Q4 2023 Ulta Beauty Inc Earnings Call

Unknown Executive: Good afternoon and welcome to Ulta. FORTH QUARTER. Time, Question in the... We ask that you please limit your questions to The Bulletproof Executive 2013 and what you require. Kylie Rollins. Thank you, Camilla.

Good afternoon, and welcome to Ulta Beauty's conference call to discuss results for the fourth quarter 'twenty twenty-three earnings result.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

We ask that you. Please limit yourself to one question and then reenter queue for any additional questions. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce MS. Kiley, Rawlins, Vice President of Investor Relations Ms. Rawlins. Please proceed.

Kiley F. Rawlins: Thank you Melanie good afternoon, everyone and thank you for joining us for our discussion of our fourth quarter and fiscal 'twenty 20, Threep adult Dave Kimbell CEO will begin the call with key highlights from our quarter and full year results and share our priorities for fiscal 'twenty 'twenty four.

Unknown Executive: Good afternoon, everyone, and thank you for joining us for our discussion of our fourth quarter and fiscal 2023 results. Dave Kimbell, CEO, will begin the call with key highlights from our quarter and full-year results and share our priorities for fiscal 2024. Then Scott Settersten, CFO, will review our quarterly financial results in more detail, and Paolo Ibo, SVP of Finance and incoming CFO, will discuss our fiscal 2024 outlook. After our prepared comments, we will open the call to questions.

Scott <unk> CFO will review, our quarterly financial results and watch T L and Paulo, IBO SVP of finance and incoming CFO will discuss our fiscal 'twenty 'twenty four outlook.

Kiley F. Rawlins: After our prepared remarks.

Kiley F. Rawlins: And then we will open the call for questions. He's just steelman, President and Chief operating officer will join us for the Q&A session.

Unknown Executive: Kecia Steelman, President and Chief Operating Officer, will join us for the Q&A session. As a reminder, our fourth quarter and full year fiscal results include an extra week as compared to fiscal 2022. Comments regarding comp sales are based on a comparable number of weeks from the prior year. Before we begin, I'd like to remind you of the company's safe harbor language. The statements contained in this conference call, 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. However, 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.

Kiley F. Rawlins: As a reminder, our fourth quarter and full year fiscal results included an extra week compared to fiscal 'twenty to 'twenty two.

Kiley F. Rawlins: Regarding comp sales are based on a comparable number of weeks from the prior year.

Kiley F. Rawlins: Before we begin I'd like to remind you of the Companys Safe Harbor language. The statements contained in this conference call, 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 actual future results may differ materially from those projected in such statements due to a number.

Kiley F. Rawlins: 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 14th 2024, 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.

Unknown Executive: We caution you not to place undue reliance on these forward-looking statements, which speak only as of today, March 14, 2024. 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. Today's prepared remarks will be longer than usual to allow us to accommodate as many questions as possible. We respectfully ask that you limit your time to one question.

Kiley F. Rawlins: Today's prepared remarks will be longer than usual to allow us to accommodate as many questions as possible. We respectfully ask that you limit your time to one question. If you have additional questions. Please re queue as always the IR team will be available for any follow up questions. After the call now I will turn the call over to Dave Dave. Thank.

Kylie Rollins: If you have additional questions, please requeue. As always, the IR team will be available for any follow-up questions after the call. Now, I'll turn the call over to Dave.

David C. Kimbell: Thank you, Kylie, and good afternoon, everyone. We appreciate your interest in Ulta Beauty. The Ulta Beauty team delivered strong performance again this quarter, with sales, operating margin, and EPS all exceeding our internal expectations. Our traffic trends remained healthy, our brand awareness reached all-time highs, and we drove strong member growth and retention. For the quarter, net sales increased 10.2% to $3.6 billion. Operating profit was 14.5% of sales, and diluted EPS was $8.08 per share.

David C. Kimbell: Thank you Kiley and good afternoon, everyone. We appreciate your interest in Ulta beauty.

David C. Kimbell: The Ulta beauty team delivered strong performance again, this quarter with sales operating margin and EPS, all exceeding our internal expectations.

David C. Kimbell: Our traffic trends remained healthy our brand awareness reached all time highs and we drove strong member growth and retention.

David C. Kimbell: For the quarter net sales increased 10, 2% to $3 $6 billion operating profit was 14, 5% of sales and diluted EPS was $8.08 per share.

David C. Kimbell: Comparable sales increased 2.5% driven by high single-digit growth from digital channels. Store.com sales increased slightly as we lapped high teen growth last year. A thoughtfully curated assortment, engaging marketing strategies, and new fulfillment and technology capabilities enabled our teams to deliver mid-single-digit comp growth for the holiday period. Our holiday campaign this year centered around the gift is just the beginning, which underscored our belief in the power of beauty and Ulta Beauty. To support the campaign, we created relevant storytelling that inspired authentic connection, leading to record-breaking impressions, significant growth in shared voice, and strong social engagement.

David C. Kimbell: Comparable sales increased two 5% driven by high single digit growth from digital channels.

David C. Kimbell: Store comps.

David C. Kimbell: Comp sales increased slightly as we lapped high teen growth last year.

David C. Kimbell: It's awfully curated assortment engaging marketing strategies, and new fulfillment and technology capabilities enabled our teams to deliver mid single digit comp growth for the holiday period.

David C. Kimbell: Our holiday campaign this year centered around the gift is just the beginning which underscored our belief in the power of beauty and Ulta beauty.

David C. Kimbell: To support the campaign, we created relevant storytelling, which inspired authentic connection leading to record breaking impressions significant growth in share of voice and strong social engagement.

David C. Kimbell: These successful marketing efforts complemented our engaging in-store messaging and events, which focused on bringing beauty attainment to guests and building the best. Compelling content combined with successful promotional strategies drove strong new member acquisition and reactivation while increasing shopping frequency and retention. From a market share perspective, we continue to outpace the growth of the mass market for the 14 weeks ended February 3, 2024, according to Circona data.

David C. Kimbell: The successful marketing efforts complemented our engaging in store messaging and events, which focused on bringing beauty tainment to guests and build into basket.

David C. Kimbell: Compelling content combined with successful promotional strategies drove strong new member acquisition and reactivation, while increasing shopper shopping frequency and retention.

From a market share perspective, we continued to outpace the growth of the mass market for the 14 weeks ended February three 2024, according to sort of kind of data.

David C. Kimbell: Our marketing share our market share of prestige beauty was more challenged as we lapped strong share growth in 2022 and continued to face pressure from the expansion of beauty.

David C. Kimbell: Our market share of Prestige Beauty was more challenged as we lapped strong share growth in 2022 and continued to face pressure from the expansion of beauty distribution points in Prestige. However, while competitive intensity has increased, we remain confident our differentiated model and sales driving strategies will support our ability to capture additional market share over the long term. Turning to performance by category, skincare was our fastest growing category, delivering double-digit comp growth. Brands leading into relevant trends like Bioma, Bubble, and Good Molecules, which is exclusive to Ulta Beauty, delivered strong growth. Dermatologist-recommended brands also continue to appeal to consumers looking for efficacious products from trusted brands, fueling growth for La Roche-Posay, Dermalogica, and Cetaphil. The fragrance and bath category also delivered low double-digit comp growth again this quarter.

David C. Kimbell: Distribution points in prestige.

David C. Kimbell: While competitive intensity has increased we remain confident our differentiated model and sales driving strategies will support our ability to capture additional market share over the long term.

David C. Kimbell: Turning to performance by category Skincare was our fastest growing category delivering double digit comp growth brands, leading into relevant trends like biomarker bubble and good molecules, which is exclusive to ulta beauty delivered strong growth.

David C. Kimbell: Matala just recommended brands also continued to appeal to consumers looking for efficacious products from trusted brands fueling growth for La Roche pose dermatologic <unk> and Cedar Phil.

David C. Kimbell: The fragrance and Bath category also delivered low double digit comp growth again this quarter no.

David C. Kimbell: Nunes from Valentino, Burberry, and Treehut, and holiday gift sets from consumer favorites YSL, Gucci, and Billie Eilish contributed to strong performance. In addition, in January, we welcomed Sol de Janeiro, a Brazilian-inspired body care brand, to the Ulta Beauty family. Available in 700 stores and online, Sol de Janeiro has quickly become a guest favorite, driving growth in the category. However, top sales for the makeup category decreased in the low single-digit range.

David C. Kimbell: Nunez from Valentino, Burberry, and Sri HUD and holiday gift sets from consumer favorites Y S. L Gucci and Billy Irish contributed to strong performance.

David C. Kimbell: In addition in January we were up we welcomed Sol de Janeiro, a Brazilian inspired body care brand to the Ulta beauty family.

David C. Kimbell: Available in 700 stores and online Sol de Janiero has quickly become a guest favorite driving growth in the category.

David C. Kimbell: Comp sales for the makeup category decreased in the low single digit range softness in prestige cosmetics was partially offset by growth in mass makeup.

David C. Kimbell: The softness and Prestige Cosmetics was partially offset by growth in mass makeup. Lip layering and blush proliferation continue to resonate with beauty enthusiasts, and brands leaning into these trends, including e.l.f., NYX, and exclusive brand, Juvia's Place, delivered strong growth. While prestige makeup was challenged in totality as we lapped strong growth last year, luxury brands Dior, Natasha Denona, and Pat McGrath continued to engage guests, and Hourglass, Tard, and Lancôme saw success with compelling holiday offers. Finally, comp sales for the hair care category decreased in the mid single-digit range, primarily due to a decline in hair tools and the lapping of strong brain launches in 2022.

David C. Kimbell: Lick layering them plus blush proliferation continue to resonate with beauty enthusiast and brands bleeding into these trends, including Els Nicks and exclusive brand jube its place delivered strong growth.

David C. Kimbell: While prestige makeup was challenged in totality as we lapped strong growth last year luxury brands D Oar, Natasha Danone and Pat Mcgrath continued to engage guests and hourglass tired and lancome saw success with compelling holiday offerings.

David C. Kimbell: Finally comp sales for the hair care category decreased in the mid single digit range, primarily due to a decline in hair tools and the lapping of strong brand launches in 2022.

David C. Kimbell: Products focused on styling and foundational routines drove growth for professional brands Redken, Kenra, and Biola, while interest in hair health and treatments drove increased guest engagement with Wei, Miel, and Divi. Newer brands, including Shark Beauty and Lulavay, also resonated with guests. Our services businesses delivered high single-digit growth for this quarter driven by an increase in transactions. In addition to core styling services, specialty offerings including extensions, hair treatments, textures, texture services, and ear piercing drove strong engagement with guests. Turning now to the full year, net sales for the year increased 9.8% to $11.2 billion.

David C. Kimbell: Products focused on styling and foundational routines drove growth for professional brands Redken, Ken running dialogue.

David C. Kimbell: And interest in her health and treatments drove increased guest engagement with way my L and Debbie newer brands, including short beauty and Lola Weil also resonated with guests.

David C. Kimbell: Our services businesses delivered high single digit growth for this quarter driven by an increase in transactions in.

David C. Kimbell: In addition to core styling services specialty offerings, including extensions hair treatments textures texture services, an ear piercing drove strong engagement with guests.

David C. Kimbell: Turning now to the full year net sales for the year increased nine 8% to 11.2 billion comp sales increased five 7% operating profit was 15% of sales and diluted EPS increased 8.4% to a record $26.03 per share.

David C. Kimbell: Comp sales increased 5.7%, operating profit was 15% of sales, and diluted EPS increased 8.4% to a record $26.03 per share. In addition to delivering strong financial results, we also made meaningful progress against our strategic priorities. Let me share highlights of progress made this year.

David C. Kimbell: In addition to delivering strong financial results, we also made meaningful progress against our strategic priorities.

Speaker Change: Let me share highlights of advances made this year.

David C. Kimbell: Reflecting our efforts to drive growth through all things beauty, we strengthened our assortment with compelling newness and the expansion of strategic cross-category platforms. Using the consumer lens of how guests experience Ulta Beauty through all of our touch points, we estimate that we maintained our share of the total U.S. beauty product industry. We launched customer favorite brands, including Dior, Beautycounter, and Sol de Janeiro, and introduced emerging and exclusive brands, including Half Magic and Polite Society. We launched Luxury at Ulta Beauty, a strategically curated luxury beauty experience, and we expanded our cross-category platform. We ended the year with more than half of our brand portfolio certified in at least one conscious beauty pillar and continue to drive greater awareness and discovery through unique sample kits and greater marketing support. We expanded our black-owned or founded brands to 50 brands and welcomed the second cohort of BIPOC brands to our Muse Accelerator program, a program designed to help early stage BIPOC brands prepare for retail readiness.

Speaker Change: Reflecting our efforts to drive growth through all things beauty, we strengthened our assortment with compelling newness and the expansion of strategic cross category platforms.

Speaker Change: Using the consumer lens of how guest experience Ulta beauty through all of our touch points. We estimate we maintained our share of the total U S beauty product industry.

Speaker Change: We launched customer favorite brands, including Dr Beauty counter and Sol de Janeiro, and introduced emerging in exclusive brands, including half magic in polite Society.

Speaker Change: We launched a luxury at Ulta beauty is strategically curated luxury beauty experience and we expanded our cross category platforms.

Speaker Change: We ended the year with more than half of our brand portfolio certified in at least one conscious beauty pillar and continued to drive greater awareness and discovery through unique sample kits and greater marketing support.

Speaker Change: We expanded our black owned or founded brands to 50 brands and welcome to the second cohort of AIPAC brands to our Muse accelerator program a program designed to help early stage bipack brands prepare for retail readiness. Additionally.

David C. Kimbell: Additionally, we expanded the wellness shop to nearly all stores and refreshed the presentation to inspire and educate guests how to integrate wellness into their everyday lives. Turning to our second strategic pillar, All in Your World, we improved the guest experience across all of our touchpoints. We enhanced our physical footprint, opening 33 new stores and renovating or relocating 25.

Speaker Change: Additionally, we expanded the wellness shop to nearly all stores and refresh the presentation to inspire and educate guests how to integrate wellness into their everyday lives.

Speaker Change: Turning to our second strategic pillar all in your world.

Speaker Change: We improved the guest experience across all of our touch points.

Speaker Change: We enhanced our physical footprint opening 33, new stores and renovating or relocating twenty-five stores, our services business delivered double digit comp growth for the year, increasing frequency with members, who already engaged and services. While also introducing new members to our offering and we drove greater experiential shopping through more in <unk>.

David C. Kimbell: Our services business delivered double-digit comp growth for the year, increasing frequency with members who already engaged in services while also introducing new members to our offering. And we drove greater experiential shopping through more in-store events focused on engaging and educating guests about new products, new techniques, and the latest beauty trends. We also delivered significant improvements in our digital store experience. We successfully transitioned key guest-facing and commerce elements to a new, modern architecture, delivering a fresh guest experience across both Ulta.com and our app and providing our teams with new tools to optimize the guest experience. These enhancements, combined with our efforts to drive omnichannel member penetration, resulted in high single-digit growth in e-commerce sales and a 30% increase in member utilization of our app. To support stronger omnichannel experiences, we continue to improve our Buy Anywhere, Fill Anywhere capabilities. We expanded same-day delivery to all stores and increased our ship from store capabilities to 450 stores. Between VOPUS, same-day delivery, and ship-from-store, 37% of our digital orders this year were fulfilled by stores, up from 31% last year.

Speaker Change: Tour events focused on engaging and educating the cast about new products, new techniques and the latest beauty trends.

Speaker Change: We also delivered significant improvements in our digital store experience.

Speaker Change: We successfully transitioned key guest facing and commerce elements to our new modern architecture, delivering a fresh guest experience across both Ulta dotcom and our app and providing our teams with new tools to optimize the guest experience. These enhancements combined with our efforts to drive the Omnichannel member penetration resulted in <unk>.

Speaker Change: High single digit growth in ecommerce sales and a 30% increase in member utilization of our App.

Speaker Change: To support stronger Omnichannel experiences, we continue to improve our buy anywhere fill anywhere capabilities. We expanded same day delivery to all stores and increased our ship from store capabilities to 450 stores.

Speaker Change: Between both is same day delivery and ship from store, 37% of our digital orders. This year were fulfilled by stores up from 31% last year.

David C. Kimbell: Finally, we strengthened our partnership with Target with the introduction of new brands and the opening of 155 additional Ulta Beauty at Target locations, ending the year with 510 shops. And we deepened guest engagement as reflected in growth of new member conversions, re-engagement of last guests, and greater loyalty account linkage, as well as increased bounce back to Ulta Beauty stores. Moving to our third strategic pillar, expanding and deepening guest engagement and loyalty by operating at the heart of the beauty community. Our marketing strategies, media investments, and brand building efforts resulted in record-level unaided awareness, brand love, and loyalty. To drive awareness and spark deeper connection engagement, we launched the Joy Project, a multi-year brand equity initiative to make beauty and the world a more joyful place.

Finally, we strengthened our partnership with target with the introduction of new brands and the opening of 155 additional Ulta beauty at target locations ending the year with 510 shops, and we deepen guest engagement is reflected in growth of new member conversions reengagement of lapsed guests and greater.

Speaker Change: Loyalty account linkage as well as increased bounce back to Ulta beauty stores.

Speaker Change: Moving to our third strategic pillar, expanding and deepening guest engagement and loyalty by operating at the heart of the beauty community.

Speaker Change: Our marketing strategies media investments in brand building efforts resulted in record level unaided awareness brand love and loyalty.

Speaker Change: To drive awareness and sparked deeper connection engagement, we launched the Joy project, a multiyear brand equity initiative to make beauty and the world of more joyful place.

Speaker Change: We expanded our social media engagement across multiple platforms with new trendsetting series and compelling content, which drove strong engagement positive social sentiment and share of voice and we achieved an important milestone in December we surpassed 1 million followers on tictac reinforcing our position as a social.

David C. Kimbell: We expanded our social media engagement across multiple platforms with new trend-setting series and compelling content, which drove strong engagement, positive social sentiment, and share of voice, and we achieved an important milestone. In December, we surpassed 1 million followers on TikTok, reinforcing our position as a social brand leader in beauty. With improved member retention, strong new member acquisition, and healthy reactivation of lapsed members, we expanded our loyalty program by 8%, ending the year with 43.3 million loyalty members who shopped more frequently and spent more with us on average. Leaning into the power of our best-in-class loyalty program, in January, we rebranded the program to Ulta Beauty Rewards, featuring a stronger birthday experience and a refreshed look in stores and online and across social to drive greater awareness and deepen connection with our members.

Speaker Change: <unk> brand leader in beauty.

Speaker Change: With improved member retention and strong new member acquisition and healthy reactivation of lapsed members, we expanded our loyalty program by 8% ending the year with $43 3 million loyalty members, who shopped more frequently and spend more with us on average.

Speaker Change: Meaning into the power of our best in class loyalty program in January we rebranded the program to Ulta beauty rewards featuring a stronger birthday experience and a refreshed look in stores and online and across social to drive greater awareness and deepen connections with our members.

Speaker Change: We are excited to reward our members with even more of what they love and showcase how much we appreciate them.

Speaker Change: Finally, you be media, our retail media network continued to deliver value. This year, we expanded the team introduced new onsite products and launched an innovative omnichannel solution, which supports the measurement of campaigns across both digital and physical stores.

David C. Kimbell: We are excited to reward our members with even more of what they love and showcase how much we appreciate it. Finally, UB Media, our retail media network, continued to deliver value. This year, we expanded the team, introduced new on-site products, and launched an innovative omni-channel solution, which supports the measurement of campaigns across both digital and physical stores. Our fourth strategic pillar is to drive operational excellence and optimization to enable us to capture additional market share, fund guest experience enhancements, and deliver future profitable growth. I am very proud of what our teams accomplished in fiscal 2023, which was an ambitious year of foundational transformation for Ulta Beauty. We completed the retrofit of our Greenwood Distribution Center, began the retrofit of our Dallas Distribution Center, opened our Greer Market Fulfillment Center, and began work on our Bolingbrook Market Fulfillment Center.

Speaker Change: Our fourth strategic pillar is to drive operational excellence and optimization to enable us to capture additional market share fun to guest experience enhancements and deliver future profitable growth.

Speaker Change: I am very proud of what our teams accomplished in fiscal 2023, which was an ambitious year of foundational transformation for Ulta beauty.

Speaker Change: We completed the retrofit of our Greenwood distribution Center began the retrofit of our Dallas distribution Center opened our Greer market fulfillment Center and began work on our Bolling Brook Maarten market fulfillment center we.

Speaker Change: We successfully transitioned our Jacksonville Greer in Chambersburg distribution facilities and key merchandising processes to our new enterprise resource planning platform and we converted key merchandising and commerce elements of our digital store to a new architecture, while maintaining digital operations.

Speaker Change: We built a new enterprise data platform on Google, Google Cloud infrastructure, establishing a modern ecosystem for future analytics and data driven decision capabilities and we completed our rollout of new Pos systems, including mobile check out in all stores.

David C. Kimbell: We successfully transitioned our Jacksonville, Greer, and Chambersburg distribution facilities and key merchandising processes to our new enterprise resource planning platform, and we converted key merchandising and commerce elements of our digital store to a new architecture while maintaining digital operations. We built a new enterprise data platform on Google Cloud Infrastructure, establishing a modern ecosystem for future analytics and data-driven decision capabilities.

Speaker Change: Our teams enable our success and we continue to invest and protect and cultivate our world class culture and talent. This.

Speaker Change: This year, we introduced a new leadership competency model redesigned our succession planning and talent review processes expanded our associate development offering uncompleted enterprise wide training to reinforce inclusivity and address unconscious bias.

David C. Kimbell: And we completed our rollout of new POS systems, including mobile checkout in all stores. Our teams enable our success, and we continue to invest in, protect, and cultivate our world-class culture and talent. This year, we introduced a new leadership competency model, redesigned our succession planning and talent review processes, expanded our associate development offering, and completed enterprise-wide training to reinforce inclusivity and address unconscious bias. Associate retention improved across stores, distribution centers, and our corporate team.

Speaker Change: Associate retention improved across stores distribution centers, and our corporate team and our 2023 culture survey results reinforce that our overall associate engagement remains strong.

Speaker Change: Finally, we made progress against our six strategic pillar two expand our environmental and social impact we continue to improve the energy efficiency of stores through L. A D lighting retrofits H V. A C retrofits and energy management system upgrades and established 2030 emissions reduction goals.

Speaker Change: It's approved by the science based target initiative.

Speaker Change: I am incredibly proud of what our teams accomplished in 2023, our teams worked through unexpected challenges with agility and Grace and I'm grateful for their steadfast commitment to deliver value for all stakeholders, while also enabling new capabilities for future growth.

David C. Kimbell: And our 2023 culture survey results reinforce that our overall associate engagement remains strong. Finally, we made progress against our sixth strategic pillar to expand our environmental and social impact. We continue to improve the energy efficiency of stores through LED lighting retrofits, HVAC retrofits, and energy management system upgrades and established 2030 emissions reduction goals approved by the Science Based Target Initiative. I am incredibly proud of what our teams accomplished in 2023.

Speaker Change: As we look forward, we remain optimistic about the strength and resiliency of the beauty category.

Speaker Change: Over the last three years, the beauty category has experienced unprecedented growth in 'twenty 'twenty four we expect the category will remain healthy, but the growth will moderate to the mid single digit range barring a major economic event.

David C. Kimbell: Our teams worked through unexpected challenges with agility and grace, and I'm grateful for their steadfast commitment to deliver value for all stakeholders while also enabling new capabilities for future growth. As we look forward, we remain optimistic about the strength and resiliency of the beauty category. Over the last three years, the beauty category has experienced unprecedented growth. In 2024, we expect the category will remain healthy, but growth will moderate to the mid single-digit range, barring a major economic event.

Speaker Change: Beauty is an attractive category and competitive intensity continues to increase as channels blur and distribution expense.

Speaker Change: To protect and expand our leadership position. This year, we expect to advance our transformational agenda with the completion of key projects. While also investing in core traffic inexperienced drivers to strengthen engagement and enhance the guest experience.

Speaker Change: Starting with our go to market strategic pillars, we will innovate evolve and expand all things beauty to excite and engage the beauty enthusiast to.

Speaker Change: To strengthen our differentiated position, we will continue to expand our assortment with compelling and relevant in relevant brand launches like Sol de Janeiro, and Charlotte Tilbury, while also building exclusive emerging brands in our pipeline yet to be announced.

David C. Kimbell: Beauty is an attractive category, and competitive intensity continues to increase as channels blur and distribution expands. To protect and expand our leadership position, this year, we expect to advance our transformational agenda with the completion of key projects, while also investing in core traffic and experienced drivers to strengthen engagement and enhance the guest experience. Starting with our go-to-market strategic pillars, we will innovate, evolve, and expand all things beauty to excite and engage the beauty enthusiast. To strengthen our differentiated position, we will continue to expand our assortment with compelling and relevant brand launches like Sol de Janeiro and Charlotte Tilbury, while also building exclusive emerging brands in our pipeline, yet to be announced. In addition, this year we will refresh the Ulta Beauty collection and position the brand as the cornerstone of our conscious beauty platform, and we will continue to enhance and amplify luxury at Ulta Beauty and our cross-category platform.

In addition, this year, we will refresh Ulta beauty collection and position the brand as the cornerstone of our conscious beauty platform.

Speaker Change: And we will continue to enhance and amplified luxury at Ulta beauty.

Speaker Change: And our cross category platforms.

Speaker Change: Reflecting the importance of Omnichannel engagement, we will invest in the guest experience across all of our touch points, we will further expand and enhance our physical footprint through additional new stores Remodels and relocations.

Speaker Change: It all stores, we will focus on enhancing the guest experience through friendly and helpful Associates fast and frictionless fulfillment and engaging services and events, while also improving operational excellence through simplification prioritization and optimizing our store teams.

Speaker Change: We also plan to drive growth across digital platforms, as we leverage new capabilities to amplify brand launches and events drive greater digital discovery and conversion and expand personalization across our digital platforms.

Speaker Change: And we will expand and enhance our partnership with target as we support new Ulta beauty of target shops evolve the assortment and deepen member engagement through targeted loyalty strategies.

David C. Kimbell: Reflecting the importance of omnichannel engagement, we will invest in the guest experience across all of our touch points. Additionally, we will further expand and enhance our physical footprint through additional new stores, remodels, and relocations. In all stores, we will focus on enhancing the guest experience through friendly and helpful associates, fast and frictionless fulfillment, and engaging services and events, while also improving operational excellence through simplification, prioritization, and optimizing our store. We also plan to drive growth across digital platforms as we leverage new capabilities to amplify brand launches and events, drive greater digital discovery and conversion, and expand personalization across our digital platforms. We will expand and enhance our partnership with Target To support long-term brand equity and drive deeper emotional connection with consumers, we will amplify the JOI project with a continuous rhythm of engaging activations and drive community through an expanded creator network and affiliate program.

Operating at the heart of the beauty community, we intend to expand and deepen guest loyalty and engagement.

Speaker Change: To support long term brand equity and drive deeper emotional connection with consumers, we will amplify the joy project with a continuous rid of of engaging activations and drive community through an expanded curated creator network and affiliate program.

Speaker Change: We will support brand Activations and events to drive New member acquisition, while also leveraging our unique data insights to expand our targeting and member engagement.

Speaker Change: We will evolve our strategic promotional events to inspire and engage our beauty community drive trips and encourage omnichannel engagement and we plan to expand the impact and value of you be media.

Speaker Change: Turning now to our operational excellence and optimization efforts in fiscal 2024, we plan to complete many of the foundational elements of our transformational agenda, including project SOR digital store and the upgrade of our data management capabilities.

Speaker Change: We also plan to invest in a new martech stack to support our personalization retail media and overall e-commerce efforts.

Speaker Change: Our supply chain optimization journey will continue as our bolingbrook market. The film Center is completed we continue to retrofit our Dallas distribution Center and we begin the retrofit of our remaining full service D. CS in Chambersburg and Fresno.

David C. Kimbell: We will support brand activations and events to drive new member acquisition, while also leveraging our unique data insights to expand our targeting and member engagement. We will evolve our strategic promotional events to inspire and engage our beauty community, drive trips, and encourage omnichannel engagement, and we plan to expand the impact and value of UB Media. Turning now to our operational excellence and optimization efforts, in fiscal 2024, we plan to complete many of the foundational elements of our transformational agenda, including Project SOAR, the digital store, and the upgrade of our data management capabilities. We also plan to invest in a new MarTech stack to support our personalization, retail media, and overall e-commerce efforts. Our supply chain optimization journey will continue as our Bolingbrook Market Fulfillment Center is completed, we continue to retrofit our Dallas Distribution Center, and we begin the retrofit of our remaining full service DCs in Chambersburg and Fresno.

Speaker Change: In addition, we intend to leverage our established continuous improvement capabilities to drive additional cost efficiencies with a priority on improving.

Speaker Change: Improving processes to reduce shrink.

Speaker Change: To protect our culture and cultivate our talent, while also enabling future business performance, we will continue to invest in our associates and tea.

Speaker Change: We intend to focus on enrichment to the frontline associate experience enhanced associate learning and development and deepen our D E impact.

Speaker Change: Turning to our final strategic pillar, we intend to stay focused on our environmental and social impact building on progress made in 2023, we plan to implement our roadmap to achieve to achieve our emission reduction goals.

Speaker Change: Finally, I want to share an update on how we are approaching expansion opportunities outside the U S.

Speaker Change: International expansion represents an incremental long term opportunity for Ulta beauty to extend our reach and leverage our differentiated value proposition.

Speaker Change: Today, we are excited to announce our planned market entry into Mexico.

Speaker Change: The Mexican beauty market is sizable and growing and has significant beauty opportunity.

David C. Kimbell: In addition, we intend to leverage our established continuous improvement capabilities to drive additional cost efficiencies with a priority on improving processes to reduce shrinkage. Furthermore, to protect our culture and cultivate our talent while also enabling future business performance, we will continue to invest in our associates and team. We intend to focus on enrichments to the frontline associate experience, enhance associate learning and development, and deepen our DEI impact. Turning to our final strategic pillar, we intend to stay focused on our environmental and social impact. Building on progress made in 2023, we plan to implement our roadmap to achieve our emission reduction goal.

Speaker Change: Our research suggests there is a healthy awareness of the Ulta beauty brand with local beauty enthusiasts and we also see strong engagement in stores located in geographically adjacent markets.

After extensive evaluation, we prioritized and asset light partnership approach to enable us to move quickly and I am excited to announce we have formed a joint venture with XO, a highly experienced operator of global brands to launch and operate Ulta beauty in Mexico in 2025.

As a result of this partnership approach we do not expect this event this venture to be material to our financials in fiscal 'twenty 'twenty four for.

Speaker Change: For competitive reasons, we're not sharing more details today, but we will provide updates as appropriate.

Speaker Change: In closing the Ulta beauty team delivered strong financial performance in fiscal 2023, while also achieving meaningful progress against our strategic priorities.

David C. Kimbell: Finally, I want to share an update on how we are approaching expansion opportunities outside the U.S. International expansion represents an incremental long-term opportunity for Ulta Beauty to extend our reach and leverage our differentiated value proposition. Today, we are excited to announce our planned market entry into Mexico. The Mexican beauty market is sizable, growing, and has significant beauty opportunities.

Speaker Change: As we look to 2024 I remain excited about the opportunity to enhance our market leadership and drive profitable growth.

Speaker Change: We operate in a growing category with strong consumer engagement and I am confident that our proven differentiated business model strategic priorities and outstanding passionate team will enable us to move beauty forward in ways that create values for our shareholders and have a positive impact on our guests associates.

David C. Kimbell: Our research suggests there is a healthy awareness of the Ulta Beauty brand among local beauty enthusiasts, and we also see strong engagement in stores located in geographically adjacent markets. After extensive evaluation, we prioritized an asset-light partnership approach to enable us to move quickly, and I am excited to announce we have formed a joint venture with Axo, a highly experienced operator of global brands, to launch and operate Ulta Beauty in Mexico in 2025. As a result of this partnership approach, we do not expect this event or this venture to be material to our financials in fiscal 2024. For competitive reasons, we're not sharing more details today, but we'll provide updates as appropriate. In closing, the Ulta Beauty team delivered strong financial performance in fiscal 2023 while also achieving meaningful progress against our strategic priorities.

Speaker Change: And the communities we serve.

Speaker Change: Now as many of you know this will be Scott's last earnings call and I want to recognize and thank Scott for his many contributions to Ulta beauty.

Scott: He has been an exceptional partner to me and an inspirational leader for our entire team.

Scott: Now today, you will also hear from Paula Evo, who will become our CFO on April 1st Paulo joined Ulta beauty in 2019, and as a dynamic finance executive with broad industry experience. She understands our business and our guests and I know she will have a strong impact on our business going forward.

Scott: And now I will turn the call over to Scott for a discussion of our financial results Scott.

Scott: Thanks, Dave and good afternoon, everyone.

Scott: I will review, our fourth quarter financial results before turning it over to Paulo, <unk>, who will walk through the outlook for fiscal 2024.

David C. Kimbell: As we look to 2024, I remain excited about the opportunity to enhance our market leadership and drive profitable growth. We operate in a growing category with strong consumer engagement, and I am confident that our proven, differentiated business model, strategic priorities, and outstanding, passionate team will enable us to move beauty forward in ways that create value for our shareholders and have a positive impact on our guests, associates, and the communities we serve. Now, as many of you know, this will be Scott's last earnings call, and I want to recognize and thank Scott for his many contributions to Ulta Beauty. He has been an exceptional partner to me and an inspirational leader for our entire team.

Scott: Financial results for the fourth quarter came in ahead of our expectations across the top and bottom line, reflecting strong holiday performance growth in other revenue and healthy traffic trends as well as strong execution and focused expense management.

Paulo: Net sales for the quarter increased 10, 2% driven by two 5% growth in comp sales strong new store performance of $25 million increase in other revenue as well as the impact of the 50 <unk> week in fiscal 2023 net sales for the 50, <unk> week or 181 9 million.

Paulo: The growth in comp sales was driven by a four 5% increase in transactions.

Paulo: Average ticket declined one 9% driven by lower units per transaction, which were partially offset by higher average selling price.

Scott M. Settersten: Now today, you will also hear from Paula Evo, who will become our CFO on April 1. Paula joined Ulta Beauty in 2019 and is a dynamic finance executive with broad industry experience. She understands our business and our guests, and I know she will have a strong impact on our business going forward. Now, I will turn the call over to Scott for a discussion of our financial results. Scott?

Paulo: Reflecting a more normalized pricing environment, we estimate that product price increases contributed about 100 basis points to the overall increase.

Paulo: Looking at the cadence of sales through the quarter comp sales were solid in November and December reflecting strong holiday performance as expected sales were more challenged in January as we lap the exceptional results from our strongest months in fiscal 2022.

Scott M. Settersten: Thanks, Dave. And good afternoon, everyone. I will review our fourth quarter financial results before turning it over to Paula Oyebo, who will walk through the outlook for fiscal 2024. Financial results for the fourth quarter came in ahead of our expectations across the top and bottom lines, reflecting strong holiday performance, growth in other revenue, and healthy traffic trends, as well as strong execution and focused expense management. Net sales for the quarter increased 10.2%, driven by 2.5% growth in comp sales, strong new store performance, a $25 million increase in other revenue, as well as the impact of the 53rd week in fiscal 2023.

Paulo: During the quarter, we opened 13, new stores relocated two remodeled two stores and closed two stores.

Paulo: For the quarter gross margin increased 10 basis points to 37, 7% of sales. The increase was driven by strong growth in other revenue lower shipping rates and leverage of supply chain costs, which were largely offset by lower merchandize margin.

Paulo: Our efforts to grow other revenue continued to yield benefits with performance driven by increased credit card income greater loyalty point redemptions and royalties earned through our target partnership.

Paulo: At the same time, we realized benefits from our supply chain optimization efforts as our carrier diversification strategy drove improved profitability.

Paulo: As anticipated merchandize margin was pressured during the quarter, reflecting the lapping of benefits from price increases increased promotion holiday as well as the impact from brand mix.

Scott M. Settersten: The growth in comp sales was driven by a 4.5% increase in transaction volume, and average ticket declined 1.9% driven by lower units per transaction, which were partially offset by higher average selling prices. Reflecting a more normalized pricing environment, we estimate that product price increases contributed about 100 basis points to the overall increase. Looking at the cadence of sales through the quarter, comp sales were solid in November and December, reflecting strong holiday performance.

Paulo: These pressures were partially offset by ongoing category management efforts the.

Paulo: The impact of promotional activity was above last year, but continues to be well below 2019 levels.

Paulo: Notably shrink was flat during the quarter slightly better than our expectations, reflecting the impact of our investments this year in training labor and new fragrance fixtures for the full year shrink as a percentage of sales increased 40 basis points.

Speaker Change: Moving to expenses.

Speaker Change: SG&A increased seven 6% to $820 million.

Speaker Change: Overall, SG&A spend was better than planned due to focused expense management and a shift in timing of certain strategic investments.

Scott M. Settersten: As expected, sales were more challenged in January as we lagged the exceptional results from our strongest month in fiscal 2022. During the quarter, we opened 13 new stores, relocated two, remodeled two stores, and closed two stores. For the quarter, gross margin increased 10 basis points to 37.7% of sales. The increase was driven by strong growth in other revenue, lower shipping rates, and leverage of supply chain costs, which were largely offset by lower merchandise. Our efforts to grow other revenue continue to yield benefits, with performance driven by increased credit card income, greater loyalty point redemptions, and royalties earned through our target partnership. At the same time, we realize benefits from our supply chain optimization efforts as our carrier diversification strategy drives improved profitability. As anticipated, merchandise margin was pressured during the quarter, reflecting the lapping of benefits from price increases, increased promotionality, as well as the impact from brand mix. However, these pressures were partially offset by ongoing category management.

Speaker Change: As a percentage of sales SG&A decreased 50 basis points to 23, 1% compared to 23, 6% last year, primarily due to lower incentive compensation and leverage of marketing expenses and store payroll and benefits, which was partially offset by deleverage in corporate overhead and store expenses.

Speaker Change: <unk>.

Incentive compensation drove 40 basis points of leverage in the quarter, reflecting operational performance that was more in line with our internal targets compared to last year's significant outperformance.

In addition to the impact of higher sales marketing expense leverage was driven by the timing of advertising expenses.

Speaker Change: Store payroll and benefits leverage reflected fewer payroll hours per store, which more than offset ongoing wage rate pressures.

Speaker Change: Offsetting these benefits corporate overhead expense deleverage during the quarter, primarily reflecting investments related to our strategic priorities, including project SOR digital store and other IP capabilities and <unk> media.

Speaker Change: For the full year, we invested $62 million of incremental spend to support our strategic initiatives, which was at the lower end of our expectations, reflecting the shift in timing of certain projects into 2024.

Speaker Change: Finally store expenses also deleveraged driven by investments to support merchandising initiatives as well as ongoing inflationary pressures across the business.

Scott M. Settersten: The impact of promotional activity was above last year, but continues to be well below 2019 levels. Notably, shrink was flat during the quarter, slightly better than our expectations, reflecting the impact of our investments this year in training, labor, and new fragrance fixtures. For the full year, shrink as a percentage of sales increased 40 basis points. Moving to expansion. SG&A increased 7.6% to $820 million. Overall, SG&A spend was better than planned due to focused expense management and a shift in timing of certain strategic investments. As a percentage of sales, SG&A decreased 50 basis points to 23.1%, compared to 23.6% last year, primarily due to lower incentive compensation and leverage of marketing expenses and store payroll and benefits, which was partially offset by de-leverage of corporate overhead and store expenses.

Speaker Change: Operating margin was 14, 5% of sales compared to 13, 9% last year.

Speaker Change: The companys tax rate decreased to 24, 2% compared to 24, 6% in the fourth quarter last year. The lower effective tax rate is primarily due to benefits from a decrease in state income taxes.

Speaker Change: Diluted GAAP earnings per share increased 21% to $8.08 compared to $6 68 since last year.

Speaker Change: The EPS impact of the 50 <unk> week was <unk> 46 cents.

Speaker Change: To recap the full year net sales increased nine 8% to $11 2 billion.

Speaker Change: Comp sales increased five 7% driven by a seven 4% increase in transactions and a one 5% decrease in average ticket.

Speaker Change: We estimate that product price increases contributed about 200 basis points to the overall comp increase for the year.

Speaker Change: Operating profit was 15% of sales with deleverage I mean evenly from gross margin and SG&A and diluted EPS increased eight 4% to a record $26 <unk> per share.

Scott M. Settersten: Incentive compensation drove 40 basis points of leverage in the quarter, reflecting operational performance that was more in line with our internal targets compared to last year's significant outperform. In addition to the impact of higher sales, marketing expense leverage was driven by the timing of advertising expense, while store payroll and benefits leverage reflected fewer payroll hours per store, which more than offset ongoing wage rate pressure.

Speaker Change: Moving on to the balance sheet and cash flow statement.

Speaker Change: Total inventory increased eight 6% to $1 7 billion compared to $1 6 billion last year. In addition to the impact of 30 net new stores. The increase reflects inventory to support new brand launches and new market fulfillment center in Greer, South Carolina, as well as the impact of product cost increases.

Speaker Change: Reese's.

Speaker Change: Our well established business model continues to generate significant cash from operations, including nearly $1 5 billion in fiscal 2023.

Scott M. Settersten: Offsetting these benefits, corporate overhead expense de-leveraged during the quarter, primarily reflecting investments related to our strategic priorities, including Project SOAR, Digital Store, and other IT capabilities, and UB Media. For the full year, we invested $62 million of incremental spend to support our strategic initiatives, which was at the lower end of our expectations reflecting the shift in timing of certain projects into 2024. Finally, store expenses also deleveraged, driven by investments to support merchandising initiatives, as well as ongoing inflationary pressures across the business. Operating margin was 14.5% of sales compared to 13.9% last year. The company's tax rate decreased to 24.2% compared to 24.6% in the fourth quarter last year. The lower effective tax rate is primarily due to benefits from a decrease in state income tax.

Speaker Change: Our capital allocation approach remains consistent.

Speaker Change: Our first priority is to reinvest in our business to drive future growth followed by returning excess cash to our shareholders.

Speaker Change: In fiscal 2023, we invested $435 million and capital expenditures, including approximately 178 million for new stores, Remodels and merchandise fixtures $124 million for it.

Speaker Change: 73 million for supply chain and $60 million for store maintenance and other depreciation.

Speaker Change: Depreciation for the year was $244 million compared to $241 million last year, and primarily reflects the ongoing shift of investments from capital to cloud expense.

Speaker Change: During the fourth quarter, we repurchased 352000 shares at a cost of $159 million, bringing total share repurchase to $1 billion for the full year.

Speaker Change: Since launching our stock buyback program in 2014, we've purchased more than 18 million shares at a weighted average price of $313 effectively returning $5 8 billion to shareholders, while continuing to invest in strategic growth drivers.

Scott M. Settersten: Diluted GAAP earnings per share increased 21% to $8.08 compared to $6.68 last year. The EPS impact of the 53rd week was 46%. To recap the full year, net sales increased 9.8% to $11.2 billion. Com sales increased 5.7%, driven by a 7.4% increase in transactions and a 1.5% decrease in average ticket. We estimate that product price increases contributed about 200 basis points to the overall comp increase for the year. Operating profit was 15% of sales, with D leverage coming evenly from gross margin and SG&A, and diluted EPS increased 8.4% to a record $26.03 per share. Moving on to the balance sheet and cash flows. Total inventory increased 8.6% to $1.7 billion compared to $1.6 billion last year.

Speaker Change: Before I turn the call over to Paula I wanted to take a moment to express my sincere gratitude to our teams for delivering these strong results for our shareholders. This year and throughout my tenure with Ulta beauty.

Paula Evo: It has been an honor to serve as the company's CFO and a privilege to lead and serve alongside such talented associates IMAX.

Paula Evo: Im excited to pass the baton to Paula who I know will be an excellent leader and steward of Ulta Beauty's business going forward.

Paula Evo: Thank you Scott I am honored and humbled to be assuming the position of Chief financial Officer at Ulta Beauty and I am excited to lead our talented finance organization and to drive <unk> next phase of growth.

Paula Evo: I want to thank Scott for his mentorship over the years and wish him all the best in his well deserved retirement.

Paula Evo: I look forward to working with those.

Paula Evo: Call today and meeting those of you I have not yet met.

Paula Evo: Before we talk about our expectations for fiscal 2024, I want to share two capital allocation update first yesterday, we amended our revolver agreement to $800 million in.

Scott M. Settersten: In addition to the impact of 30 net new stores, the increase reflects inventory to support new brand launches, the new Market Fulfillment Center in Greer, South Carolina, as well as the impact of product cost increases. Our well-established business model continues to generate significant cash from operations, including nearly $1.5 billion in fiscal 2023. Our capital allocation approach remains consistent.

Paula Evo: And extended the term to 2029, reflecting the current rate environment, we reduced the size of the revolver to lower the impact of higher fees, but retain flexibility to upsize the capacity if needed.

Paula Evo: Second having essentially completed the authorization announced in March 2022, today, we announced a new share repurchase authorization for $2 billion.

Paula Evo: Now turning to our outlook for fiscal 2024, we expect net sales will be in the range of 11.7 to 11 8 billion.

Scott M. Settersten: Our first priority is to reinvest in our business to drive future growth, followed by returning excess cash to our shareholders. In fiscal 2023, we invested $435 million in capital expenditures, including approximately $178 million for new stores, remodels, and merchandise fixtures, $124 million for IT, $73 million for supply chain, and $60 million for store maintenance and other. Depreciation for the year was $244 million compared to $241 million last year, and primarily reflects the ongoing shift of IT investments from capital to the cloud. During the fourth quarter, we repurchased 352,000 shares at a cost of $159 million, bringing total share repurchase to $1 billion for the full year.

Paula Evo: With comp sales growth expected to be between four and five Christine.

Paula Evo: We anticipate comp growth will be in the low single digit range in the first half and then increased to mid single digit growth in the second half of the year.

Paula Evo: We expect operating margin will be between 14% and 14, 3% of sales primarily driven by SG&A deleverage as we complete many of the foundational elements of our transformational agenda and move to investments to enable growth.

Paula Evo: Operationalize the investments made in 2023 manage ongoing wage pressures and support core traffic and experienced drivers.

Paula Evo: In total we expect SG&A growth for the year will moderate and see the high single digit range from 12, 5% growth in fiscal 2023, we expect SG&A growth in the first half will be in the low double digit range as we annualize investment spend.

Scott M. Settersten: Since launching our stock buyback program in 2014, we've purchased more than 18 million shares at a weighted average price of $313, effectively returning 5.8 billion to shareholders while continuing to invest in strategic growth drivers. Before I turn the call over to Paula, I want to take a moment to express my sincere gratitude to our teams for delivering these strong results for our shareholders this year and throughout my tenure with Ulta Beauty. It has been an honor to serve as the company's CFO and a privilege to lead and serve alongside such talented associates. I'm excited to pass the baton to Paula, who I know will be an excellent leader and steward of Ulta Beauty's business going forward. Thank you, Scott.

Paula Evo: In 2023, and complete key milestones of our transformational agenda, and then slow to mid single digit growth in the second half.

Paula Evo: We expect gross margin for the year will be down modestly as lower merchandise margin and deleverage of supply chain costs are partially offset by other revenue.

Paula Evo: Our assumptions result in a diluted earnings guidance in the range of 26.

Paula Evo: 26, $26 20 to.

Paula Evo: I am honored and humbled to be assuming the position of Chief Financial Officer at Ulta Beauty. I am excited to lead our talented finance organization and to drive Ulta Beauty's next phase of growth. I want to thank Scott for his mentorship over the years and wish him all the best in his well-deserved retirement.

To $27 per share we are planning EPS to the large decline in the first half and then accelerate to high single digit growth in the second half of the year.

Paula Evo: For modeling purposes, we expect operating margin to be the most challenged in the first quarter with meaningful deleverage across SG&A and gross margin.

Paula Evo: I look forward to working with those on the call today and meeting those of you I have not yet met. Before we talk about our expectations for fiscal 2024, I want to share two capital allocation updates. First, yesterday we amended our revolver agreement to $800 million and extended the term to 2029. Reflecting the current rate environment, we reduced the size of the revolver to lower the impact of higher fees but retained flexibility to upsize the capacity if needed.

Paula Evo: Finally, we plan to spend between 415 and $490 million on capex, including approximately $270 million to $282 million for new stores, Remodels and merchandise fixtures $120 million to $155 million for supply chain and it.

Paula Evo: And 45% to $53 million for store maintenance and other.

Paula Evo: We expect depreciation for the year will be between 275 and $280 million.

Paula Evo: Second, having essentially completed the authorization announced in March 2022, today we announced a new share repurchase authorization for $2 billion. Now, turning to our outlook for fiscal 2024. We expect next year's sales will be in the range of 11.7 to 11.8 billion dollars, with comp sales growth expected to be between four and five percent. We anticipate comp growth will be in the low single digit range in the first half and then increase to mid single digit growth in the second half of the year. We expect operating margin to be between 14 and 14.3% of sales, primarily driven by SG&AD leverage, as we complete many of the foundational elements of our transformational agenda and move to investments to enable growth. Operationalize the investments made in 2023, manage ongoing wage pressures, and support core traffic and experience drivers.

Paula Evo: We believe the outlet for the beauty category is bright and we are confident our strategic framework and strong financial foundation will enable us to drive long term growth and shareholder returns.

Speaker Change: Before you take here before we take your questions I want to announce that we plan to host an investor event here in Chicago This fall to share our longer term plans and outlook.

Speaker Change: We will share more of the logistical details later this summer.

Speaker Change: Now I will turn the call back over to our operator to moderate the Q&A.

Speaker Change: Thank you we will now be conducting a question and answer session. Dan if he would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: As I will indicate that your line is in the question queue and.

Speaker Change: And you May press Star two if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.

Rupesh Dhinoj Parikh: Our first question comes from the line of <unk> Parikh with Oppenheimer. Please proceed with your question.

Rupesh Dhinoj Parikh: Good afternoon, and thanks for taking my question and also Scott best wishes in retirement.

Rupesh Dhinoj Parikh: So I wanted to start out just with the prestige cosmetics category as you look towards if you look towards this fiscal year, we're seeing a lot of newness in storage, you're moving past I think pretty difficult comparisons. So just curious if you guys expect to return to share gains within the prestige cosmetics category.

Rupesh Dhinoj Parikh: <unk>.

Speaker Change: Thanks for your question and thanks for calling out Scott.

Speaker Change: Deserved.

Speaker Change: I'll say on <unk>.

Paula Evo: In total, we expect SG&A growth for the year will moderate into the high single-digit range from 12.5% growth in fiscal 2023. We expect SG&A growth in the first half will be in the low double-digit range as we annualize investment spend in 2023 and complete key milestones of our transformational agenda and then slow to mid-single-digit growth in the second half. We expect gross margin for the year will be down modestly as lower merchandise margin and deleverage of supply chain costs are partially offset by other revenue. Our assumptions result in diluted earnings guidance in the range of $26,000. $26.20 to $27 per share.

Speaker Change: And I'll, even speak a little bit more broadly across all of our categories.

Speaker Change: We are focused on driving growth in every part of our business. Our makeup business in 2023 U S.

Particularly in the second half we saw.

Speaker Change: Healthy growth on the mass side and more challenges on the prestige side. So we have a strategy to drive <unk>.

Speaker Change: Ride performance within all parts of our makeup business. It is our largest segment and obviously important in the beauty category to our efforts.

Speaker Change: Our our holistic we've got a number of new brands that we believe will either already or will add value to to the category, including the launch of Charlotte Tilbury, which just rolled out recently.

Paula Evo: We are planning EPS to decline in the first half and then accelerate to high single-digit growth in the second half of the year. For modeling purposes, we expect operating margins to be the most challenged in the first quarter, with meaningful deleverage across SG&A and gross margins. Finally, we plan to spend between $415 and $490 million in CapEx, including approximately $270 to $282 million for new stores, remodels, and merchandise fixtures, $120 to $155 million for supply chain and IT, and $45 to $53 million for store maintenance and others. We expect appreciation for the year will be between $275 and $280 million. We believe the outlook for the beauty category is bright, and we are confident our strategic framework and strong financial foundation will enable us to drive long-term growth and shareholder return. Before we take your questions, I want to announce that we plan to host an investor event here in Chicago 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.

Speaker Change: So exclusive brands like half magic in polite Society Rabban.

Speaker Change: Innovation from Nina <unk> from our existing big brands that will continue to see that have been so important to our business like tarte and benefit and clinique and lancome on the prestige side.

Speaker Change: Our luxury.

Proposition really launched lax last year too with a lot of success and as we continue to grow and build our presence in that space, we see that as a contributor and then through our holistic efforts, we're going to try to find ways to lean into two.

Speaker Change: The important trends makeup is of course has a key trend components. So whether it's blush shade proliferation lip layer and Matt makeup nail as it is an important opportunity.

Speaker Change: Going to continue to drive that and the last thing I'd say is we continue to revamp and elevate our events that play an important role in mass migration the number of mass consumers that we've acquired over.

Speaker Change: Over the years continuing to introduce them to prestige for the first time. So we're focused on driving that business. We are confident over time that we'll be able to deliver.

Speaker Change: Deliver the growth that we expect and we're working hard to deliver across all parts of that business.

Speaker Change: Great. Thank you I'll pass it along.

Rupesh Dhinoj Parikh: Good afternoon, and thanks for taking my question. And also, Scott, best wishes in retirement. So I wanted to start out just with the Prestige Cosmetics category. As you look towards this fiscal year, you know, we're seeing a lot of new stores. You're moving past, you know, I think pretty difficult comparisons.

Speaker Change: Our next question comes from the line of Karan Wolf Meyer with.

Speaker Change: Piper Sandler. Please proceed with your question.

Speaker Change: Hey, good afternoon team I. Thank you for taking the question and congrats on the quarter.

Speaker Change: I'd like to touch a little bit on the decision to enter into Mexico, and then previously we've been talking about potentially going and thanks again.

Speaker Change: Just would like to understand your thought process is going.

Speaker Change: Doing Mexico versus Canada and what.

David C. Kimbell: So just curious if you guys expect to return to share gains within the Prestige Cosmetics category. Rupesh, thanks for your question. And thanks for calling out Scott. Well deserved.

Speaker Change: What kind of opportunity do you really see there over the longer term. Thanks.

Speaker Change: Hey, I'm just going to say, we're really excited about this announcement and.

David C. Kimbell: Yeah, I'll say on makeup, and I'll even speak a little bit more broadly across all of our categories. You know, we are focused on driving growth in every part of our business, including our makeup business. In 2023, you know, particularly in the second half, we saw healthy growth on the mass side and more challenges on the prestige side. So we have a strategy to drive performance within all parts of our makeup business. It is our largest segment and obviously important in the beauty category.

Speaker Change: Really as I said in the in the prepared remarks see Mexico as a great opportunity. That's a tailor made for the Ulta beauty experience Keisha is leading this effort among many things that she does so I'm going to ask you sort of give some more color on it yeah, absolutely well after a careful evaluation of many market opportunities, we really felt like.

Keisha: The Mexican market is the next step for all TBD.

Keisha: For us to have this partnership with OXXO I mean, I'm really excited about this I know that the future is going to be really brightness partnership when you spend a lot of time with their teams from a cultural prospect cultural perspective also just even from the best in class performance with global partners that they brought to the Mexico how consumer.

David C. Kimbell: You know, our efforts are holistic; we've got a number of new brands that we believe will either already add value to the category, including the launch of Charlotte Tilbury, which just rolled out recently. Also, exclusive brands like Half Magic and Polite Society, Ravon, innovation from Nuna from our existing big brands that will continue to see that have been so important to our business, like Tarte and Benefit and Clinique and Lancome on the prestige side. Our luxury proposition really launched last year at two with a lot of success.

Keisha: Mexican consumer our border stores are performing really really well and I just think it's a it's the next natural step for us as we continue to expand internationally. So we are really excited about this again, we are planning to be operational in 2025.

David C. Kimbell: And as we continue to grow and build our presence in that space, we see that as a contributor. And then, through our holistic efforts, we're going to try to find ways to lean into the important trends. Makeup, of course, has a key trend component. So whether it's blush, shade, proliferation, lip layering, matte makeup, nail is an important opportunity.

Keisha: The cost of this is built into the guidance and 24, so we don't feel like it's very material but.

Super excited and feel that OXXO is the right partner for us to launch in this next new territory for us.

Alright, thanks, so much.

Our next question comes from the line of Ike <unk> with Wells Fargo. Please proceed with your question.

Ike: Hi, everyone.

Speaker Change: Tim This is <unk> on for Ike. Thank you for taking my question I just wanted to ask in regards to thoughts on the beauty category as may be required, particularly the balance in prestige and mass and maybe immigration how we can see that drive on merchandise margin given the benefit that we've seen.

David C. Kimbell: We're going to continue to drive that. And the last thing I'd say is that we continue to revamp and elevate our events that play an important role in mass migration, the number of mass consumers that we've acquired over the years, continuing to introduce them to prestige for the first time. So we're focused on driving that business, and we are confident that, over time, we'll be able to deliver the growth that we expect. And we're working hard to deliver across all parts of that business. Great, thank you. I'll pass it along.

Tim: Well for the overall.

Tim: Category as I mentioned in the remarks.

Tim: We're fortunate to be in a category that continues to be healthy that is highly connected to our consumers a high level of engagement that there is an emotional connection that's driving driving the category and has been.

Rupesh Dhinoj Parikh: This question comes from the line of... Simeon Gutman, Christopher Horvers, Mark Altschwager, Dana Telsey, Simeon Siegel, Ashley Helgans, Hey, good afternoon team. Thanks for taking the question and congrats on the quarter. I'd like to touch a little bit on the decision to enter Mexico. I mean, previously, we've been talking about potentially going into Canada, and I just would like to understand your thought process of going to Mexico versus Canada. And what kind of opportunity do you really see there over the longer term?

Tim: For a very long time.

Tim: And then certainly coming out of Covid has been exceptionally strong all indicators as we look at the at the consumer landscape is a continued level of engagement when we look into this year, though of course.

Tim: We are in.

Tim: Evaluate into an anticipated and preparing.

Tim: Four.

Tim: Consumer <unk>.

Tim: Tumor behavior to continue to evolve we know there's a external pressures on the consumer we know we're entering into a dynamic time.

Tim: With an election year.

David C. Kimbell: I'm just going to say we're really excited about this announcement and, really, as I said in the prepared remarks, I see Mexico as a great opportunity. That's, you know, tailored made for the Ulta Beauty experience.

Tim: And what we've seen in this category is.

Tim: Strong growth, but as expected some moderation in that growth still above historical trends, but.

Tim: Some moderation, but simply put we think consumers.

Kecia L. Steelman: Kecia is leading this effort among many things that she does. So I'm going to ask Kecia to give some more color on it. Yeah, absolutely. Well, after careful evaluation of many market opportunities, we really felt like the Mexican market is the next step for Ulta Beauty for us to have this partnership with EXO. I'm really excited about this, and I know that the future is going to be really bright in this partnership. We spend a lot of time with their teams from a cultural and historical perspective.

Tim: Highly engaged in the category, but still.

Tim: And still passionate about the category, but we will continue to be thoughtful in all of their spending but Fortunately we know that beauty is an important one and as a reminder, ulta beauty is well positioned to manage through really any kind of economic.

Tim: No disruption or challenge given our unique portfolio all price points.

Tim: All categories that allow us to meet our consumers needs. If there is a time that they feel more pressured or have other changes, but overall category healthy.

Kecia L. Steelman: Also, just even from the best in class performance with global partners that they've brought to the Mexican consumer, the Mexican consumer, our border stores are performing really, really well. And I just think it's the next natural step for us as we continue to expand internationally. So we are really excited about this. Again, we are planning to be operational in twenty twenty five. The cost of this is built into the guidance in twenty four.

Paula as it relates to any potential margin changes.

Paula Evo: Yes, Hi, what I would say is our <unk>.

Paula Evo: <unk> margin, although remind we are mean.

Paula Evo: Meaningfully higher and better merchandise margin since 2019, and really that has a lot to do with we are a much healthier business now than we have.

Paula Evo: Our mix in our business between our categories as well at Christina <unk> do category performance efforts over the years has really helped us.

Kecia L. Steelman: So we don't feel like it's very material, but we're super excited and feel that EXO is the right partner for us to launch in this next new territory for us. Great, thanks so much. Question comes from the line of Ike Boruchow with... Hi everyone, good afternoon team. This is Juliana for Ike.

Paula Evo: Be able to be flexible as the consumer shifts between various categories as well as between mass and prestige and so we believe that.

Paula Evo: We're able to manage that that dynamic.

Speaker Change: Got it thank you very much.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of Susan Anderson with Canaccord Genuity. Please proceed with your question.

Juliana: Thank you for taking my question. I just wanted to ask in regards to thoughts on the beauty categories moving forward, particularly the balance of prestige and mass and maybe, in addition, how we can see that driving merchandise margin given the benefit that we've seen. Well, for the overall category, as I mentioned in my remarks, we're fortunate to be in a category that continues to be healthy, that is highly connected to our consumers, a high level of engagement, and there's an emotional connection that's driving the category and has been for a very long time. And it's certainly coming out of COVID has been exceptionally strong.

Susan Kay Anderson: Hi, good evening, Thanks for taking my question.

Susan Kay Anderson: I wanted to maybe ask about the store expansion it looks like it picks up a lot. This year I guess, how should we think about timing throughout the year and then also.

Susan Kay Anderson: Should we expect these to be the full size stores or are you going to roll out any of the smaller test stores that you've been looking at.

Susan Kay Anderson: And then also just how do you think this helps to maybe win back some of the share from other competition. Thanks.

Speaker Change: Thanks, Susan we are planning to open between 60 and 65 net new stores in fiscal 2024 that puts our growth between the two year period at $90 95, which is generally in line with the 100 that we had communicated.

David C. Kimbell: All indicators as we look at the consumer landscape are for continued levels of engagement. When we look into this year, though, of course, we are evaluating, anticipating, and preparing for consumer behavior to continue to evolve. We know there are external pressures on the consumer. We know we're entering into a dynamic time with an election year.

Speaker Change: And so our thinking hasn't materially changed there we remain confident in our ability to open and operate between 1500 1700 traditional ocbd freestanding locations in the U S and we're optimistic the small format store prototype could give us an opportunity for additional additional.

David C. Kimbell: And what we've seen in this category is strong growth, but, as expected, some moderation in that growth, still above historical trends, but some moderation. Simply put, we think consumers are highly engaged in the category and still passionate about it, but will continue to be thoughtful in all of their spending. But fortunately, we know that beauty is an important category.

Speaker Change: And the partnership with target and then similarly, as we're excited about the additional opportunity with our international expansion and said until Mexico.

Related to the small geographies, we are planning to open 10 small store formats in 2024.

Speaker Change: Great. Thanks, so much good luck the rest of the year.

David C. Kimbell: And as a reminder, Ulta Beauty is well positioned to manage through any economic disruption or challenge, given our unique portfolio, all price points, all categories that allow us to meet our consumers' needs if there is a time that they feel more pressured or have other changes, but overall category health. Paula, as it relates to any potential margin changes? Yes, hi, what I would say is, you know, our merchandise margin. I would remind you we are meaningfully higher and better on our merchandise margin since 2019. And really, that has a lot to do with us being a much healthier business now. And we have our mix in our business between our categories, as well as prestige and math, category performance efforts over the years have really helped us be able to be flexible as a consumer. And so we believe that we're able to manage that dynamic. Got it. Thank you very much. Hi, good evening.

Speaker Change: Sure.

Speaker Change: Our next question comes from the line of Ashley Hogan with Jefferies. Please proceed with your question.

Hi, Thanks for taking our questions. So I just wanted to ask for an update on <unk> anything you can share about the number of brands that are currently on the platform maybe demand for the platform and then any color to help us model.

Speaker Change: Concepts of scale. Thanks.

Speaker Change: Yes, we're really pleased with the progress that we've made.

Speaker Change: As a reminder for those on the call. This this really does represent.

Speaker Change: A way for us to.

Speaker Change: <unk> generated.

Speaker Change: Positive impact on our business by leveraging the first party data.

Speaker Change: And insights that we have in partnering with our brands.

Speaker Change: We're not we're not sharing we haven't shared and we don't plan to share specific on number of brands or even specific financial financial.

Speaker Change: <unk> impact at this time, but what I will say is.

Speaker Change: We're really pleased with the progress that we've made in 2023 and are confident that we will continue to grow this part of the business.

Susan Kay Anderson: Thanks for taking my question. I wanted to maybe ask about the store expansion. It looks like it picks up a lot this year. I guess, how should we think about timing throughout the year?

Speaker Change: The network that we have offers advertising access via Offsite display video social influencers as well as.

Unknown Executive: And then also, should we expect these to be the full-size stores? Or are you going to roll out any of the smaller test stores that you've been looking at? And then also, just how do you think this helps to maybe win back some of the share from other competition things? Thanks, Susan.

Speaker Change: Onsite sponsored Prada.

Speaker Change: Products you are on spy onsite display inventory.

Speaker Change: Is one of the actually new core offerings that we activated just in 2023. So we've got a full suite of AD inventory experiences value added services.

Unknown Executive: We are planning to open between 60 and 65 net new stores in fiscal 2024. That puts our growth for the two-year period at 90 to 95, which is generally in line with the 100 that we had communicated. And so our thinking hasn't materially changed there. We remain confident in our ability to open and operate between 1,500 and 1,700 traditional Ulta Beauty freestanding locations in the U.S. And we're optimistic the small format store prototype could give us an opportunity for additional growth, as does the partnership with Target, and then similarly, as we're excited about the additional opportunity with our international expansion into Mexico.

Speaker Change: And as I said, we're confident in and its impact going forward and the support engagement reaction from brands has been very positive.

Speaker Change: As you know the advertising world continues to evolve so the value that we can bring through first party data with 43 million beauty enthusiast is very meaningful and we continue to work with our brand partners and they have demonstrated to us that they see.

Speaker Change: See a positive return and where can continuing to grow that business.

Speaker Change: Great. Thanks, so much that's the block.

Speaker Change: Our next question comes from the line of Olivia Tong with Raymond James. Please proceed with your question.

Unknown Attendee: Great. Thanks, good afternoon.

Unknown Attendee: Scott and I look forward to working with Nikola.

Unknown Attendee: I wanted to ask you a little bit about your thoughts on new product contribution this year because it does seem like.

Unknown Attendee: Certainly starting off with with some momentum with Charlotte Tilbury and holiday Janeiro, We did some store.

Unknown Attendee: Store tours in New York recently, and the team is very energized around these brands. So was wondering if you could talk about contribution this year versus previous years and then.

Susan Kay Anderson: Related to small geographies, we are planning to open 10 small store formats in 2024. Great. Thanks so much. Good luck for the rest of the year.

Unknown Attendee: Helping us understand sort of.

Speaker Change: I think you mentioned hello to generalize that.

Unknown Attendee: Next question. Hi, thanks for taking our questions. So we just wanted to ask for an update on UB Media, anything you can share about the number of brands that are currently on the platform, maybe demand for the platform, and then any color to help us model as UB starts to scale. Thanks.

Speaker Change: A portion of the doors, maybe can you give the same statistics for Charlotte Tilbury.

Speaker Change: And then.

Speaker Change: On the margin I would just love a little bit more detail in terms of what's driving the margin outlook to 14.

Speaker Change: 14, three and of the longer term range.

Speaker Change: Whether there was anything sort of.

Speaker Change: Higher investment or or or what have you that's sort of.

David C. Kimbell: Yeah, we're really pleased with the progress that we've made. As a reminder for those on the call, this really does represent a way for us to, you know, generate a positive impact on our business by leveraging the first-party data and insights that we have and partnering with our brands. We're not we're, we're not sharing, we haven't shared, and we don't plan to share specifics on the number of brands or even specific financial, financial impact at this time. But what I will say is, you know, we're really pleased with the progress that we've made in 2023 and are confident that we'll continue to grow this part of the business. The network that we have offers advertising access via offsite display, video, and social influencers, as well as onsite sponsored products.

Speaker Change: To that end the range. Thank you.

Speaker Change: Okay. Thanks, Olivia Yeah, I'll talk about new product.

Speaker Change: At our newest pipeline and then Paula can pick up on your question.

Speaker Change: Around margin so yes.

Speaker Change: Yes.

Speaker Change: Well first I'll say newness is always a critical part of our business and historically has been between 20% to 30% of our sales and that's.

Speaker Change: An important part of the category and one of the best things about the category. There is a large desire from our beauty enthusiast guests from our members to discover what's new and exciting across all of our categories.

Speaker Change: And so we do have.

Speaker Change: What I believe is a bad are well balanced.

Speaker Change: Portfolio of new brands between the big recognized brands like Charlotte Tilbury as well as a steady stream of emerging emerging brands that are you.

David C. Kimbell: Our onsite display inventory is one of the actually new core offerings that we activated just in 2023. So we've got a full suite of ad inventory experiences, and value-added services. And as I said, we're confident in its impact going forward, and the support engagement reaction from brands has been very positive. As you know, the advertising world continues to evolve. So the value that we can bring through first party data with 43 million beauty enthusiasts is very meaningful. And we continue to work with our brand partners, and they have demonstrated to us that they see a positive return, and we're continuing to grow that business. Thanks so much. That's the block, in the line of Olivia Thomas.

Speaker Change: Our unique or exciting within the Ulta beauty environment and so we don't we're not going to give any specific numbers about newness this year versus last year, but I will give you a couple of highlights first you mentioned Charlotte Tilbury and just to reiterate that is in 600 stores and online.

And we're excited about that it's a it was one of the top requested brands.

Speaker Change: From our members and we're pleased to be partnering with them to bring a unique and powerful experience to life.

Speaker Change: So sold as narrow as in 700 700 stores.

Speaker Change: And also online at all and also was highly requested and brings a just a terrific experience in store and online and has been very well received since we launched launched that in January but there's a whole range of products that we're going to continue to launch and bring bring to life.

Olivia Tong Cheang: Great, thanks, good afternoon, and congrats, Scott, and I'm looking forward to working with you. I wanted to ask you a little bit about your thoughts on new product contribution this year because it does seem like we are certainly starting off with some momentum with Charlotte Tilbury and Soledad Janeiro. We did some store tours in New York recently, and the team is very energized around these brands. So I was wondering if you could talk about contribution this year versus previous years and then help us understand, you know, sort of. I think you mentioned Soledad Janeiro was that a portion of the doors; maybe you could give the same. for Charlotte Tilbury.

Speaker Change: We do focus as I said on emerging brands and while I'm not going to go into for competitive reasons share. Some of the pipeline that are ahead of us are going to highlight some of the brands that we launched last year like Lola very polite society have magic a brand like Lib tend to it which has been with us for a little bit.

Speaker Change: Important brands plane.

Speaker Change: And exciting role in driving growth in various categories that were.

Speaker Change: Excited about and our luxury business that I talked about we continue to add brands to that throughout the year and see growth. So newness important we see we like the balance that we have we're excited about the brands that we've launched so far and and I look forward to rolling out more partnerships and bringing newness.

David C. Kimbell: And then on the margin, I would just love a little bit more detail in terms of what's driving the margin outlook to the 14, you know, 14 to 14.3 end of the longer term range, whether there's anything, you know, http://www.youtube.com.au Okay, thanks, Olivia. Yeah, I'll talk about new products at our newness pipeline. And then Paula can pick up on your question around margin. So, you know, well, first, I'll say newness is always a critical part of our business and, historically, has been between 20 to 30% of our sales. And that's an important part of the category.

Speaker Change: Across our portfolio throughout 2024.

Speaker Change: Paula on the margin question, yes, so from a operating margin perspective.

Paula Evo: We say, our 2014 to 14, 3% of sales.

That is <unk>.

Paula Evo: Mostly deleverage coming from SG&A as we complete many of our foundational elements of our transformation agenda and move to investments to enable enable growth.

Paula Evo: As well as as we operationalize the investments that we've made to date and those go into one state.

Paula Evo: We also are managing ongoing wage pressures, which is assumed in our guidance and we also will continue to support core traffic an experienced driver and so as you think about SG&A growth for the year. It will moderate into the high single digit range from the 12, 5% growth we saw in fiscal 2010.

David C. Kimbell: And one of the best things about the category is that there is a large desire from our beauty enthusiasts guests and from our members to discover what's new and exciting across all of our categories. And so we do have, what I believe is, a well-balanced portfolio of new brands between big recognized brands like Charlotte Tilbury as well as a steady stream of emerging brands that are unique or exciting within the Ulta Beauty environment. And so we're not going to give any specific numbers about newness this year versus last year, but I will give you a couple of highlights. First, you mentioned Charlotte Tilbury.

Paula Evo: Three.

Paula Evo: And then we do expect gross margin to be down modestly as lower merchandize margin and deleverage from supply chain cost.

Paula Evo: Partially offset by the growth, we see and expect and other revenue.

David C. Kimbell: And just to reiterate, that is in 600 stores and online. And we're excited about that. It was one of the top requested brands from our members, and we're pleased to be partnering with them to bring a unique and powerful experience to life. Sol de Janeiro is in 700 stores and also online and was also highly requested and brings just a terrific experience in store and online and has been very well received since we launched that in January.

Paula Evo: Yeah.

Paula Evo: Yeah.

Speaker Change: Operator can we have the next question.

Speaker Change: Of course.

Speaker Change: Our next question comes from the line of Michael Baker with D. A Davidson. Please proceed with your question.

Michael Allen Baker: Okay. Thanks.

Michael Allen Baker: Just to follow up on what you just said.

Michael Allen Baker: Can you tell us where you are in this investment in <unk>.

Michael Allen Baker: Foundational investments I think you said $62 million in 2023, which was below plan and shift some into 2024, so what should it be in 2024, and even working backwards can you remind us what it was in 'twenty, one and 2022, it was sort of supposed to be a three year investment plan.

David C. Kimbell: But there's a whole range of products that we're going to continue to launch and bring to life. We do focus, as I said, on emerging brands. And while I'm not going to, for competitive reasons, share some of the pipeline that is ahead of us, no, I'd highlight some of the brands that we launched last year, like Lollavay, Polite Society, Half Magic, a brand like Lib Tinted, which has been with us for a little bit. Important brands playing an exciting role in driving growth in various categories that we're excited about. And our luxury business that I talked about, we continue to add brands to that throughout the year and see growth. So, newness is important.

Michael Allen Baker: Is rolling off it sounds like it's still rolling off and although there'll be some lingering costs in 2024, so just trying to conceptualize.

Michael Allen Baker: Slide four investments will look like versus 2023. Thank you.

Speaker Change: Yes, Michael.

I'll start with some of the numbers and then turn it over to Keisha, especially you can get a little bit more flavor for where we are.

Keisha: So we.

We had incremental 55 million in 2022 related to our transformational strategic investments, we communicated 62 million incremental in 2023 as you think about 2024, we expect limited incremental investment as we complete the foundational element.

David C. Kimbell: We like the balance that we have. We're excited about the brands that we've launched so far and look forward to rolling out more partnerships and bringing newness across our portfolio throughout 2024. Paula on the margin question. Yes. So from an operating margin perspective, we shared 14 or 14.3% of sales. And that is mostly the leverage coming from SG&A as we complete many of our foundational elements of our transformational agenda and move to investments to enable growth, as well as as we operationalize the investments that we have made to date, and those go into one state. We also are managing ongoing wage pressures, which is assumed in the guidance, and we also will continue to support core traffic and experienced drivers. And so, as you think about SG&A growth for the year, it will moderate into the high single-digit range from the 12.5% growth we saw in fiscal 2023. And then we do expect gross margin to be down modestly as lower merchandise margin and the leverage from supply chain costs are partially offset by the growth we see and expect in other revenues. Operator, can we have the next question? This question comes from the line...

Keisha: <unk> of our transformation agenda thing about projects, all our digital store and other IP project.

Keisha: As I communicated once we complete those particular systems. These upgraded systems rolled into our core operations and become a part of our base and there is Brian cost associated with that so.

Keisha: There isn't Brian cost associated with those foundational investments, we will continue to invest to enable growth as well as the other items that I've mentioned regarding wage pressures and investing in traffic and experienced drivers.

Keisha: Yes, so in regards to like where we are on the investments and where we are and the projects for our ERP upgrade or what we're internally calling us projects store just this week we completed.

Keisha: Completed our Dallas DC, and we have plans to wrap up Greenwood and Fresno and open up our new MFC and Bolingbrook, which is a relocation of the existing FFC N romeoville all before.

Keisha: For peak this year part of the ERP upgrade we're also transitioning our store systems and our merchandising systems and we have those plans to be completed before the second half again prior to peak for supply chain in 'twenty. Four we are continuing to invest in our automation capability is and I mentioned already the MFC in bolingbrook hits our <unk>.

Michael Charles Binetti: Okay, thanks. Really, just to follow up on what you just said, can you tell us where you are in this investment in these foundational investments? I think you said $62 million in 2023, which was below plan and shifts some into 2024. So what should it be in 2024? And even working backwards, can you remind us what it was in 2021 and 2022? It was sort of supposed to be a three-year investment plan that is rolling out.

Keisha: Apply chain lines, and then also finishing out that retrofit and Dallas with Dallas DC and then for the digital store of the future. So our digital store platform, we expect that to be completed in the first half of 2024, and we're wrapping up all of our upgrades around our analytical tools and reporting capabilities. So bottom line, we continue to be.

Paula Evo: Sounds like it's still rolling off, and although there'll be some lingering costs in 2024. So just trying to conceptualize, you know, what 2024 investments will look like versus 2023. Thank you. Yes, Michael. I'll start with some of the numbers and then turn it over to Kecia so she can give a little bit more flavor of where we are. So we had an incremental $55 million in 2022 related to our transformational strategic investments. We communicated $62 million in incremental revenue in 2023. As you think about 2024, we expect limited incremental investment as we complete the foundational elements of our transformational agenda. Think about Project SOAR, Digital SOAR, and other IT projects. But as I communicated, once we complete those particular systems, these upgraded systems roll into our core operations and become a part of our base, and there's run costs associated with that. So there are run costs associated with those foundational investments.

Keisha: On track and on budget and we are all in wrapping these foundational enabling systems up this year.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Anthony <unk> with loop capital markets. Please proceed with your question.

Thank you so much for taking my question and let me add my congratulations to Scott as well, it's been a pleasure working with you all these years.

Anthony: So my question was on.

Anthony: The luxury brands I guess just.

Anthony: Two parts to the same question, both pretty quick first off how do they perform relative to your expectations in 2024, and what are your expectations in terms of.

Anthony: Additional brand Rollouts luxury brand Rollouts in 'twenty.

Anthony: Starting 2023 and in order to expectations for additional luxury brand Rollouts in 2024. Thank you.

Anthony: Okay.

Speaker Change: Great well thanks for the question and yes luxury as I said was one of our one of many initiatives last year to drive engagement and we're really pleased with establishing that more more firmly.

Speaker Change: With some of our existing partners.

Speaker Change: Including Chanel.

Speaker Change: D Oar Natasha dodona.

Pat Mcgrath.

Kecia L. Steelman: We will continue to invest to enable growth, as well as the other items that I mentioned regarding wage pressures on investing in traffic and experience driving. Yeah, so in regards to where we are on the investments and where we are on the projects, for our ERP upgrade, or what we're internally calling Project SOAR, just this week, we completed our Dallas, D.C., and we have plans to wrap up Greenwood and Fresno and open up our new MFC in Bolingbrook, which is a relocation of the existing FFC in Romeoville, all before peak this year. As part of the ERP upgrade, we're also transitioning our store systems and our merchandising systems, and we have those plans to be completed before the second half, again, prior to peak. For supply chain and 24, we are continuing to invest in our automation capabilities.

Speaker Change: And so we see strong performance and we're really pleased with how our guests are engaging in that in that part of the business. We had a lot of confidence going in because of existing relationships with brands like Chanel.

Speaker Change: And then by elevating and expanding it.

Speaker Change: It is really we believe met met our guest needs and are they're excited about it and further demonstrates our ability to deliver all things beauty from all all price points, including luxury.

Speaker Change: No we're not sharing any specific.

Speaker Change: Launches of any anything beyond what I've already shared today more broadly as I said with newness we have a.

Speaker Change: Steady steady stream of newness throughout the year and we will continue to innovate specifically within luxury our focus is continuing to grow in partnership with the brands that we've launched and find new ways to.

Kecia L. Steelman: And, you know, I mentioned already the MFC in Bolingbrook hits our supply chain lines, and then also finishing out that retrofit in Dallas, D.C. And then for the digital store of the future, so our digital store platform, we expect that to be completed in the first half of 2024, and we're wrapping up all of our upgrades around our analytical tools and reporting capabilities. So, bottom line, we continue to be on track and on our budget, and we are all in on wrapping these foundational enabling systems up this year. Thank you. Thank you so much for taking my question.

Speaker Change: Expanding in those businesses and delight, our guests with them and we're really pleased and proud to have that experience in our stores.

Speaker Change: Yes.

Speaker Change: Operator can we have the last question. Please.

Speaker Change: Our final question comes from the line of Adrienne <unk> with Barclays. Please proceed with your question.

Adrienne: Thank you very much good afternoon, Scott Congratulations it's been great and thanks for all the help over the years.

Adrienne: This question, maybe for Dave or Keith can you talk about the promotional environment.

And your guidance is under for 2024 is it expected to sort of remain in maybe the first half and then if they are kind of pre exist all year long and whether it was from more from prestige.

Are you concerned that there, perhaps as a longer term shift to master masstige from younger or my more price sensitive consumers and then Scott and Paul just a quick one.

Unknown Attendee: And let me add my congratulations to Scott as well. It's been a pleasure working with you all these years. So my question is about the luxury brands. I guess there are two parts to the same question, but pretty quick.

Speaker Change: In your four to five comp what are you expecting in terms of any ASP increases this year and what's the rationale behind the low single digit to mid single digit comp in the back half what's going to drive the acceleration. Thank you very much.

Unknown Attendee: First off, you know, how will they perform relative to your expectations in 2024? And what are your expectations in terms of additional luxury brand rollouts in 2023? And then what are your expectations for additional luxury brand rollouts in 2024? Thank you. Great. Well, thanks for the question.

Speaker Change: Yeah.

Speaker Change: So yes, just on the promotional environment.

Speaker Change: Uh huh.

Speaker Change: Probably won't answer every one of your detailed questions because we're not going to break it out that that way exactly what I'll say more broadly as a.

David C. Kimbell: And yeah, luxury, as I said, was one of our many initiatives last year to drive engagement. And we're really pleased with establishing that more, more firmly with some of our existing partners, including Chanel, but Dior, Natasha Denona, Pat McGrath. And, and so we see strong performance.

Speaker Change: We're not expecting.

Speaker Change: And that the promotional environment go into <unk>.

Speaker Change: Significantly intensified become irrational we are in a competitive environment.

Speaker Change: That for sure.

Speaker Change: And we are focused on ensuring that we're delivering.

David C. Kimbell: And we're really pleased with how our guests are engaging in that part of the business. We had a lot of confidence going in because of existing relationships with brands like Chanel, then by elevating and expanding it, it has really, we believe, met our guests' needs, and they're excited about it, and further demonstrates our ability to deliver all things beauty from all price points, including luxury. You know, we're not sharing any specific launches of any, anything beyond what I've already shared today.

Speaker Change: On our leadership position so as we look forward we would anticipate.

Speaker Change: We have in our plans the ability to drive our business which includes.

Speaker Change: Marketing store labor digital experiences and promotional activity as a as a as appropriate but not an expectation more broadly for OA.

Speaker Change: A significant seven and we do anticipate.

Speaker Change: As we saw in 2023 that it will still remain well below 2009 teen levels.

David C. Kimbell: But more broadly, as I said, with newness, we have a steady, steady stream of newness throughout the year, and we'll continue to innovate. Specifically within luxury, our focus is continuing to grow in partnership with the brands that we've launched and find new ways to expand those businesses and delight our guests with them. And we're really pleased and proud to have that experience in our stores. Operator, can we have the last question, please? The final question comes from the line of Adrienne Yih with... Thank you very much. Good afternoon. Scott, congratulations. It's been great, and thanks for all the help over the years. This question is, maybe, for Dave or Kecia. Can you talk about the promotional environment that your guidance is in for 2024?

Speaker Change: Mass to mass prestige quest.

Speaker Change: Question, Yeah, we see opportunity across both both parts of the business, yes consumers are engaged and young consumers are engaged in a mass, but theyre also engaged in prestige theyre loving our luxury experience. So it's really not so much about price or promotion necessarily as you know what brand is really delivering.

Speaker Change: Great innovation, great marketing engaging with them in social media those brands a win.

Speaker Change: Regardless of the price points.

Speaker Change: Paula do you want to give a little color on some of the affordable care and Adrian on your question with regards to expectation around <unk>, what I would share that we are planning for a more normalized pricing environment in 2024.

David C. Kimbell: Is it expected to sort of remain in maybe the first half and then abate or kind of exist all year long? And whether it was more from prestige, are you concerned that there perhaps is a longer-term shift to mass or mastige from younger or more price-sensitive consumers? And then Scott and Paula, just a quick one. In your four-to-five comp, what are you expecting in terms of any ASP increases this year? And what's the rationale behind the low single-digit to mid-single-digit comp in the back half?

Speaker Change: Perfect Great. Thank you very much.

Speaker Change: So much.

Speaker Change: Great. Thank you.

Speaker Change: Thanks, everyone for joining today I'd like to close by thanking our 55000 associates for delivering a strong 2023 together I know, we will continue to unleash the unique power of beauty and keep moving our business forward in exciting ways I'm optimistic about the future of Ulta beauty and confident we will continue to.

Adrienne Eugenia Yih: What's going to drive the acceleration? Thank you very much. So yeah, just on the promotional environment, what I would, you know, I probably won't answer every one of your detailed questions because we're not going to break it out that way exactly. But what I'll say more broadly is we're not expecting that the promotional environment is going to significantly intensify or become irrational.

Speaker Change: Create significant shareholder value I do want to take one second to thank Scott again, Scott as I said has been an amazing partner to all of us and I. So appreciate his impact and his leadership and I want to thank those on the call that have the chance to.

Speaker Change: Thank him yourself I know.

Speaker Change: He he loved spending time in our in all of our meetings and all of our earnings calls.

David C. Kimbell: We are in a competitive environment, that's for sure, and we are focused on ensuring that we're delivering on our leadership position. As we look forward, we would anticipate, and we have in our plans, the ability to drive our business, which includes marketing, store labor, digital experiences, and promotional activity as appropriate. Not an expectation more broadly for a significant step, and we do anticipate, as we saw in 2023, that it will still remain well below 2019 levels.

It was Oh no. He appreciated the partnership with all of you and I do want to thank Scott for everything you've done for our company. Thank you Scott.

Speaker Change: We look forward to speaking to all of you again, when we report results for the first quarter of fiscal 2024 on May 30th. Thank you again and have a great night.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

David C. Kimbell: The mass prestige question, we see opportunity across both parts of the business. Yes, consumers are engaged, and young consumers are engaged in mass, but they're also engaged in prestige. They're loving our luxury experience. It's really not so much about price or promotion necessarily as what brand is really delivering great innovation, great marketing, and engaging with them on social media. Those brands will win regardless of the price points.

Speaker Change: Okay.

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Paula Evo: Paula, do you want to give a little color on some of the four to five? Adrian, on your question with regard to expectations around ASP, what I would share is that we are planning for a more normalized pricing environment in 2024. Perfect. Thank you very much. Thank you so much.

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David C. Kimbell: And thank you everyone for joining today. I'd like to close by thanking our 55,000 associates for delivering a strong 2023. Together, I know we will continue to unleash the unique power of beauty and keep moving our business forward in exciting ways. I'm optimistic about the future of Ulta Beauty and confident we will continue to create significant shareholder value.

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David C. Kimbell: I do want to take one second to thank Scott again. Scott, as I said, has been an amazing partner to all of us, and I so appreciate his impact and his leadership. And I want to thank those on the call that had the chance to thank him themselves. I know he loved spending time in all of our meetings and all of our earnings calls.

Speaker Change: Okay.

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David C. Kimbell: I know he appreciated his partnership with all of you, and I do want to thank Scott for everything you've done for our company. Thank you, Scott. We look forward to speaking to all of you again when we report results for the first quarter of fiscal 2024 on May 30th. Thank you again, and have a great night.

Speaker Change: [music].

Speaker Change: Okay.

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Unknown Executive: This concludes today's teleconference. You may disconnect your line. Thank you for your patience. The Ultimate Parody Site! www.larryweaver.com http://www.facebook.com www.larryweaver.com, Bye!

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Unknown Executive: ... The Ultimate Parody Site!

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Unknown Executive: ........