Q4 2020 Ulta Beauty Inc Earnings Call
Breathing space to the Ulta beauty fourth quarter 2020 earnings results Conference call.
At this time all participants are in a listen.
A brief question and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please.
Of course Star zero at the telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Ms. Kiley Rawlins, Vice President Investor Relations. Please proceed.
Thank you Laura and good afternoon, everyone. Joining me on the call today are Mary Dillon, Chief Executive Officer, Scott Center Sen, Chief Financial Officer, and Dave Kimbell President for.
Before we begin I'd like to remind you that statements on this conference call at which are not historical facts may be deemed to constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 at.
Actual future results may differ materially from those projected in such statements due to a number of risks and uncertainties all of which are described in the company's filings with the SEC. We caution you not to place undue reliance on these forward looking statements, which speak only as of today March 11 2021.
We have no obligation to update or revise our forward looking statements, except as required by law and you should not expect us to do so.
In todays comments, we will discuss certain non-GAAP financial measures, including adjusted operating income adjusted net income and adjusted diluted EPS, which have been presented to reflect our view of our ongoing operations by adjusting fiscal 'twenty 'twenty results for store impairment charges.
Costs associated with the permanent closure of 19 stores and the decision to suspend our expansion into Canada as well as other restructuring costs and adjusting both 2020 and 'twenty of 19 for stock compensation and other tax credit.
Reconciliation of these measures to the corresponding GAAP measures can be found in our earnings release, which is available on in the Investor Relations section of our website at Www Dot Ultra dot com.
Following prepared remarks from our leadership team, we will open the call for questions as our prepared remarks will be longer than usual, we plan to end our call today at 515 central time to allow us to accommodate as many questions as possible. Please limit your time to one question and re queue. If you have a follow up question.
As always the IR team will be available for any follow up questions. You have after the call now I'd like to turn the call over to Mary Mary. Thank you Kiley and good afternoon, everyone. I'll start today with comments about our leadership transition plans and then share highlights from our fourth quarter and full year results and Dave will discuss our priorities for 2021.
And Scott will review the financial results and our outlook.
Starting with the succession plans, we announced this afternoon I'm very excited to announce at in June Dave Campbell will become CEO of Ulta beauty and I will transition to executive chair of the Board. In addition, Keisha Steelman will be elevated to chief operating officer in June in conjunction with these changes serum Aldo will retire from his role as chief.
Share of the board as planned and Lorne of Nagler will assume the role of lead independent director.
These changes reflect a thorough and thoughtful succession planning process I of engaging with our board of directors over multiple years and are designed to ensure strategic and leadership continuity as Ulta beauty moves into its next chapter of growth I personally want to thank our board for their care of consideration and oversight of this important process.
Yes.
After serving as CEO for nearly eight years I believe at the time is right for me and for Ulta beauty to make this change we have a differentiated business model that has proven its strength over and over again throughout our 30, plus year history and position Ulta beauty as a leader in the beauty industry.
We've developed a sustained at world class guest centric values based high performance culture, we're emerging from the Twenty-twenty pandemic with a strong foundation and good operational momentum.
And we have of talented diverse and experienced team of leaders to drive our next phase of growth.
Well I'm proud of what we've achieved of these past eight years I truly believe now at the time for my successor and their leadership team to continue the journey.
Since joining ulta beauty as Chief marketing Officer in 2014, Dave has continued to expand his leadership responsibilities ultimately assuming the role of president in 2019.
Highly regarded in the beauty industry, Dave as a results driven guest focus inclusive leader, whose work to motivate teams and activate strategies to move our business forward Daves passion for Ulta beauty, our guests and our associates is extraordinary and I believe there was no one more prepared or better suited to lead ulta beauty into the future.
Keisha Steelman joined Ulta beauty in 2014, as senior Vice President of operations before assuming the role of Chief of store operations Officer in 2015.
In this role she is overseeing all aspects of store in Salon operations, leading passionate associates to consistently deliver great experiences for our guests even as we nearly doubled our footprint.
As Chief operating officer, Keisha will have responsibility for a store in surfaces operations supply chain external partnerships, including Ulta beauty at target and key enterprise wide continuous improvement initiatives.
David Keisha will be supported by an executive team with deep expertise and Ulta beauty experience.
My focus has been and will continue to be on Ulta beauty and in my new role as executive Chair I'll advise and support Dave on key issues, including strategy external relationships and organizational development Mike.
My plan is to remain in the executive chair role for one year.
I am optimistic and excited about the long term growth opportunity for Ulta beauty and I'm confident that under Dave's leadership, Ulta beauty will keep shaping and leading the beauty industry for many years to come.
Now, let's talk about our fourth quarter performance.
The Ulta beauty team delivered better than expected results for the fourth quarter for the quarter net sales were $2 2 billion and GAAP diluted EPS was $3.03 per share adjusted diluted EPS for the quarter was $3 41 per share store.
<unk> enterprise wide execution of our plans combined with improving trends in consumer demand resulted in momentum across multiple metrics, including sales transactions and profitability.
We experienced less disruption from COVID-19 than we anticipated in the quarter end topline trends improved across all channels and all categories, resulting in a comp store sales decline of four 8% an improvement compared to the eight 9% decline in the third quarter.
We kicked off the holiday season in early November with our multichannel see the Joy campaign targeted marketing and promotional activity as it extends at Black Friday event, we continue to lean into our successful we love our members of events throughout holiday rewarding guests with member only offers promoted broadly across channels.
To reinforce the value of the program and to engage our members.
And we leverage our CRM and analytics capabilities to expand our reach and maximize productivity.
We drove strong sell through of holiday merchandise and core product and transitioned quickly after holiday to support our strategic love your skin and Jumbo love events.
The planned expansion of our gift card program drove robust year over year of growth and gift card sales during the holiday period and delivered elevated redemption activity in stores post holiday.
Our ecommerce business increased more than 70% with increased fulfillment capacity in place our D. C and store teams did an excellent job supporting record level of ecommerce demand limitations on in store capacity and reduced operating hours are still in place, but we're encouraged by the momentum we're seeing in store traffic.
From a category perspective, we continued to increase our market share across most major of prestige beauty categories.
Starting with one of our strategic growth categories skincare delivered a low double digit comp.
In addition to broader self care of wellness trends newness and engagement on social media platforms are driving interest in newer brands like the ordinary and urban skin Rx as well as established brands like survey and first aid beauty.
Fragrance at Bath delivered strong double digit comp growth delivered driven by newness and a strong base fragrance business for brands like Chanel and for your.
<unk> also continued to benefit from self care trends newness and social media engagement.
Comp sales in hair care were down slightly in the quarter, primarily reflecting planned changes to our jumbo love of that which negatively impacted topline growth, but deliberate significant profit improvement excluding.
Excluding the of that comp sales in the hair care category were positive for the quarter driven by Haircolor color care texture and innovation press.
Prestige hair of continues to be an area of focus and in January we launch Breo Shiao of black owned clean brand formulated for all her types at all stores and online.
Comp sales in the makeup category were negative, but improved sequentially, reflecting less year over year product newness and continued mask wearing and limitations on makeup wearing occasions.
New launches were limited we do see guests eager to engage with newness from established brands like to face of Nyx as well as new brands, including law of Mercy, a K V D beauty and our glass.
Sales for our services business were down more than 40 per cent in the fourth quarter due to a decline in transactions, while average ticket continued to be higher.
Our services business remains adversely impacted by Covid related capacity constraints and local restrictions, but we're starting to see some local markets increased capacity thresholds.
Well, we ended fiscal 2020 was $30 7 million loyalty members about 10% fewer than last year, we maintained strong retention levels of our high value of platinum and Diamond members. The reduction in total members was anticipated given the store closures earlier in the year and ongoing store traffic challenge.
As importantly, we saw a rebound in new membership this quarter as our store associates delivered stronger conversion versus last year.
Reactivation trends also rebounded due to amplified marketing and promotional efforts across print and digital channels.
We also saw good growth in our credit card program, increasing our member penetration by about 400 basis points versus last year, reflecting strong acquisition and retention of our highly engaged credit card members.
We ended the year with noteworthy changes in our member channel mix, while two thirds of our members continued to the in store only shoppers. This year our mix of Omnichannel members nearly doubled to 23% of members and our online only members grew to 12 per cent of members.
Well Scott will take you through the details of the P&L in a few minutes I want to highlight two areas of focus that are delivering tangible results for our profitability.
First we continue to see strong success at optimizing our promotions. We offer we offered a number of compelling promotions during holiday, but we further leverage our CRM capabilities to be more targeted and more profitable with our offers.
Post holiday, we saw an opportunity to be more strategic and employ relevant storytelling to drive guest engagement for.
For our love your skin and Jumbo love events, we took of content forward approach across print and digital channels to focus on education of routines I, let at newness like never before and refined the focus of offers and brand participation.
As a result of these efforts we delivered meaningful improvement in our merchandise margin.
Second we continued to take steps to reset our cost structure after a thorough and thoughtful evaluation of working capabilities across every corporate function. This quarter, we eliminated approximately 340 roles, resulting in a charge in the quarter of approximately $10 million.
Even as we made difficult decisions to eliminate certain roles. We also reorganized select teams expand at some roles and introduced a number of new positions in key investment areas aligned to our strategic priorities. We expect these decisions will result in approximately $50 million of SG&A savings in 2021.
These decisions for incredibly difficult, but I'm proud of the respect care and compassion that went into the process I'm confident these changes combined with planned investments to enhance our enterprise capabilities will position Ulta beauty for continued success in the short and long term.
And now turning to the full year.
From a financial perspective total sales were $6 2 billion comp store sales decreased 17, 9% and GAAP diluted EPS was $3 11 per share adjusted.
Adjusted diluted EPS for the year was $4 68 per share while fiscal 2020 was not the year. We originally plan I am proud of how our teams adjusted and responded to the unprecedented challenges and I want to express my sincere appreciation for my leadership team and all Ulta beauty associates for their flexibility.
Agility and unwavering commitment to our guests into each other.
Facing a very dynamic operating environment early in 2020, we moved quickly to align on six strategic priorities intended to expand our market share and extend our competitive advantages we made meaningful progress across each of these priorities in 2020.
Our teams continue to deliver great omnichannel experiences for our guests after temporarily closing all of our stores in March in response to the spread of the virus. We began welcoming back guests and associates of stores in May with our new shop same standards in all stores and enhanced digital shopping capabilities to keep our guests.
And of our associates safe.
While store traffic remained challenged sales through our digital channels doubled in fiscal 2020 to meet this increased demand, we expanded our ecommerce fulfillment capabilities, including the opening of our Jacksonville fast film at center expansion of our ship from store capabilities and introduction of curbside pick up.
Reflecting increased safety concerns we restricted the use of testers in stores, but accelerated our virtual try on capabilities, we expanded glad lab, our virtual try on tool beyond cosmetics, who include Haircolor false lashes and the benefit brow bar, we expanded our shared library to include more than 11000 shades.
We introduced QR codes, so that guests could virtually try on shades while in store we.
We also introduced of digital skin analysis tool to assess guest skincare needs and offer personalized product and regimen of recommendations.
In 2020 more than 11 million guests engage with these tools trying on more than 100 million shades through the App and Ulta dotcom.
And of here that saw at the contraction of the U S. Prestige beauty market Ulta beauty gained dollar share of specifically in key categories, such as makeup skincare and fragrance based on N. P. DS point of sales data for the 52 weeks ending January 30th 2021.
We expanded our assortment in key growth categories like skin care hair care of wellness to provide guests with engaging newness and innovation.
And we launched conscious beauty at Ulta beauty in stores and at Ulta Dotcom certified more than 230 brands across four key pillars clean ingredients cruelty free vegan and sustainable packaging.
Our marketing teams pivoted quickly to reflect the environment and as a result, we maintained our unaided awareness in the mid 50 per cent range and increase our aided awareness.
We drove innovation at our ultimate rewards loyalty program launching new member of appreciation events implementing new reactivation campaigns and reinforcing the value of the program across all communications channels.
Behind the scenes, we expanded our CRM capabilities, leveraging new propensity modeling applications to optimize the return on print investment and Reengage with labs and at risk members in our marketing outreach.
We took actions in fiscal 2020 also to adjust our cost structure, we delivered meaningful reductions in occupancy costs for aggressive negotiations and effective portfolio management.
We permanently COVID-19 stores further strength in our store portfolio, we made changes to our store management structure to improve efficiency and productivity and we took steps to rightsize our corporate structure.
We announced of course, an exclusive partnership with target Corporation that will disrupt the beauty of the beauty category and change how guests experienced beauty.
And finally, we published our first ESG report sharing our efforts and commitments in four key pillars people product community and the environment.
While we're early in our journey I am proud of the progress we've made at these areas, particularly as it relates of diversity and inclusion.
First of all inclusion of always been important at Ulta beauty as we want all of associates at people they can be their true authentic selves.
Given the events that unfolded throughout 'twenty 'twenty addressing Russell racial and social and justice has become more important than ever at the end of fiscal 2000 2091 per cent of our associates for women and 47 per cent of our associates for people of color.
And our leadership team, 64% were female at 18% for people of color, We recently announced new commitments to help US progress further in our journey to support greater diversity inclusivity and equity.
Our team is deeply committed to leading purposefully with and for underrepresented voices across retail and beauty.
Fiscal 'twenty 'twenty was a difficult year, but the progress we've made positions us well to grow in lead and of post COVID-19 environment and now I'd like to introduce Dave Kimbell, who will share more about our plans and priorities for fiscal 'twenty One day.
Thanks, Mary before I discuss our priorities for 2021 I want to thank you Mary for your World class and exceptional leadership of Ulta beauty and personally for your Mentorship your.
Your impact on our company has been tremendous under your leadership Ulta beauty has grown to become a beloved beauty destination known as of welcoming and accept accessible place for guest at an inclusive workplace offering outstanding career opportunities for associates.
I am grateful to have worked alongside you for many years and look forward to your ongoing support and guidance as I transition to my new role in June.
I also want to express my sincere appreciation to our board of directors for the opportunity to become Ulta Beauty's next CEO and to all of our associates and partners for their continued support.
In addition, I want to offer congratulations to future on her well deserved promotion to Chief operating officer.
I look forward of leading with keisha, and our experienced and diverse executive team and service of our Ulta beauty associates, our guests and our shareholders.
I am passionate about the beauty category, the vibrant and dynamic business, we have built and the role we play in the beauty industry end in our guests' lives.
Ulta beauty as the leading destination for beauty of discovery and meaningful human experiences and I am excited and humbled by the opportunity to lead such a strong organization through the next phase of its growth.
As Mary said earlier fiscal 2020 was a difficult year, but our teams met the challenges with agility creativity and an unwavering focus on serving our guests.
As a result, we begin 2021 with a strong foundation from which we can accelerate our growth and shape, how guest experience beauty in the post COVID-19 environment.
As we think about growth opportunities in the new normal we are focused on six strategic priorities to continue expanding our market share gains and extending our competitive advantages.
First we are committed to meeting guests wherever they want to shop, whether it's in physical stores or on digital platforms to support this commitment we're building capabilities to win in an increasingly omni channel world.
This is not of new journey for US end as Mary noted, we made a lot of progress in 2020.
As we look forward to 2021, we plan to continue to expand and refresh our store fleet, including opening approximately 40 net new stores this year.
Further accelerate our ecommerce business through elevated marketing loyalty engagement and advancement on our journey to create a more personalized experience for our guests on all of our digital platforms.
Continue to evolve our supply chain to enable more flexibility, while also supporting our omnichannel strategies.
And as the newest pillar in our Omnichannel strategy successfully opened.
The beauty of target.
Since our November announcement about the new partnership with target our teams continue to make progress to bring our vision to life of.
Our brands are excited to partner with us and we have more brands than originally considered for this space with strong support from our largest brand partners as well as several brands, which are exclusive to Ulta beauty across makeup skin skin care hair care and fragrance.
We remain confident that this partnership is an innovative forward looking approach to further delight our existing members. While also acquiring new members from the millions of guests shopping target every day.
We continue to see great social engagement and enthusiasm for Ulta beauty of target and we're on track to launch online and in about 100 stores in the fall scaling into hundreds of stores in the next few years.
Our second strategic priority is to re imagine how guest experience and discover beauty across all touch points.
COVID-19 has not changed the importance of beauty and we are confident in the future growth of the category.
Beauty enthusiasts still value of the human connection and physical experience of beauty one of balance safety with the desire to discover and play with product, reflecting these factors. We are elevating the end to end guest experience at Ulta beauty.
In 2021, we intend to safely reintroduce testers in select areas of the store and work closely with our brand partners to develop innovative sampling programs.
Drive enhancements to our digital experiences further investing in our app, including guided education and recommendation experiences like our skin advisor.
Implement layout changes and select new stores to elevate key growth categories unified presentation of skin care makeup and improve the focus of pickup experience.
And as our associates have the greatest impact on the guest experience we plan to implement training for our team focused on priority categories like skin care as well as key skills to further strengthen human connections with our guests.
Our third priority is to drive winning category strategies to engage and delight beauty enthusiasts and expand our market share.
Our curation of diverse of a diverse assortment focused on newness exclusivity and leading brands has enabled us to grow our market share over time.
Building on the progress we made in 2020, we plan to continue to strengthen our assortment in key growth categories like skin care and hair care, while protecting our strength in makeup.
Scale of our conscious beauty platform.
We introduced a new wellness shop to offer guests self care for the mind body and spirit.
And double our number of black owned brands, while investing to increase awareness in support of those brands.
Our fourth priority is to deepen Ulta beauty love loyalty and engagement over time, we've evolved our brand purpose to build stronger connections with our guests and the changes and challenges our guest experienced in 2020 provide us with a unique opportunity to reinforce our brand purpose and of course for anymore.
T program is central to our efforts to build brand love for Ulta beauty.
In fiscal 'twenty 2021 we are focused on creating culturally relevant content that leverages the power of beauty to deeply engage with guests across channels, including expanding our where dreams began campaign and building out our music platform <unk>.
Developed to celebrate honor and amplify black voices and beauty.
Expanded beauty school at Ulta beauty, our content forward Entertainment digital platform to drive of hyper relevant product and services engagement.
Increasing member growth across channels through new guest acquisition lapsed member Reengagement and targeted retention efforts.
And we will accelerate spend and engagement through further personalization efforts, including advancing offer optimization in print and digital channels.
Our fifth priority is to drive holistic cost optimization.
Others, we face ongoing headwinds for macro cost, including wage pressure and transportation costs.
We are also navigating category and channel shifts.
In fiscal 2020, we actively took steps to reshape our organization and adjust our cost structure, while also investing in new capabilities that will drive future growth.
Building on these efforts, we will continue to pursue process optimization opportunities and merchandising and supply chain.
While also looking for ways to reduce occupancy and operating costs.
Importantly, we will continue to invest some of these savings in support of our strategic priorities to drive growth.
Our final priority is the develop of our talent and strengthen our culture. This is not a new priority our talent and culture are always in focus and we know that our associates bring to life. The Ulta beauty brand for our guests.
I am incredibly proud of how our teams led through 2020 with respect.
At the encourage look into 2020. One we will continue to work to create an environment, where every associate feels they can fully contribute in every guest is optimally served regardless of differences.
We will expand our training and development to inspire and empower our associates and we will continue to enhance and magnify our diversity and inclusion efforts.
In closing I am excited and optimistic about the future of Ulta beauty.
Our business is emerging from 2020 with good momentum and a strong foundation in place.
We are positioned to thrive going forward and I am confident our team will continue to lead with creativity passion and continued care for each other and our guests, while leading the beauty industry, capturing market share and driving profitable growth.
And now I'll turn the call over to Scott for a discussion of the quarter's financial results and our outlook for fiscal 2021 Scott.
Thanks, Dave and good afternoon, everyone before I review, our financial results and provide our outlook for the year I just wanted to take a moment on behalf of the entire executive team and all of our associates to congratulate Dave on his upcoming appointment as our next CEO. We are excited for Dave as he takes this new.
Next step and is already successful career and have the utmost confidence in his ability to lead Ulta beauty through its next phase of growth.
Now beginning with the income statement net sales for the quarter declined four 6% and total company comp declined four 8% as Mary mentioned, we are incredibly pleased with our performance as topline results for the quarter were much better than our internal expectations.
Average ticket increased eight 3%, primarily driven by an increase in units per transaction transactions.
Transactions declined 12, 2% at.
As we have seen in recent quarters, we experienced nice conversion at both channels, we continue to be impacted by softer traffic to stores as well as capacity limitations in fewer operating hours compared to last year. However.
However, we are encouraged by the sequential improvement in store traffic during the fourth quarter.
As expected ecommerce growth slowed relative to the third quarter as demand in stores improved but still delivered very strong growth versus last year. Our ecommerce operations delivered a sales increase of 72% for the quarter as guests continue to take advantage of our omnichannel capabilities.
Buy online pick up in store and curbside were strong again this quarter, particularly in the weeks, leading up to Christmas and total to about 15% of ecommerce sales for the quarter.
Gross profit margin was 35, 1% an increase of about 10 basis points compared to 35% a year ago.
The largest driver of gross margin performance was an increase in merchandise margin, which was driven primarily by lower promotional activity as we chose not to repeat certain promotional activity from last year and continued to refine our promotional strategies.
We also experienced a positive outcome from our holiday purchasing strategy, which reduced our exposure to limited edition holiday sets and lean more into core product, resulting in higher sell through and minimal post season markdowns and clearance.
Lastly, we continue to see benefits from our cost optimization efforts across the organization.
The increase in merchandise margin was partially offset by the impact of channel shift however.
However, we are pleased with the profitability improvement in our ecommerce business driven by continued strong adoption of our focus and curbside capabilities as well as the impact from our efforts to refine our promotional strategy.
We also experienced deleverage of fixed costs due to lower sales, although the headwinds improve from what we experienced earlier in the year, given the better sales trends and actions taken by our real estate team to strengthen our portfolio and reduce occupancy costs, including lease negotiation efforts and our decision.
To permanently COVID-19 stores.
SG&A expenses decreased to $514 1 million compared to $515 5 million in the fourth quarter of 2019.
The largest drivers of the decrease were lower store payroll and benefits and lower variable store expenses as we adjusted to softer store traffic.
These reductions were partially offset by higher marketing expense as we continue to prioritize and invest in digital and social channels and resumed print advertising in preparation for the holiday season.
We also experienced an increase in corporate overhead primarily due to higher incentive compensation, reflecting our financial performance versus our internal targets.
We offset by reduced spending across multiple areas.
We incurred about 18 million of PPE and Covid related expenses during the quarter.
This quarter, we recorded a charge of $30 4 million for impairment restructuring and other costs.
Last quarter, we suspended our planned expansion to Canada and our teams completed the wind down effort during the fourth quarter. This resulted in a $13 2 million charge related to lease termination costs long lived asset impairment charges and severance.
We also recorded $10 million in severance associated with charges changes made to our corporate and field management organization.
$5 6 million of lease termination costs related to the previously announced permanent closure of 19 stores and 1.5 million due to the impairment of tangible long lived assets and operating lease assets associated with certain stores.
GAAP operating income decreased to $224 3 million compared to $287 8 million a year ago at.
Adjusted operating income was $254 7 million or 11 six percentage of sales.
Diluted GAAP earnings per share was $3 three compared to $3 89 for last year's fourth quarter adjusted diluted earnings per share was $3 41, compared to $3 83, a year ago.
Moving onto the balance sheet and cash flow.
Total inventory decreased nine 7% compared to last year as we adjusted purchasing to maintain flexibility and manage inventory.
For the year, we invested $152 million in capital expenditures, including approximately $70 million for new stores, Remodels and merchandise fixtures 49 million for supply chain at I T and about $33 million for store maintenance and other we.
We ended the year with $1 billion in cash and cash equivalents.
Reflecting our confidence we resumed our stock buyback program in the fourth quarter and repurchased approximately 148000 shares of stock.
We have $1 5 billion remaining under our current repurchase authorization.
Turning to our outlook for 2021.
While we are encouraged by recent sales momentum visibility into the timing of of demand recovery remains limited.
We expect much of 2021, we will continue to be negatively impacted by masking requirements and social distancing.
And while we expect sales trends will improve as we progress throughout the year and COVID-19 vaccines become more accessible we are planning for total sales to be slightly lower in 2019.
That being said, we plan to be nimble and agile and will be prepared to capitalize should the environment improve earlier than we expect.
Now specifically for 2021.
We expect to open approximately 40 net new stores remodeled 11 stores and relocate approximately 10 stores.
Note that when the pandemic hit last year, we moved quickly to defer most of the new stores planned for 2020.
As a result more than half of our new stores are expected to open in the first quarter.
We anticipate net sales for the year will be between seven 2% and $7 3 billion with comp sales plan in the 15 to 17 percentage range.
We expect comp results will vary significantly between the front half and the back half of the year as we lap store closures that occurred in the first half of 2020.
With this in mind, we anticipate comp growth will be in the low to mid thirties for the first half of 2021, and then moderate to low to mid single digit growth for the second half.
We expect operating margin rate for the year will be around 9% of sales as we lap easier topline comparisons due to COVID-19 related store closures in 2020.
To give you a little more color on the expected puts and takes driving our operating margin expectation.
Overall, we expect the largest driver of operating margin expansion will come from gross margin.
For the year, we anticipate an improving sales trend from our brick and mortar operations, resulting in less headwind from channel shift and leverage of fixed costs.
We are planning e-commerce penetration to be in the low to mid twenties for the year.
We also expect merchandise margin will improve modestly as we continue to optimize our promotional strategy and continue to pursue efficiency efficiency for growth opportunities.
We also expect SG&A will deleverage driven primarily by higher store payroll as we anniversary of the 52 million benefit from the cares Act in fiscal 2020.
In addition, we expect to see payroll deleverage from store management changes made in 2020 and ongoing wage pressures.
Recall that in the fourth quarter of 2020, we realigned our store management structure to create a more cost efficient store model.
As a result of these changes we will see a reduction of salon payroll, which is part of cost of goods sold and an increase in retail payroll, which is included in SG&A relative to last year.
The deleverage of retail payroll should partially offset by lower corporate overhead reflecting changes we made in 2020 to reset our corporate cost structure, we anticipate advertising will be relatively flat for the year as a percent of sales.
These assumptions result in guidance for diluted earnings per share in the range of $8 85 to $9 30 per share, including the impact of approximately $850 million and share repurchases.
We plan to spend between 202 hundred 50 million of Capex, including approximately $115 million for new stores, Remodels and merchandise fixtures $77 million for supply chain and it and about $33 million for store maintenance and other.
I would note that our guidance for 2021 assumes at consistent federal tax rate and no material increases in the federal minimum wage and does not include assumptions for any impact related to a resurgence of COVID-19.
Before we take your questions I wanted to announce that we plan to host an analyst and Investor Conference. This fall to share our longer term plans and outlook, we will share more of the logistical details later this summer.
And now I'll turn the call back over to our operator to moderate the Q&A session.
Thank you we will now be conducting a question and answer session at <unk>.
Paul a question. Please press star one on your telephone keypad at confirmation tone will indicate your line is at the question queue. You May Press Star two if you would like to go for your question from the cash for participants.
Okay.
And maybe net.
Okay.
That's true.
We respectfully request that you.
Only.
Uh-huh.
Okay.
Follow up question, we ask that you re queue.
While we poll for questions.
Our first question comes from the line of.
Kate Mcshane with Goldman Sachs. You May proceed.
<unk>.
Hi, good afternoon, Thanks for taking my question.
Thank you for all of the guidance and congratulations Mary Anne gains all of.
On the news today.
Mike centered around the guidance for the 15% to 17% comp growth for 2021.
Wonder to the extent that you could comment how you expect the cadence or the wall of hair care and skincare driving dot com vs.
Vs makeup.
Yes Kate.
Yeah, Great Great question, and one that we're spending a lot of time on it.
As we look out over the course of of the year. We continue to be encouraged by the engagement that we're seeing from our guests across across channels, both in stores and online or non makeup businesses have been strong throughout really throughout 2020, and certainly in the fourth quarter with skincare fragrance hair care.
For Bath, all all of you are performing at.
At or above our expectations.
And we anticipate that continuing throughout throughout this year there there is as of.
<unk> continues to be a fair amount of uncertainty about makeup and I'd say, that's as we look out over the year, while we have a lot of confidence in the long term of.
Makeup of and we know that there'll be a innovation and growth of new behaviors that will drive long term growth.
And we see signs of engagement through our consumer research.
And we anticipate pent up demand and excitement from guests from consumers as they feel more comfortable.
Participating in society, and going out and celebrating and end of doing all the things that I think we know is coming the question for US is as when that will come in we built in a number of models, where we're certainly prepared for that.
Renewed engagement of makeup we haven't fully seen it yet even though we've seen signs of it but we have a whole line of sight towards driving innovation with our brand partners are highlighting through our marketing and communication leveraging our digital tools, our virtual try on tools.
And then being prepared from a with with close coordination with our brand partners on inventory as as we see makeup.
Gross so uncertainty about when because it's been a bit of of a ride even before COVID-19 on makeup, but we're confident in the long term and prepared for that growth and all of that is reflected in our guidance for 2021.
Thank you.
Our next question comes from the line of Christopher <unk> with JP Morgan You May proceed with your question.
Thanks, Good evening.
You're still you're still you're still young you own a lot of stock in the company and the business is clearly poised to recover here in 2021.
So I think of lot of investors look at the announcement and think this is you know at least a year early can you share your thoughts on why you know why further why now why investors shouldn't think that way and any thoughts on how youre thinking about your next career steps beyond June 'twenty two when you leave at the board. Thank you.
Chris I'll take that as a compliment.
Listen at this is Ben.
Plan for a while with the board in terms of you know the kind of governance and succession planning that that we all do I just feel that this is the right time for me personally I'm excited I'm going to be the executive chair for a year. So I'm excited about that as well.
I am very close to the strategies in the future as well you don't work coming out of 2020 strong. The foundation of the business is very strong. Most importantly, Dave is ready to take on the next chapter of growth as the CEO of the company. So it just felt to also to me like of natural time to make this transition I'm very confident very confident about the future.
Of Ulta beauty and we're excited I'm also excited that case of Steelman Who's Gonna have new responsibilities as chief operating officer. So all told I think this is about as seamless of a succession of stories you can come up with him at we're really excited about it.
I guess from the personal side I mean do you view. This as also a good time for you to take another transition in your career as you'd think about beyond Ulta do you still think you're sort of going to stay in the game here at retail executive or.
Any thoughts there would be really helpful. I know the original call many of them.
So many questions Yeah, no you know at listen I'm focused on Ulta beauty right now and I'm very excited about that and that's why I'm gonna be of executive chair I'll be the CEO through June and the executive chair for a year after that and you know, we'll see I'm excited to you know for the next for the next chapter of but I don't really have any plans yet.
Understood Best of luck, thanks, very much thank you.
Our next question comes from the line of Omar Saad with Evercore ISI. You May proceed with your question.
Thanks for taking my question I would add my congratulations to everyone as well I'd be curious at this kind of a specific question on makeup, but I'd just be curious what youre seeing given this kind of uncertainty around what the recoveries kind of look like and when it's going to start to happen, but a lot of the products you sell have expiration dates on them and exploration periods I'd be.
Areas of you're seeing any consumers come back into the store online and end and kind of throwing out. The expired makeup that hasn't been used in the last year and starting to replenish.
That part of their closet, if you will.
Well first yeah, we don't we haven't had any.
Issues for sure with expired products are too much inventory or anything like that but your point about consumers refreshing their their stock their of their their cabinets at home is we believe of behavior that is happening throughout 2020, there's been there's been slower engagement in makeup pre pandemic and then.
Certainly all of the disruption that happened throughout 2020, we see of renewal coming in and just how people will engage our guests will engage in makeup.
The the behaviors.
The fashion for the looks of the styles will continue to evolve we're excited and optimistic about that emergence as I said earlier the timing as you know.
Is a bit uncertain, but we see it coming and we feel that with that.
Of our guests. They love makeup they love beauty, they love God diving into different categories. They love newness.
And I think because of the makeup category has been challenged as a reflection of less engagement for probably the last couple of years. We know our beauty enthusiasts are excited about it. So we'll see that exact behavior, you talked about of cleaning out your stock, replacing it with new meaning into newness, which there's tons coming in.
And then.
Got it.
Embracing new lots of new styles as that moves forward. So we think that'll be part of the total story.
Thanks, Dave Good luck everyone.
Thanks Omar.
Our next question comes from the line of.
Dana Telsey with Telsey Advisory Group you May proceed with your question.
Good afternoon, everyone and Mary Congratulations on a wonderful career at Ulta and who knows what comes next.
At Dana and Dave Congratulations to you on assuming the new rule role also.
As you think about the changes that happened in 'twenty 'twenty going into 'twenty 'twenty. One how do you think of the digital channel and ecommerce and the margins that you've had in the past any opportunity for margins on E com and digital to improve go for it and how we get there. Thank you.
So we're thrilled with our digital and e-commerce experience of the growth as it has been strong for many years and of course was extraordinary in 2020 as of as our guest at embraced that channel and our entire team.
Worked tirelessly to make sure that we were able to service our guests with really an unexpected growth in demand, so and end and that engagement will pay off for Ulta beauty for a long time not only in the short term sales, but history shows that as we get our guests engaged in multiple aspects of our business not just in store.
But in stores and online and participating in salon and other aspects of their total.
<unk> of beauty of their total spend their frequency increases dramatically and so we're confident that that will pay off.
And so overall it is a very good.
The outcome for our business to have more people engaged in our digital channels and driving that growth. We are of course focused on there are there are low margin pressures on that part of the business again overall, a very positive part of our business, but and so we're focused on that end, we have an entire kind of.
Process to try to continue to optimize cost through promotional activity and cost to serve and we see that as an important part of the business and Scott do you want to give a little more color on how we're approaching it isn't that we've seen we've demonstrated in the fourth quarter of some of the benefits from promotional optimization, which again a lot of that occurs in the digital channel just by the very.
Nature of the shopping experience there. So we believe there's plenty of opportunity to improve the profitability that channel of our business. Both on the promotional side, but also on the supply chain effectiveness side of the business. So the FFC strategy. The ship from store strategy of getting closer to our end customers will help but also just the AUM.
For all scale of that business continues to grow we believe will help drive some rate improvement there over the long term.
Thank you.
Our next question comes from the line of Kelly Crago with Citi Research You May proceed with your question.
Hi, there.
Mary Dave Congratulation.
Lovely net.
My first question or my question is really around the gross margin.
All different areas of focus at all and I guess number one is there a chance at gross margin could reach back to EF 19 levels, Yeah in F. 'twenty, one and then at.
Drilling down a little bit further on the on the rent and occupancy line could you first talk about can be of beat me she's at this year and how we should think about the.
So right now occupancy line in in 'twenty, one and then on the merch margin I think you said.
You expected merchandise margin to be up for the year is that would it be pretty consistent throughout the year given it seems for here.
Can you hold onto some of the he said you know what.
One of our promotional Cds that going for us.
Right.
Yeah. So there's a lot connected to that question, but the overall theme about gross margin getting back to 2019 again theres a lot of puts and takes if you go back to the prepared remarks, we gave a lot of detail provided a lot of detail on that I would say our initial outlook is not to get back to 'twenty to 'twenty nine.
<unk> part of it is the geography change on the services manager moving you know out of gross margin. So that's a plus up for us, but there is something you know the sales lower sales overall at least our initial outlook there creates a bit of deleverage there when we look back and try to compare to 2019. So there is quite a laundry list of.
Things Besides channel mixes, which is one of the biggest drivers when we look at 'twenty one versus 19 again remainder of 2019 ecommerce was in the mid teens as a percentage of total sales and we're thinking it's going to be in the mid twenties for 2021. So a lot of puts and takes there I mean I would go back.
For the comment we made about sales upside. So we are optimistic we feel good about you know exiting the fourth quarter and of sales come back stronger, especially in the makeup of part of our business and Theres potentially some good tailwind there and that again sales helps scale and helps drive leverage.
Okay.
Alright, and then just on the merchandise margin.
Is it do you expect it to be consistently up throughout the year or is it you know.
Net of weighted to the first half given some of the pressures you saw in the first quarter of last year, Yeah, I think it'll be a little stronger first half of the year, because we're lapping some of you know.
Large disruptions you know over a year ago, and then building momentum throughout the course of the year. So again theres a lot of a lot of levers that we have to pull and push as we navigate through the course of the year with.
Promotion cadence and some of our major events, so again, where you're looking to optimize the total business as we navigate throughout the year.
Got it thank you.
Our next question comes from the line of.
In the end Gutman with Morgan Stanley You May proceed with your question.
Hi, everyone. Good afternoon, Congratulations Mary and Dave.
I wanted to ask a question that I think you'll probably defer to the analyst day.
So I guess, Dave in the next chapter of growth where margins can go and part of the question is.
It looks like you know your sales level is not going to be that far below 2019, and it looks like your SG&A level is somewhat back to 2019 levels.
So I guess what level of sales can you get back to 2019 levels of margin.
Well Youre right well, we'll talk a lot more about the future growth and what we have seen come in at.
At the analyst day in the fall and we're excited to share share of those plans with you.
We do see pressure now that's got just as Scott has described on.
The of our.
The guidance that we've given around our overall profitability for for 'twenty 2021, and said that over time, we see that we're focused on improving that we're optimistic that we can prove that and we see that continued growth of them, but as we manage through some of those short term disruption. So we'll have a much more detail in the in the outlook.
On the planning of the time in our sales outlook beyond beyond this year Oh, we're focused right now on driving driving our business through you know the reemergence as we get in through 2021, and I would just add to that that we are and we've talked about this over the course of the last couple of phone calls semi end at where the executive team and all of this.
Senior leaderships are focused on getting back to double digit EBIT margins were very confident we can do that I think you can look at the fourth quarter result, and see its within striking distance again, that's a little bit of an outlier because of the the level of sales there and some of the leverage yeah. It creates by nature, but we're confident.
That is 2021 of the plan is put together again in a prudent and reasonable fashion here initially and hopefully you know the the crisis.
Passes by Us a little bit quicker and we can get some wind in our sales and hopefully drive a better result over all of them with what we're planning for today.
Yes.
Dave when Mary did the keynote for shop talk a couple of years back she came out.
No.
Right.
Yeah.
Alright at work on that same in thanks take care.
Our next question comes from the line of Steph Wissink with Jefferies. You May proceed with your question.
Thanks, Good afternoon, everyone at all at our congratulations as well.
Yeah.
Hi, Dave. This is a question for you it's on the changes in the loyalty balance I think Mary you mentioned at a 10% reduction in customers within the program can you help US just think through is that of function of how you define customers active customers, meaning some of them that haven't shopped with you within your defined period or are those customers that have opted.
At out of the loyalty program and if so is that giving you any indication about how you have to think about.
Retaining or re engaging those customers that you may have lost thank you.
Yes of course, our loyalty program is key to our success and has been for a long time and will be well into the future. We believe we've got just a world class laws of program. The engagement at remains incredibly high we think we've got one of the best loyalty programs in all of retail where theres been no change.
<unk> to how we define our guests our definition as to be counted as a member you need to have shopped at least once in any of our.
To touch points in the last 12 months, so that that Hasnt changed for what we are seeing is.
We at.
As particularly early in this crisis one of our stores were closed so a little over you know really about a year ago and for the next few months, we will start lapping that.
Our store only guest we lost some of of less engaged.
Less tenured less engage members that debt either.
Stepped out of beauty for a little bit or shopped at some of the retailers that were opened and did not pivot to our ecommerce business. We've had a big focus and re engaging them. We know who they are we know that they didn't have a bad experience with ulta. They just changed behavior in the in the short term and so some of this is the math as we start to lap.
We're lapping.
We were you know strong months 12 strong months in 2019 with some of the challenges we had in 2020 and so we will continue to work through that over these next few months you said that there's nothing in any of our research that suggests our guests are any less engaged in beauty overtime and Ulta beauty at.
Or anything that we've done and one of the biggest most important parts of that is our diamond and platinum guests. Our most engaged guests have maintained really best in class retention really very committed and connect it to Ulta beauty. So we have a whole team that's focused really everything we do is for our loyalty guests for the communication we have through personalization.
<unk> broad scale marketing, our assortment evolution, they love our newness in the merchant merchant team has done a great job our stores.
Our focus on ensuring that every guest gets a great experience. So we're confident there's a bit of of lapping an element going on and as we worked through those short term disruption, but the long term outlook for loyalty is very positive.
Thank you.
Our next question comes from the line of Michael Laser with UBS. You May proceed with your question.
Good evening. Thanks, a lot for taking my question and congratulations to everybody as part of the succession profit was there of thought to guide conservatively for the year ahead to help with the transition and provide more flexibility for.
2021 end as.
Folks will be in their new roles or does it simply reflects the fact that ulta long term operating profit margin won't be as high as it's been important to e-commerce penetration being in the low to mid 20 per cent range versus 2019, when it was in the 13% range.
Well, obviously at this we guide for the best of our ability to what we think is going to happen with some with some range of around that so if you look at the guidance you know, we feel encouraged and optimistic about the momentum on the business, but as we said there's a great deal of uncertainty still ahead, and we've embedded some of that uncertainty into our outlook.
As we would normally under any circumstances not just due to a transition I'm you know as we said we saw lack clear visibility into the exact timing of an improvement in our largest category which is makeup.
So while we see something I think Dave explained at really well you know we see some green shoots of we're excited about the pipeline, but at the timing of certain so you know with all of the puts and takes both of them you.
You know at managing costs, I think we're doing well, but also investing in the future of the business that leads us to the guidance that we provided we think it's it's achievable we're ready to move quickly if things get even faster in terms of the economic recovery in consumer recovery, but we think this is very reasonable guidance.
Thank you good luck.
Our next question.
Of that.
Don't you think you May proceed with your question.
Good afternoon, and my congratulations as well Mary gave includes and also to the team on the Muse campaign. This household is of fan.
Just wanted to enquire about a few updates of one.
40 store openings this year.
Just maybe if you can put that in context of how you think about our long term door growth and end potential kind of reacceleration.
In the outer years at maybe incorporate just any updates.
On Canada.
Into that end and then similarly, just any updates as you've had further conversations with your vendor partners around the target a shop in shop in that partnership and end and what your expectations are for for women at launches.
Okay.
Yeah. So yeah I'll start here at the first of all thanks for the shut out of them use of the team. We're all really proud of the work and I'm.
I'm sure some of our team is listening and there'll be glad.
Glad to hear that.
On the stores you have 40 stores this year and we remain.
Consistent with the guidance that we've had is that overtime and grown to 15 to 1700 stores.
No update no changes to Canada, specifically as it related to that we that's all of them pause and we have no.
New news related to that we continue to be optimistic and positive about the outlook of physical retail and we'll continue to find just terrific locations across the country of 40 that were opening this year, where we feel really really good about and we see plenty of of growth ahead of us so that that's.
The plan on stores.
That's connected in ways to our target of our target business. So your question about how how that's coming along well.
We're just really really pleased with that partnership.
The the relationship we have with target as we've been building. This together has just been exceptional and and we're really thrilled with the feedback that we've had from them on the concept from our consumers. They are pumped up about this and excited for it to come come to life, we really see this as just a completely new way to engage our consumers in.
Of the prestige segment and in beauty overall at.
Definitely not I mean, we've worked so hard to make sure of this is not just more of the same from of retail standpoint, which we think is really critical in this time of of disruption in the marketplace of.
So this is gonna be completely new totally different focus on the best of the best in prestige highly curated assortment of beautiful presentation exceptional staffing and we're anticipating a high consumer engagement.
Compelling guest experience and for us acquiring millions of of new members over over time.
Not sharing.
Much more detail than what our what I shared in the script earlier today, we'll be sharing that as we get a bit closer, but I can assure you of that.
But our plans are on track, we're ready to launch Ulta beauty and we have tremendous support from our brand partners. Both big our biggest brand partners that we have and end small and emerging brands in for.
Fact, where we're going to launch with more brands than we originally considered we have the brands that we wanted to launch this with end more and we're excited about it. So it's coming together great. We think it's going to be an awesome experience, we're thrilled to be partnering with target they've been nothing but just exceptional partners to build this with and we're excited to go create this next.
Chapter in the in the future of beauty.
Yes.
Our next question comes from the line of Michael Binetti with Credit Suisse. You May proceed with your question.
Hey, Thanks, a lot.
Let me add my congrats Mary.
What an end date look very forward to working with you congrats on the new role.
I guess I.
Maybe my first of all be for Scott, but I'm wondering if you can help us understand any of the of the metrics around how much of the SG&A that you guys.
Having the plan that you guided us to this this year is what you would call investment I know I think he described it as you know.
Investments, partially offsetting some of the tailwind on the margin, but if we just look at EBIT dollars per store I think you were at like 742019 any guidance it looks like it's closer to 500000.
So I'm just curious it seems like a lot of that focus here as it is at SG&A.
And then Mary in the markets that have been less restrictive or opened up more quickly. What do you. What are you seeing there as leading indicators that lead you describing the beauty category of the color cosmetics category as as low visibility of uncertain as you guide us with your thoughts on how the rest of the markets will start to reopen.
Yeah, I wouldn't say that we've seen a material difference in performance across markets for the most part of it and there's certainly been weather disruptions at everything with Covid.
Been watching it closely and I think just with makeup. We just know it's a category has been under pressure even prior to Covid and then we have a long period of time, where folks are changing their makeup routines and so you know we know that the category has lots of newness and innovation to come and it's it's large people are very engaged at the category. We're just not sure.
Actually when people are going to start wearing makeup you know more makeup for social occasions and things like that so we're watching it closely but you know it's of great assets of our business model that we are across so many categories that you know the self care of the skin care of the Bath and fragrance categories have performed as we know exceptionally well so were well balanced and we're poised to take advantage of that.
Ill take which we think will come.
And on the G&A part of the question. So again it depends what you're trying to measure against 2020 or 2019, I guess I'll keep it in context of 2019.
These specific debt, there's roughly 50 net new stores in the store fleet compared to 2019, but by the time, we get the end of 2020. So there's a natural fixed cost element of that that runs through gross margin and then there's a variable cost piece of that rate on them.
Payroll for stores and all of the signage and other variable cost at it takes to operate of stores. So that's embedded in there.
On a topline that slightly weaker than 2019 is what our initial outlook is so that's a big element of it.
The service manager re categorization right out of gross margin down into SG&A. So it's a help on the gross margin line, but it is a headwind on the SG&A line, but it's an overall win for the company because we're more effective and at it is a plus up on operating margin overall.
The investment I mean, we don't we've never shied away from that I mean, yes, 2019, it's a recovery year. That's how we're looking at at makeup is a big part of our business as Dave and Mary both said.
There's a lot of uncertainty on when it will come back we were optimistic that it will but its just a question of timing and that's a big part of our business and then there is continuing investments and just all of the infrastructure, especially in the digital space, which again is a key component to being able to deliver a great omni channel experience to the guests.
And to make sure that we're continuing to innovate for the long term and to help drive future growth for the business.
Thanks, a lot of Scott.
Our next question comes from the line of Steve Forbes with Guggenheim Securities. You May proceed with your question.
Thank you and good evening, everyone and let me extend my congratulations as well.
Maybe I wanted to sort of focus on the outlook for AD spends a quick two part here Scott you mentioned flat year over year, maybe just tell us if he can of what the expense ratio was for.
2020 of them and then more importantly for me all of you.
I think about the reopening.
Opportunity here to drive new customer acquisition to drive services adoption right and maybe reaccelerate those number of trends. It just seems like they're doing a very large opportunity ahead of us.
I would love to just hear about you know why not why not be more aggressive right or sort of how you're thinking about overall AD spend whether it's payback or just.
Just love to hear just higher level thoughts on how you're sort of viewing this reopening.
Yeah opportunity right in terms of customer acquisition vehicle.
Yeah. So maybe I can start there. So again I would just say we're being flexible like we were in 2020 when the Covid crisis was on US we pulled back significantly, especially in area of print and re allocated resources into the digital space I think smartly right looking at at the result.
Of that so again this is an area when we talk about E. F. G efficiencies for growth of print the whole advertising bucket is another large area of opportunity for us over the long term and so we continue to look for ways to optimize both print.
Print just the cost of print overall, but also the distribution and the postage and working with our vendor partners on you know new better ways to be thinking about how we go to market over the long term. So that's part and parcel of our everyday activities I guess I would say and again, we're thinking it's going to be flattish year over year as a percent of sales.
So but always of work in progress.
And just to reiterate on the on your points about reopening in guest re engaging in the category of we feel.
Confident in what we're seeing.
But uncertain about the pace and the return, particularly in our biggest category of makeup and so we feel as Mary said I think it's got to say we feel of the guidance that we have is right, but we're also prepared to adjust.
Becoming an increase.
For 2020, just further enhanced our skills at agility and being prepared to take whatever comes at us and so we're ready to drive growth and lead the industry end, but also feel like the guidance that we've given is correct.
So Laura I think will take me of time for one more question sorry, Steve.
No worries thank you.
Thanks, Dave.
Our final question comes from the line of.
With Wells Fargo. You May proceed with your question.
Hey.
Thanks, everyone congrats to everyone as well.
Just two quick ones so Dave for your own store productivity can you talk to US I think you were doing around $500 a foot pre COVID-19 can you not necessarily this year, but maybe over the next two to three years, where do you see store productivity kind of normalizing too given the rise in E com and at that point Scott on the guidance it seems to imply that.
Comp sales you were expecting them to decline year over year end dollars based on the mix could you maybe give some color about what's embedded on E. Com revenue either first half back half for full year of anything would be helpful. Thanks, guys.
Yes at store productivity I think of that kind of.
Give any specifics.
Right now because we've got a.
Lots of figure out of where things settle out and settle down having said that we remain really committed and positive about the physical store channel for Ulta beauty at beauty in general and so.
We're watching that closely we're seeing positive trends as guests are getting re engage we know our guests are telling us and then and then increasingly demonstrating that they want to get back in at physical way, but we know where you kind of will play a bigger part of it too so I imagine that it'll be a big part of our discussion in the fall as we kind of talk about of a.
Our longer term outlook, but it's a big focus for sure Yeah, I would just add on to that exactly in the fall we'd have more to share on that with investors I mean at the fact is that the trends in the store of the traffic trends have been negative now for a while and listen we're going to have to watch how consumers how that rebounds here as 2021.
Lays out and how that fits into the overall digital part of our business and Omnichannel equation.
As far as the E. Com question goes like so yeah, you're on the right track there and we get we're guiding 20 mid twentyish kind of penetration for the year.
Which again, we're not apologizing for it based on what we just delivered in 2020 of that business is twice the size of it was a year ago at this time and the team is ready and we're ready to scale that up and take advantage of.
Opportunities that are presented to us and now we're just focused on making sure. We take care of the store fleet. The teams that are out there at make sure as customers come back and shop us in brick and mortar that we're delivering a great guest experience and continue to keep them engaged with the brand.
Okay.
True.
I think we're done with the questions. Thank you. So I just want to thank everybody for joining US today, you know the future is really bright for Ulta beauty, we have a strong of differentiated business model. We're emerging from the 2020 pandemic with good momentum, we're strategically investing in our business to drive further market share gains and we have strong leadership for the next chapter of growth and really proud.
As a job that's the Ulta beauty store distribution center of corporate associates at all here to deliver this amazing, but tough year I remain very excited about the long term growth opportunity I'm confident at Ulta beauty will continue to shape and lead the beauty industry I'm excited about the next chapter of ahead for all of US. It's the right time for me personally at the right time for day then keisha.
And the right time for Ulta beauty as the team continues to drive growth for many years to come we look forward to speaking with all of you again in May when we report at our first quarter results. Thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your day.
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