing ​ ​ 100.00 ​ ​ 107.55 ​ ​ 125.27 ​ ​ 176.00 ​ ​ 185.28 ​ ​ 152.12 ​ ​ ​ 30 Table of Contents Item 6. [Reserved] ​
All values assume reinvestment of the full amount of all dividends, if any, into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the applicable time period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ February 2, ​ February 1, ​ January 30, ​ January 29, ​ January 28, ​ February 3, Company / Index 2019 2020 2021 2022 2023 2024 Ulta Beauty ​ $ 100.00 $ 91.95 $ 96.02 $ 123.16 $ 173.56 $ 173.44 S&P 500 ​ ​ 100.00 ​ ​ 119.18 ​ ​ 137.23 ​ ​ 163.75 ​ ​ 150.40 ​ ​ 183.21 S&P 500 Consumer Discretionary ​ ​ 100.00 ​ ​ 119.51 ​ ​ 167.91 ​ ​ 176.76 ​ ​ 145.13 ​ ​ 202.14 ​ ​ ​ Item 6. [Rese rved] ​ ​ ​ ​ ​ ​ 35 Table of Contents
Purchases of equity securities by the issuer and affiliated purchasers The following table sets forth repurchases of our common stock during the fourth quarter of 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (2) Approximate dollar value of shares that may yet be purchased under plans or programs (in thousands) (2) October 30, 2022 to November 26, 2022 ​ 164,683 ​ $ 426.90 ​ 164,657 ​ $ 1,357,800 November 27, 2022 to December 24, 2022 ​ 557,912 ​ ​ 462.24 ​ 557,800 ​ ​ 1,099,966 December 25, 2022 to January 28, 2023 ​ 388 ​ ​ 484.68 ​ — ​ ​ 1,099,966 13 weeks ended January 28, 2023 ​ 722,983 ​ ​ 454.20 ​ 722,457 ​ ​ 1,099,966 (1) There were 722,457 shares repurchased as part of our publicly announced share repurchase program during the 13 weeks ended January 28, 2023, and there were 526 shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the period.
Purchases of equity securities by the issuer and affiliated purchasers The following table sets forth repurchases of our common stock during the fourth quarter of 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under plans or programs (in thousands) October 29, 2023 to November 25, 2023 ​ 102,295 ​ $ 397.66 ​ 102,261 ​ $ 219,154 November 26, 2023 to December 30, 2023 ​ 97,384 ​ ​ 476.60 ​ 97,384 ​ ​ 173,180 December 31, 2023 to February 3, 2024 ​ 152,819 ​ ​ 485.11 ​ 152,360 ​ ​ 99,933 14 weeks ended February 3, 2024 ​ 352,498 ​ ​ 457.38 ​ 352,005 ​ ​ 99,933 (1) There were 352,005 shares repurchased as part of our publicly announced share repurchase program during the 14 weeks ended February 3, 2024 and there were 493 shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the period.
We currently grant awards only under the Amended and Restated 2011 Incentive Award Plan.
We currently grant awards only under the Amended and Restated 2011 Incentive Award Plan. (2) Includes 307,424 shares issuable pursuant to the exercise of outstanding stock options, 140,004 shares issuable pursuant to restricted stock units, and 105,623 shares issuable pursuant to performance-based units.
Removed
(4) Represents shares that are available for issuance pursuant to the Amended and Restated 2011 Incentive Award Plan. The shares available under the plan are reduced by 1.0 for each stock option awarded and by 1.5 for each restricted stock unit and performance-based unit awarded.
Added
Holders of the registrant’s common stock The last reported sale price of our common stock on the NASDAQ Global Select Market on March 22, 2024 was $520.37 per share. As of March 22, 2024, we had 27 holders of record of our common stock.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. ​ [Reserved] ​ 31 ​ ​ ​ ​ ​ Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 31 ​ ​ ​ ​ ​ Item 7A. ​ Quantitative and Qualitative Disclosures about Market Risk ​ 43 ​ ​ ​ ​ ​
Biggest changeItem 6. ​ [Reserved] ​ 35 ​ ​ ​ ​ ​ Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 36 ​ ​ ​ ​ ​ Item 7A. ​ Quantitative and Qualitative Disclosures about Market Risk ​ 48 ​ ​ ​ ​ ​ Item 8. ​ Financial Statements and Supplementary Data ​ 49 ​ ​ ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

61 edited+12 added−16 removed40 unchanged
Biggest changeThe following tables present the components of our consolidated results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ January 28, ​ January 29, ​ January 30, (Dollars in thousands) ​ 2023 2022 2021 Net sales ​ $ 10,208,580 ​ $ 8,630,889 ​ $ 6,151,953 Cost of sales ​ ​ 6,164,070 ​ ​ 5,262,335 ​ ​ 4,202,794 Gross profit ​ ​ 4,044,510 ​ ​ 3,368,554 ​ ​ 1,949,159 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative expenses ​ ​ 2,395,299 ​ ​ 2,061,545 ​ ​ 1,583,017 Impairment, restructuring and other costs ​ ​ — ​ ​ — ​ ​ 114,322 Pre-opening expenses ​ ​ 10,601 ​ ​ 9,517 ​ ​ 15,000 Operating income ​ ​ 1,638,610 ​ ​ 1,297,492 ​ ​ 236,820 Interest (income) expense, net ​ ​ (4,934) ​ ​ 1,663 ​ ​ 5,735 Income before income taxes ​ ​ 1,643,544 ​ ​ 1,295,829 ​ ​ 231,085 Income tax expense ​ ​ 401,136 ​ ​ 309,992 ​ ​ 55,250 Net income ​ $ 1,242,408 ​ $ 985,837 ​ $ 175,835 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other operating data: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of stores end of year ​ ​ 1,355 ​ ​ 1,308 ​ ​ 1,264 Comparable sales ​ ​ 15.6% ​ ​ 37.9% ​ ​ (17.9%) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ January 28, ​ January 29, ​ January 30, (Percentage of net sales) ​ 2023 2022 2021 Net sales ​ ​ 100.0% ​ ​ 100.0% ​ ​ 100.0% Cost of sales ​ ​ 60.4% ​ ​ 61.0% ​ ​ 68.3% Gross profit ​ ​ 39.6% ​ ​ 39.0% ​ ​ 31.7% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative expenses ​ ​ 23.5% ​ ​ 23.9% ​ ​ 25.7% Impairment, restructuring and other costs ​ ​ 0.0% ​ ​ 0.0% ​ ​ 1.9% Pre-opening expenses ​ ​ 0.1% ​ ​ 0.1% ​ ​ 0.2% Operating income ​ ​ 16.1% ​ ​ 15.0% ​ ​ 3.9% Interest (income) expense, net ​ ​ 0.0% ​ ​ 0.0% ​ ​ 0.1% Income before income taxes ​ ​ 16.1% ​ ​ 15.0% ​ ​ 3.8% Income tax expense ​ ​ 3.9% ​ ​ 3.6% ​ ​ 0.9% Net income ​ ​ 12.2% ​ ​ 11.4% ​ ​ 2.9% 34 Table of Contents Fiscal year 2022 versus fiscal year 2021 Net sales Net sales increased $1.6 billion, or 18.3%, to $10.2 billion in fiscal 2022 compared to $8.6 billion in fiscal 2021.
Biggest changeThe following tables present the components of our consolidated results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ February 3, ​ January 28, ​ January 29, (Dollars in thousands) ​ 2024 2023 2022 Net sales ​ $ 11,207,303 ​ $ 10,208,580 ​ $ 8,630,889 Cost of sales ​ ​ 6,826,203 ​ ​ 6,164,070 ​ ​ 5,262,335 Gross profit ​ ​ 4,381,100 ​ ​ 4,044,510 ​ ​ 3,368,554 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative expenses ​ ​ 2,694,561 ​ ​ 2,395,299 ​ ​ 2,061,545 Pre-opening expenses ​ ​ 8,510 ​ ​ 10,601 ​ ​ 9,517 Operating income ​ ​ 1,678,029 ​ ​ 1,638,610 ​ ​ 1,297,492 Interest (income) expense, net ​ ​ (17,622) ​ ​ (4,934) ​ ​ 1,663 Income before income taxes ​ ​ 1,695,651 ​ ​ 1,643,544 ​ ​ 1,295,829 Income tax expense ​ ​ 404,646 ​ ​ 401,136 ​ ​ 309,992 Net income ​ $ 1,291,005 ​ $ 1,242,408 ​ $ 985,837 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other operating data: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of stores end of year ​ ​ 1,385 ​ ​ 1,355 ​ ​ 1,308 Comparable sales ​ ​ 5.7% ​ ​ 15.6% ​ ​ 37.9% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ February 3, ​ January 28, ​ January 29, (Percentage of net sales) ​ 2024 2023 2022 Net sales ​ ​ 100.0% ​ ​ 100.0% ​ ​ 100.0% Cost of sales ​ ​ 60.9% ​ ​ 60.4% ​ ​ 61.0% Gross profit ​ ​ 39.1% ​ ​ 39.6% ​ ​ 39.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative expenses ​ ​ 24.0% ​ ​ 23.5% ​ ​ 23.9% Pre-opening expenses ​ ​ 0.1% ​ ​ 0.1% ​ ​ 0.1% Operating income ​ ​ 15.0% ​ ​ 16.1% ​ ​ 15.0% Interest income, net ​ ​ (0.2%) ​ ​ 0.0% ​ ​ 0.0% Income before income taxes ​ ​ 15.1% ​ ​ 16.1% ​ ​ 15.0% Income tax expense ​ ​ 3.6% ​ ​ 3.9% ​ ​ 3.6% Net income ​ ​ 11.5% ​ ​ 12.2% ​ ​ 11.4% ​ Fiscal year 2023 versus fiscal year 2022 Net sales Net sales increased $998.7 million, or 9.8%, to $11.2 billion in fiscal 2023 compared to $10.2 billion in fiscal 2022.
The increase in gross profit margin was primarily due to: ● 100 basis points of leverage of fixed costs attributed to the impact of higher sales and ongoing occupancy cost optimization efforts; ● 60 basis points of leverage in other revenue primarily due to credit card income growth, an increase in royalty income from our partnership with Target, and higher loyalty point redemptions; and ● 20 basis points of leverage due to favorable channel mix shifts; partially offset by ● 70 basis points of deleverage in inventory shrink; and ● 50 basis points of deleverage in merchandise margins driven by brand mix and lapping benefits from favorable inventory reserve adjustments in fiscal 2021, partially offset by the timing of retail price changes. ​ Selling, general and administrative expenses Selling, general and administrative (SG&A) expenses increased $333.8 million, or 16.2%, to $2.4 billion in fiscal 2022 compared to $2.1 billion in fiscal 2021.
The increase in gross profit margin was primarily due to: ● 100 basis points of leverage of fixed costs attributed to the impact of higher sales and ongoing occupancy cost optimization efforts; ● 60 basis points of leverage in other revenue primarily due to credit card income growth, an increase in royalty income from our partnership with Target, and higher loyalty point redemptions; and ● 20 basis points of leverage due to favorable channel mix shifts; partially offset by ● 70 basis points of deleverage in inventory shrink; and ● 50 basis points of deleverage in merchandise margins driven by brand mix and lapping benefits from favorable inventory reserve adjustments in fiscal 2021, partially offset by the timing of retail price changes. ​ Selling, general and administrative expenses SG&A expenses increased $333.8 million, or 16.2%, to $2.4 billion in fiscal 2022 compared to $2.1 billion in fiscal 2021.
Key aspects of our business include: a differentiated assortment of more than 25,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in more than 1,350 stores predominantly located in convenient, high-traffic locations; engaging digital experiences delivered through our website, Ulta.com, and our mobile applications; our best-in-class loyalty program that enables members to earn points for every dollar spent on products and beauty services and provides us with deep, proprietary customer insights; and our ability to cultivate human connection with warm and welcoming guest experiences across all of our channels.
Key aspects of our business include: a differentiated assortment of approximately 25,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in more than 1,350 stores predominantly located in convenient, high-traffic locations; engaging digital experiences delivered through our website, Ulta.com, and our mobile applications; our best-in-class loyalty program that enables members to earn points for every dollar spent on products and beauty services and provides us with deep, proprietary customer insights; and our ability to cultivate human connection with warm and welcoming guest experiences across all of our channels.
Selling, general and administrative expenses include: ● payroll, bonus, and benefit costs for retail store and corporate employees; ● advertising and marketing costs, offset by vendor income that is a reimbursement of specific, incremental, and identifiable costs; ● occupancy costs related to our corporate office facilities; ● stock-based compensation expense; ● depreciation and amortization for all assets, except those related to our retail stores and distribution operations, which are included in cost of sales; and ● legal, finance, information systems, and other corporate overhead costs.
Selling, general and administrative (SG&A) expenses include: ● payroll, bonus, and benefit costs for retail store and corporate employees; ● advertising and marketing costs, offset by vendor income that is a reimbursement of specific, incremental, and identifiable costs; ● occupancy costs related to our corporate office facilities; ● stock-based compensation expense; ● depreciation and amortization for all assets, except those related to our retail stores and distribution operations, which are included in cost of sales; and ● legal, finance, information systems, and other corporate overhead costs.
The continued growth of our business and any future increases in net sales, net income, and cash flows is dependent on our ability to execute our strategic priorities: 1) drive breakthrough and disruptive growth through an expanded definition of All Things Beauty; 2) evolve the omnichannel experience through connected physical and digital ecosystems, All In Your World; 3) expand and deepen our presence across the beauty journey, solidifying Ulta Beauty at the Heart of the Beauty Community; 4) drive operational excellence and optimization; 5) protect and cultivate our world-class culture and talent; and 6) expand our environmental and social impact.
The continued growth of our business and any future increases in net sales, net income, and cash flows is dependent on our ability to execute our strategic priorities: 1) drive breakthrough and disruptive growth through an expanded definition of All Things Beauty; 2) evolve the omnichannel experience through connected physical and digital ecosystems, All In Your World; 3) expand and deepen our presence across the beauty journey, positioning Ulta Beauty at the Heart of the Beauty Community; 4) drive operational excellence and optimization; 5) protect and cultivate our world-class culture and talent; and 6) expand our environmental and social impact.
We remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains over the long term. ​ Impact of inflation and other macroeconomic trends Although we do not believe inflation had a material impact on our sales during fiscal 2022, continued pressure from inflation or other evolving macroeconomic conditions could have an adverse impact on consumer spending and could lead to a recession.
We remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains over the long term. ​ Impact of inflation and other macroeconomic trends Although we do not believe inflation had a material impact on our sales during fiscal 2023, continued pressure from inflation or other evolving macroeconomic conditions could have an adverse impact on consumer spending and could lead to a recession.
We do not believe that there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our inventory reserves. Adjustments to earnings resulting from revisions to management’s estimates of the inventory reserves have been insignificant during fiscal 2022, 2021 and 2020.
We do not believe that there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our inventory reserves. Adjustments to earnings resulting from revisions to management’s estimates of the inventory reserves have been insignificant during fiscal 2023, 2022 and 2021.
We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to calculate our reduction of inventory. An increase or decrease in inventory turns of five basis points would not have a material impact on our operating income for fiscal 2022.
We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to calculate our reduction of inventory. An increase or decrease in inventory turns of five basis points would not have a material impact on our operating income for fiscal 2023.
We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions used to calculate the estimated redemption rate. Adjustments to earnings resulting from revisions to management’s estimates of the redemption rates have been insignificant during fiscal 2022, 2021 and 2020.
We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions used to calculate the estimated redemption rate. Adjustments to earnings resulting from revisions to management’s estimates of the redemption rates have been insignificant during fiscal 2023, 2022 and 2021.
The higher income tax expense is primarily due 35 Table of Contents to less tax benefit from the income tax accounting for share-based compensation and an increase in state tax expense compared to fiscal 2021. ​ Net income Net income increased $256.6 million to $1.2 billion in fiscal 2022 compared to $985.8 million in fiscal 2021.
The higher income tax expense is primarily due 41 Table of Contents to less tax benefit from the income tax accounting for share-based compensation and an increase in state tax expense compared to fiscal 2021. ​ Net income Net income increased $256.6 million to $1.2 billion in fiscal 2022 compared to $985.8 million in fiscal 2021.
Our credit facility interest is based on a variable interest rate structure which can result in increased cost in periods of rising interest rates. Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores.
Our credit facility interest is based on a variable interest rate structure which can result in increased cost in periods of rising or elevated interest rates. Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores.
The estimated tax benefit of an uncertain tax position is 42 Table of Contents recorded in our consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities. ​ Judgment is required in assessing the future tax consequences of events that have been recognized on our consolidated financial statements or tax returns.
The estimated tax benefit of an uncertain tax position is recorded in our consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities. ​ Judgment is required in assessing the future tax consequences of events that have been recognized on our consolidated financial statements or tax returns.
An increase or decrease in the estimated redemption rate of 5% would not have a material impact on our operating income in fiscal 2022. ​ Income taxes ​ We are subject to income taxes in the United States.
An increase or decrease in the estimated redemption rate of 5% would not have a material impact on our operating income in fiscal 2023. ​ Income taxes ​ We are subject to income taxes in the United States.
The 2020 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time. In March 2022, the Board of Directors authorized a new share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company may repurchase up to $2.0 billion of the Company’s common stock.
The 2020 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time. In March 2022, the Board of Directors authorized a share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company could repurchase up to $2.0 billion of the Company’s common stock.
The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. 40 Table of Contents Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement.
The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement.
We estimate the amount recorded as a reduction of inventory at the end of each period based on a detailed analysis of inventory turns and management’s analysis of the facts and circumstances of the various contractual agreements with vendors. We record cash consideration expected to be received from vendors in receivables.
We estimate the amount recorded as a reduction of inventory at the end of each period based on a detailed analysis of inventory turns and management’s analysis of the facts and circumstances of the various contractual agreements with vendors. We record cash consideration expected to be received from vendors in 46 Table of Contents receivables.
Significant portions of our net sales and profits are realized during the fourth quarter of the fiscal year due to the holiday selling season. To a lesser extent, our business is also affected by Mother’s Day and Valentine’s Day.
Seasonality Our business is subject to seasonal fluctuation. Significant portions of our net sales and profits are realized during the fourth quarter of the fiscal year due to the holiday selling season. To a lesser extent, our business is also affected by Mother’s Day and Valentine’s Day.
Cost of sales includes: ● the cost of merchandise sold, offset by vendor income that is not a reimbursement of specific, incremental, and identifiable costs; ● distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities, and insurance; ● shipping and handling costs; ● retail store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, and licenses; ● salon services payroll and benefits; and ● shrink and inventory valuation reserves.
Cost of sales includes: ● the cost of merchandise sold, offset by vendor income that is not a reimbursement of specific, incremental, and identifiable costs; 37 Table of Contents ● distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities, and insurance; ● shipping and handling costs for e-commerce orders; ● retail store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, and licenses; ● salon services payroll and benefits; and ● shrink and inventory valuation reserves.
Also included are legally binding minimum lease payments for leases signed but not yet commenced of $91.5 million, which are excluded from operating lease liabilities shown on our consolidated balance sheets.
Also included are legally binding minimum lease payments for leases signed but not yet commenced of $122.2 million, which are excluded from operating lease liabilities shown on our consolidated balance sheets.
We record valuation adjustments to our inventories if the cost of a specific product on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory. These estimates are based on management’s judgment regarding future demand, age of inventory, and analysis of historical experience.
We record valuation adjustments to our inventories if the cost of a specific product on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory as well as for any excess or discontinued inventory. These estimates are based on management’s judgment regarding future demand, age of inventory, and analysis of historical experience.
The 2022 Share Repurchase Program authorization revokes the previously authorized but unused amounts from the 2020 Share Repurchase Program.
The 2022 Share Repurchase Program authorization revoked the previously authorized but unused amounts from the 2020 Share Repurchase Program.
The Loan Agreement matures on March 11, 2025, provides maximum revolving loans equal to the lesser of $1.0 billion or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $100.0 million, subject to the consent by each lender and other conditions.
The Loan Agreement matures on March 13, 2029, provides maximum revolving loans equal to the lesser of $800.0 million or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $200.0 million, subject to the consent by each lender and other conditions.
An impairment loss would be recorded if the carrying amount of the long-lived asset exceeds its fair value. We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to calculate our impairment charges.
An impairment loss would be recorded if the carrying amount of the long-lived asset exceeds its fair value. We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to calculate our impairment charges. No impairment charges were recognized in fiscal 2023, 2022, and 2021.
The amount of purchase obligations relates to commitments for products and services and other goods and service contracts entered into as of January 28, 2023. Excluded from purchase obligations are normal purchases and contracts entered into in the ordinary course of business.
The amount of purchase obligations relates to commitments for products and services and other goods and service contracts entered into as of February 3, 2024. Excluded from purchase obligations are normal purchases and contracts entered into in the ordinary course of business.
An increase or decrease in the lower of cost or net realizable value reserve of 10% would not have a material impact on our operating income for fiscal 2022.
An increase or decrease in the lower of cost or net realizable value reserve of 10% would not have a material impact on our operating income for fiscal 2023. An increase or decrease in the shrink rate included in the shrink reserve calculation of 10% would not have a material impact on our operating income for fiscal 2023.
Furthermore, inflationary pressures, as well as other macroeconomic trends, could negatively impact our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with higher costs. In addition, inflation could materially increase the interest rates on any future debt.
Furthermore, inflationary pressures, as well as other macroeconomic trends, could negatively impact our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with higher costs.
Comparable sales 32 Table of Contents include retail sales, salon services, and e-commerce. There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales. Measuring comparable sales allows us to evaluate the performance of our store base as well as several other aspects of our overall strategy.
There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales. Measuring comparable sales allows us to evaluate the performance of our store base as well as several other aspects of our overall strategy.
(2) The unrecognized tax benefit of $4.2 million as of January 28, 2023 is excluded due to uncertainty regarding the realization and timing of the related future cash flows, if any. Purchase obligations reflect legally binding agreements entered into by the Company to purchase goods or services.
(2) The unrecognized tax benefit of $4.1 million as of February 3, 2024 is excluded due to uncertainty regarding the realization and timing of the related future cash flows, if any. 42 Table of Contents Purchase obligations reflect legally binding agreements entered into by the Company to purchase goods or services.
We record a shrink reserve representing management’s estimate of inventory losses by location that have occurred since the date of the last physical count. This estimate is based on management’s analysis of historical results and operating trends.
We record a shrink reserve representing management’s estimate of inventory losses by location that have occurred since the date of the last physical count. This estimate is based on management’s analysis of historical results, including consideration of current loss rates.
Long-term operating profit is expected to increase as a result of our efforts to optimize our real estate portfolio, expand merchandise margin, and leverage our fixed store costs with comparable sales increases and operating efficiencies, partially offset by incremental investments in people, guest experiences, systems, and supply chain required to support a 1,500 to 1,700 store chain in the U.S. with successful e-commerce and competitive omnichannel capabilities. 31 Table of Contents Current Trends Impact of COVID-19 We closely monitor the continuing impact of COVID-19 on all facets of our business.
Long-term operating profit is expected to increase as a result of our efforts to optimize our real estate portfolio, expand merchandise margin, and leverage our fixed store costs with comparable sales increases and operating efficiencies, partially offset by incremental investments in people, guest experiences, systems, and supply chain required to support a 1,500 to 1,700 store chain in the U.S. with successful e-commerce and competitive omnichannel capabilities.
The following table presents a summary of our cash flows during the last three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ January 28, ​ January 29, ​ January 30, (In thousands) 2023 2022 2021 Net cash provided by operating activities ​ $ 1,481,915 ​ $ 1,059,265 ​ $ 810,355 Net cash used in investing activities ​ ​ (314,584) ​ ​ (176,484) ​ ​ (48,751) Net cash used in financing activities ​ ​ (861,014) ​ ​ (1,497,216) ​ ​ (107,934) Operating activities Operating activities consist of net income adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, long-lived asset impairment charges, deferred income taxes, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes.
The following table presents a summary of our cash flows during the last three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ February 3, ​ January 28, ​ January 29, (In thousands) 2024 2023 2022 Net cash provided by operating activities ​ $ 1,476,266 ​ $ 1,481,915 ​ $ 1,059,265 Net cash used in investing activities ​ ​ (441,425) ​ ​ (314,584) ​ ​ (176,484) Net cash used in financing activities ​ ​ (1,006,124) ​ ​ (861,014) ​ ​ (1,497,216) Operating activities Operating activities consist of net income adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, deferred income taxes, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes.
Pre-opening expenses include non-capital expenditures during the period prior to store opening for new, remodeled, and relocated stores including rent during the construction period for new and relocated stores, store set-up labor, management and employee training, and grand opening advertising. 33 Table of Contents Interest (income) expense, net includes both interest income and expense.
Pre-opening expenses include non-capital expenditures during the period prior to store opening for new, remodeled, and relocated stores including rent during the construction period for new and relocated stores, store set-up labor, management and employee training, and grand opening advertising.
Capital expenditures during the last three years by major category are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Budget ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ Fiscal ​ Fiscal (In millions) 2023 2022 2021 2020 New, Remodeled, and Relocated Stores ​ $ 156 ​ $ 102 ​ $ 73 ​ $ 56 Merchandising and Refreshed Stores ​ ​ 48 ​ ​ 34 ​ ​ 16 ​ ​ 14 Information Technology Systems ​ ​ 108 ​ ​ 74 ​ ​ 37 ​ ​ 36 Supply Chain ​ ​ 113 ​ ​ 70 ​ ​ 23 ​ ​ 13 Store Maintenance and Other ​ ​ 50 ​ ​ 32 ​ ​ 23 ​ ​ 33 Total ​ $ 475 ​ $ 312 ​ $ 172 ​ $ 152 ​ Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems investments, and supply chain investments that we undertake and the timing of these expenditures.
Capital expenditures during the last three years by major category are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Budget ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ Fiscal ​ Fiscal (In millions) 2024 2023 2022 2021 New, Remodeled, and Relocated Stores ​ $ 218 ​ $ 141 ​ $ 102 ​ $ 73 Merchandising and Refreshed Stores ​ ​ 64 ​ ​ 37 ​ ​ 34 ​ ​ 16 Information Technology Systems ​ ​ 80 ​ ​ 124 ​ ​ 74 ​ ​ 37 Supply Chain ​ ​ 75 ​ ​ 73 ​ ​ 70 ​ ​ 23 Store Maintenance and Other ​ ​ 53 ​ ​ 60 ​ ​ 32 ​ ​ 23 Total ​ $ 490 ​ $ 435 ​ $ 312 ​ $ 172 ​ Our future investments will depend primarily on the number of new, remodeled, and relocated stores, information technology systems investments, and supply chain investments that we undertake and the timing of these expenditures.
The amount of deferred revenue includes estimates for the standalone selling price of points earned by members and the percentage of points expected to be redeemed. The expected redemption percentage is based on historical redemption patterns and considers current information or trends. The standalone selling price of points earned and the estimated redemption rate is evaluated each reporting period.
The expected redemption percentage is based on historical redemption patterns and considers current information or trends. The standalone selling price of points earned and the estimated redemption rate is evaluated each reporting period.
An increase or decrease in the shrink rate included in the shrink reserve calculation of 10% would not have a material impact on our operating income for fiscal 2022. ​ ​ 41 Table of Contents Vendor allowances The majority of cash consideration received from a vendor is considered to be a reduction of the cost of the related products and is reflected in cost of sales in our consolidated statements of income as the related products are sold unless it is in exchange for an asset or service or a reimbursement of a specific, incremental, identifiable cost incurred by the Company in selling the vendors’ products.
Vendor allowances The majority of cash consideration received from a vendor is considered to be a reduction of the cost of the related products and is reflected in cost of sales in our consolidated statements of income as the related products are sold unless it is in exchange for an asset or service or a reimbursement of a specific, incremental, identifiable cost incurred by the Company in selling the vendors’ products.
Capital expenditures ​ The following table presents a summary of our store activities during the last three years: ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ January 28, January 29, January 30, ​ ​ 2023 ​ 2022 ​ 2021 Stores opened ​ 47 ​ 48 ​ 30 Stores remodeled ​ 20 ​ 9 ​ – Stores relocated ​ 12 ​ 7 ​ 5 ​ During fiscal 2022, the average investment required to open a new Ulta Beauty store was approximately $1.7 million, which includes capital investment net of landlord contributions, pre-opening expenses, and initial inventory net of payables.
The increase in net cash used in investing activities in fiscal 2022 relative to fiscal 2021 was primarily due to more capital expenditures for new, remodeled, and relocated stores, supply chain, and information technology systems compared to fiscal 2021. ​ Capital expenditures ​ The following table presents a summary of our store activities during the last three years: ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ February 3, January 28, January 29, ​ ​ 2024 ​ 2023 ​ 2022 Stores opened ​ 33 ​ 47 ​ 48 Stores remodeled ​ 18 ​ 20 ​ 9 Stores relocated ​ 7 ​ 12 ​ 7 ​ During fiscal 2023, the average investment required to open a new Ulta Beauty store was approximately $2.0 million, which includes capital investment net of landlord contributions, pre-opening expenses, and initial inventory net of payables.
Interest income represents interest from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase. Interest expense includes interest costs and facility fees associated with our credit facility, which is structured as an asset-based lending instrument.
Interest (income) expense represents interest from cash equivalents, which include highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less from the date of purchase. Interest expense includes interest costs and facility fees associated with our credit facility, which is structured as an asset-based lending instrument.
Retail store and e-commerce sales are recorded net of estimated returns. Shipping and handling are treated as costs to fulfill the contract and not a separate performance obligation.
E-commerce sales are recognized upon shipment or guest pickup of the merchandise based on meeting the transfer of control criteria. Retail store and e-commerce sales are recorded net of estimated returns. Shipping and handling are treated as costs to fulfill the contract and not a separate performance obligation.
The increase in net cash used in financing activities in fiscal 2021 relative to fiscal 2020 was primarily due to an increase in share repurchases offset by an increase in stock option exercises, and no activity under our revolving credit facility. We had no borrowings outstanding under the credit facility at the end of fiscal 2022, 2021 and 2020.
The decrease in net cash used in financing activities in fiscal 2022 relative to fiscal 2021 was primarily due to a decrease in share repurchases. 44 Table of Contents We had no borrowings outstanding under the credit facility at the end of fiscal 2023, 2022 and 2021.
The total comparable sales increase of 37.9% in fiscal 2021, compared to a decrease of 17.9% in fiscal 2020, was driven by a 30.0% increase in transactions and a 6.0% increase in average ticket. ​ Gross profit Gross profit increased $1.4 billion, or 72.8%, to $3.4 billion in fiscal 2021, compared to $1.9 billion in fiscal 2020.
The total comparable sales increase of 5.7% in fiscal 2023, compared to an increase of 15.6% in fiscal 2022, was driven by a 7.4% increase in transactions and a 1.5% decrease in average ticket. ​ ​ 39 Table of Contents Gross profit Gross profit increased $336.6 million, or 8.3%, to $4.4 billion in fiscal 2023, compared to $4.0 billion in fiscal 2022.
The increase in net income was primarily due to a $676.0 million increase in gross profit, partially offset by a $333.8 million increase in SG&A expenses and $91.1 million increase in income taxes.
The increase in net income was primarily due to a $676.0 million increase in gross profit, partially offset by a $333.8 million increase in SG&A expenses and a $91.1 million increase in income taxes. Liquidity and capital resources Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowings under our credit facility.
Investment activities for capital expenditures were $312.1 million during fiscal 2022, compared to $172.2 million during fiscal 2021. The increase in net cash used in investing activities in fiscal 2022 relative to fiscal 2021 was primarily due to more capital expenditures compared to fiscal 2021.
Investment activities for capital expenditures were $435.3 million during fiscal 2023, compared to $312.1 million during fiscal 2022. 43 Table of Contents The increase in net cash used in investing activities in fiscal 2023 relative to fiscal 2022 was primarily due to more capital expenditures for new, remodeled, and relocated stores and information technology systems compared to fiscal 2022.
Purchases of treasury shares represent the fair value of common shares repurchased from plan participants in connection with shares withheld to satisfy minimum statutory tax obligations upon the vesting of restricted stock. The decrease in net cash used in financing activities in fiscal 2022 relative to fiscal 2021 was primarily due to a decrease in share repurchases.
Financing activities Financing activities include share repurchases, borrowing and repayment of our revolving credit facility, and capital stock transactions. Purchases of treasury shares represent the fair value of common shares repurchased from plan participants in connection with shares withheld to satisfy minimum statutory tax obligations upon the vesting of restricted stock.
The 2022 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time. ​ A summary of common stock repurchase activity is presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year ended ​ ​ January 28, ​ January 29, ​ January 30, (Dollars in millions) 2023 ​ 2022 ​ 2021 Shares repurchased ​ ​ 2,192,556 ​ ​ 4,249,632 ​ ​ 474,794 Total cost of shares repurchased ​ $ 900.0 ​ $ 1,521.9 ​ $ 114.9 ​ ​ Credit facility On March 11, 2020, we entered into Amendment No. 1 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender; PNC Bank, National Association, as Documentation Agent and a Lender; and the other lenders party thereto.
The 2024 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time. ​ Credit facility On March 13, 2024, we entered into Amendment No. 3 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender; PNC Bank, National Association, as Documentation Agent and a Lender; and the other lenders party thereto.
The increase in net cash provided by operating activities in fiscal 2022 is mainly due to the increase in net income, a smaller increase in merchandise inventories in fiscal 2022, and the timing of receivable collections, partially offset by the timing of payables and a smaller increase in deferred revenue compared to fiscal 2021.
The decrease in net cash provided by operating activities in fiscal 2023 compared to fiscal 2022 is mainly due to the timing of accrued liabilities, accounts payable, receivable collections, prepaid income taxes, and prepaid expenses and other current assets and a larger increase in merchandise inventories in fiscal 2023, partially offset by the increase in net income and non-cash lease expense.
No impairment charges were recognized in fiscal 2022 or fiscal 2021. Loyalty program We maintain a customer loyalty program, Ultamate Rewards, which allows members to earn points based on purchases of merchandise or services. Points earned are valid for at least one year.
Loyalty program We maintain a customer loyalty program, Ulta Beauty Rewards, which allows members to earn points based on purchases of merchandise or services. Points earned are valid for at least one year. The loyalty program represents a material right to the customer and points may be redeemed on future products and services.
The loyalty program represents a material right to the customer and points may be redeemed on future products and services. Revenue from the loyalty program is recognized when the members redeem points or points expire. We defer revenue related to points earned that have not yet been redeemed.
Revenue from the loyalty program is recognized when the members redeem points or points expire. We defer revenue related to points earned that have not yet been redeemed. The amount of deferred revenue includes estimates for the standalone selling price of points earned by members and the percentage of points expected to be redeemed.
Industry trend s ​ Our research indicates that Ulta Beauty has captured meaningful market share across all categories over the last several years.
Current Trends Industry trend s ​ Our research indicates that Ulta Beauty has captured meaningful market share across all categories over the last several years. The overall beauty market expanded in 2022 and in 2023, supported by healthy consumer engagement with the 36 Table of Contents beauty category.
Gross profit as a percentage of net sales increased 730 basis points to 39.0% in fiscal 2021 compared to 31.7% in fiscal 2020.
Gross profit as a percentage of net sales decreased 50 basis points to 39.1% in fiscal 2023 compared to 39.6% in fiscal 2022.
Basis of presentation ​ The Company has one reportable segment, which includes retail stores, salon services, and e-commerce. We recognize merchandise revenue at the point of sale in our retail stores. E-commerce sales are recognized upon shipment or guest pickup of the merchandise based on meeting the transfer of control criteria.
In addition, inflation could cause the interest rates on any future debt to remain at an elevated level or increase. Basis of presentation ​ The Company has one reportable segment, which includes retail stores, salon services, and e-commerce. We recognize merchandise revenue at the point of sale in our retail stores.
As a percentage of net sales, SG&A expenses decreased 180 basis points to 23.9% in fiscal 2021 compared to 25.7% in fiscal 2020.
As a percentage of net sales, SG&A expenses increased 50 basis points to 24.0% in fiscal 2023 compared to 23.5% in fiscal 2022.
The increase in total inventory is primarily due to the following: ● $54 million increase due to the addition of 47 new stores opened since January 29, 2022; ● $25 million increase due to new key brand launches; and ● $25 million increase primarily due to inventory cost increases. 38 Table of Contents The increase in net cash provided by operating activities in fiscal 2021 relative to fiscal 2020 was primarily due to the increase in net income and deferred revenue, partially offset by higher merchandise inventories, higher cash outflow from higher income taxes, and lower long-lived asset impairment charges compared to fiscal 2020. ​ Investing activities We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems.
The increase in non-cash lease expense was primarily due to an increase in tenant allowances. ​ The increase in net cash provided by operating activities in fiscal 2022 relative to fiscal 2021 was primarily due to the increase in net income, a smaller increase in merchandise inventories in fiscal 2022 compared to fiscal 2021, and the timing of receivable collections, partially offset by the timing of payables and a smaller increase in deferred revenue compared to fiscal 2021. ​ Investing activities We have historically used cash primarily for new, remodeled, relocated, and refreshed stores, supply chain investments, short-term investments, and investments in information technology systems.
Results of operations Our fiscal years are the 52- or 53-week periods ending on the Saturday closest to January 31. The Company’s fiscal years ended January 28, 2023 (fiscal 2022), January 29, 2022 (fiscal 2021), and January 30, 2021 (fiscal 2020) were all 52-week years. As of January 28, 2023, we operated 1,355 stores across 50 states.
The Company’s fiscal years ended February 3, 2024 (fiscal 2023), January 28, 2023 (fiscal 2022), and January 29, 2022 (fiscal 2021) were 53, 52, and 52 week years, respectively. 38 Table of Contents ​ As of February 3, 2024, we operated 1,385 stores across 50 states.
We expect fiscal 2023 capital expenditures will be up to $475 million and will be used primarily to fund our new, remodeled, and relocated stores and strategic priorities, including investments in information technology systems and supply chain optimization. ​ ​ 39 Table of Contents Financing activities Financing activities include share repurchases, borrowing and repayment of our revolving credit facility, and capital stock transactions.
Based on past performance and current expectations, we believe our sources of liquidity will be sufficient to fund future capital expenditures. We expect fiscal 2024 capital expenditures will be up to $490 million and will be used primarily to fund our new, remodeled, and relocated stores and strategic priorities, including investments in information technology systems and supply chain optimization.
The increase in net income was primarily due to an increase in gross profit resulting from higher sales, partially offset by an increase in SG&A expenses and income taxes. Merchandise inventories, net were $1.6 billion at January 28, 2023, compared to $1.5 billion at January 29, 2022, representing an increase of $104.2 million or 7.0%.
The increase in net income was primarily due to a $336.6 million increase in gross profit, partially offset by a $299.3 million increase in SG&A expenses and a $3.5 million increase in income taxes. 40 Table of Contents Fiscal year 2022 versus fiscal year 2021 Net sales Net sales increased $1.6 billion, or 18.3%, to $10.2 billion in fiscal 2022 compared to $8.6 billion in fiscal 2021.
Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements.
Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements. Recent accounting pronouncements not yet adopted See Note 2 to our consolidated financial statements, “Summary of significant accounting policies – Recent accounting pronouncements not yet adopted.” 47 Table of Contents
Liquidity and capital resources Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowings under our credit facility. The most significant components of our working capital are merchandise inventories and cash and cash equivalents reduced by accounts payable, accrued liabilities, and deferred revenue.
The most significant components of our working capital are merchandise inventories, cash and cash equivalents, and receivables, reduced by accounts payable, deferred revenue, and accrued liabilities. As of February 3, 2024 and January 28, 2023, we had cash and cash equivalents of $766.6 million and $737.9 million, respectively.
Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0% to 0.125% or the London Interbank Offered Rate plus a margin of 1.125% to 1.250%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20% per annum.
Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0.5% to 1.0% or the Term Secured Overnight Financing Rate plus a margin of 1.5% to 2.0%, and a credit spread adjustment of 0.10%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.25% to 0.375% per annum. 45 Table of Contents As of February 3, 2024 and January 28, 2023, we had no borrowings outstanding under the credit facility and we were in compliance with all terms and covenants of the Loan Agreement.
We did not have any outstanding borrowings on our credit facility as of January 29, 2022 and January 30, 2021. Income tax expense Income tax expense of $310.0 million in fiscal 2021 represents an effective tax rate of 23.9%, compared to fiscal 2020 income tax expense of $55.3 million and an effective tax rate of 23.9%.
Interest income, net Net interest income was $17.6 million in fiscal 2023 compared to $4.9 million in fiscal 2022, due to higher average interest rates on cash balances. We did not have any outstanding borrowings on our credit facility as of February 3, 2024 and January 28, 2023.
The increase in net cash used in investing activities in fiscal 2021 relative to fiscal 2020 was primarily due to less proceeds of short-term investments and more capital expenditures compared to fiscal 2020.
The increase in net cash used in financing activities in fiscal 2023 relative to fiscal 2022 was primarily due to an increase in share repurchases and less stock options exercised.
The increase in gross profit margin was primarily due to: ● 300 basis points leverage of fixed costs attributed to the impact of higher sales; ● 190 basis points of improvements in merchandise margins driven by lower promotional activity and cost optimization efforts; ● 140 basis points of leverage due to favorable channel mix shifts; and ● 100 basis points of leverage in salon expenses attributed to the impact of higher sales. ​ Selling, general and administrative expenses SG&A expenses increased $0.5 billion, or 30.2%, to $2.1 billion in fiscal 2021 compared to $1.6 billion in fiscal 2020.
The decrease in gross profit margin was primarily due to: ● 80 basis points of deleverage in merchandise margins driven by higher promotional activity and category mix, as well as lapping of benefits from price increases; and ● 40 basis points of deleverage in inventory shrink; partially offset by ● 50 basis points of leverage in other revenue primarily due to credit card income growth, an increase in royalty income from our partnership with Target, and higher loyalty point redemptions; and ● 20 basis points of leverage of store fixed costs attributed to the impact of higher sales. ​ Selling, general and administrative expenses SG&A expenses increased $299.3 million, or 12.5%, to $2.7 billion in fiscal 2023 compared to $2.4 billion in fiscal 2022.
Removed
While operations during fiscal 2022 did not appear to be negatively impacted, the COVID-19 pandemic and the conditions and trends that originated during the pandemic could have negative impacts in the future.
Added
Comparable sales include retail sales, salon services, and e-commerce. In fiscal years with 53 weeks, the 53 rd week of comparable sales is included in the calculation. In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks.
Removed
The extent of the impact of the pandemic and the conditions and trends that originated during the pandemic on our future business and financial results will depend on, among other things, the potential of temporary restrictions on operating hours, in-store services or reclosing of certain stores or other facilities of ours or our brand partners and other suppliers, supply chain disruptions, increased transportation and shipping costs, higher wholesale costs, increased labor costs, and the duration, timing and severity of the impact of the foregoing on consumer spending.
Added
Results of operations Our fiscal years are the 52- or 53-week periods ending on the Saturday closest to January 31.
Removed
However, the COVID-19 pandemic and its various impacts changed consumer behavior and consumption of beauty products, at least temporarily, due to the closures of offices, retail stores, and other businesses and the significant decline in travel, entertainment and social gatherings.
Added
The net sales increase was primarily due to increased comparable sales, strong new store performance, an increase of $68.3 million in other revenue and the benefit of an extra week of sales in fiscal 2023. Net sales for the 53 rd week of fiscal 2023 were approximately $181.9 million.
Removed
The overall beauty market declined in 2020, stabilized in 2021, and expanded in 2022, as consumers resumed in-person shopping while maintaining some of their online shopping behaviors.
Added
The deleverage of SG&A expenses was primarily due to: ● 60 basis points of deleverage of corporate overhead primarily due to strategic investments; ● 20 basis points of deleverage of store payroll and benefits due to wage investments; ● 10 basis points of deleverage of store expenses due to ongoing inflationary pressures; and ● 10 basis points of deleverage due to higher marketing expenses; partially offset by ● 50 basis points of leverage due to lower incentive compensation. ​ Pre-opening expenses Pre-opening expenses decreased $2.1 million, or 19.7%, to $8.5 million in fiscal 2023 compared to $10.6 million in fiscal 2022.
Removed
Impairment, restructuring and other costs include long-lived asset impairment charges, restructuring costs associated with store closings, costs associated with the suspension of our Canadian expansion, and employee related severance costs.
Added
Income tax expense Income tax expense of $404.6 million in fiscal 2023 represents an effective tax rate of 23.9%, compared to fiscal 2022 income tax expense of $401.1 million and an effective tax rate of 24.4%.
Removed
Fiscal year 2021 versus fiscal year 2020 Net sales Net sales increased $2.5 billion, or 40.3%, to $8.6 billion in fiscal 2021 compared to $6.2 billion in fiscal 2020.
Added
The lower income tax rate is primarily due to a decrease in state income taxes compared to fiscal 2022 and a tax benefit from the income tax accounting for stock-based compensation. ​ Net income Net income increased $48.6 million to $1.3 billion in fiscal 2023 compared to $1.2 billion in fiscal 2022.
Removed
The net sales increase was primarily due to the favorable impact from stronger consumer confidence, government stimulus payments, and the easing of COVID-19 restrictions, and an increase of $15.1 million in other revenue.
Added
We believe our primary sources of liquidity will satisfy our cash requirements over both the short term (the next twelve months) and long term.
Removed
The leverage in SG&A expenses was primarily due to: ● 180 basis points of leverage of corporate overhead due to higher sales; ● 90 basis points of leverage of store payroll and benefits due to higher sales; and ● 50 basis points of leverage of store expenses due to higher sales; partially offset by ● 80 basis points of deleverage due to less employee retention credits received under the Coronavirus Aid, Relief and Economic Security Act (CARES Act); and ● 60 basis points of deleverage due to higher incentive compensation. ​ Impairment, restructuring and other costs There were no impairment, restructuring and other costs recognized in fiscal 2021 compared to $114.3 million for fiscal 2020, which consisted of $41.9 million due to the impairment of tangible long-lived assets and operating lease assets associated with certain retail stores, $29.1 million related to the suspension of the planned expansion to Canada, $27.5 million related to the permanent closure of 19 stores, and $15.8 million of severance charges. ​ 36 Table of Contents Pre-opening expenses Pre-opening expenses decreased $5.5 million, or 36.6%, to $9.5 million in fiscal 2021 compared to $15.0 million in fiscal 2020 due to current year real estate activity and stores expected to open in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021.
Added
The following table summarizes contractual cash requirements as of February 3, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than ​ 1 to 3 ​ 3 to 5 ​ More than 5 (In thousands) Total 1 Year Years Years Years Operating lease obligations (1) ​ $ 2,289,652 ​ $ 351,517 ​ $ 755,334 ​ $ 545,888 ​ $ 636,913 Purchase obligations ​ ​ 55,587 ​ ​ 39,954 ​ ​ 15,633 ​ ​ — ​ ​ — Total (2) ​ $ 2,345,239 ​ $ 391,471 ​ $ 770,967 ​ $ 545,888 ​ $ 636,913 (1) These amounts are for our undiscounted lease obligations recorded in our consolidated balance sheets as operating lease liabilities.
Removed
Interest expense, net Interest expense, net was $1.7 million in fiscal 2021 compared to $5.7 million of interest expense, net in fiscal 2020. Interest expense represents interest on borrowings and fees related to the credit facility. Interest income results from short-term investments.
Added
Merchandise inventories, net were $1.7 billion at February 3, 2024, compared to $1.6 billion at January 28, 2023, representing an increase of $138.7 million or 8.6%.
Removed
The higher income tax expense is primarily due to higher operating income compared to fiscal 2020. ​ Net income Net income increased $810.0 million to $985.8 million in fiscal 2021 compared to $175.8 million in fiscal 2020.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest rate risk We are exposed to interest rate risks primarily through borrowings under our credit facility. Interest on our borrowings is based upon variable rates. We did not have any outstanding borrowings on our credit facility as of January 28, 2023, January 29, 2022 or January 30, 2021. Item 8.
Biggest changeWe do not hold or issue financial instruments for trading purposes. Interest rate risk We are exposed to interest rate risks primarily through borrowings under our credit facility. Interest on our borrowings is based upon variable rates.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates. We do not hold or issue financial instruments for trading purposes.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates. We continually monitor this risk and may develop strategies to manage it.
Removed
Financial Statements and Supplementary Data See the index, consolidated financial statements, and notes to consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules.” Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Added
We did not have any outstanding borrowings on our credit facility as of February 3, 2024, January 28, 2023, or January 29, 2022. ​ 48 Table of Contents

Other ULTA 10-K year-over-year comparisons