Q1 2025 Ulta Beauty Inc Earnings Call
Good afternoon, everyone. My name is Leyla and I will be your conference operator today at this time I would like to welcome you to Ulta Beauty's first quarter 2025 earnings call. This conference is being recorded and all lines have been placed on mute to prevent any background noise.
After the Speakers' prepared remarks, there will be a question and answer session.
Speaker Change: At this time I would like to turn the call over to MS. Kiley Rawlins Senior Vice President of Investor Relations Ms. Rollins. Please proceed.
Speaker Change: Thank you Leila good afternoon, everyone and thank you for joining us for our discussion of Ulta Beauty's results for the first quarter of fiscal 2025 poster.
Speaker Change: Hosting our call today are Keisha, Spielmann, President and Chief Executive Officer, and Paulo are you Bowe Chief Financial Officer.
Speaker Change: Before we begin I'd like to remind you of the company's safe Harbor language. Many of our remarks today will contain forward looking statements, which speak only as of today may 29 2025.
Speaker Change: We refer you to our earnings release, and SEC filings, where you will find a number of factors, which could cause actual results to differ materially from these forward looking statements.
Speaker Change: We caution you not to place undue reliance on these forward looking statements, which speak only as of today May 29 2025.
Speaker Change: 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.
Speaker Change: Following our prepared remarks, well open the call for questions to allow us to accommodate as many questions as possible during the hour scheduled for this call. We respectfully ask that you limit your time to one question.
Speaker Change: If you have additional questions. Please re queue as always the IR team will be available for any follow up questions. After the call and now I'll turn the call over to Keisha keisha. Thank.
Keisha: Thank you Kiley and good afternoon, everyone. Today I'll highlight overall performance update you on the progress we made across our strategic priorities and talk to you about our outlook for the future.
Keisha: Fiscal 2025 is off to an encouraging start with the Ulta beauty team delivering better than planned financial performance for the first quarter net sales increased four 5% to $2 8 billion operating profit was 14, 1% of sales and diluted earnings per share was $6.70.
Keisha: During the quarter admits considerable macro noise and uncertainty guests responded positively to key actions that we took to drive our business, including improved execution exciting new and exclusive brand launches evolved promotional plans and relevant marketing.
Keisha: As a result, we drove improvement across several key performance indicators, including member growth brand engagement and earned media value as well as in store conversion and App engagement.
Keisha: Importantly, these efforts resulted in market share gains during the quarter.
Keisha: Consumer engagement with beauty remains healthy and our insights indicate beauty and wellness remain a top priority for beauty enthusiasts, who tell us that they're more willing to make tradeoffs in other discretionary areas to maintain their beauty regimens at the same time, they are cautious and value as an increasingly important part.
Keisha: 40, as they navigate ongoing wallet pressures.
Keisha: Many consumers indicate that they are leaning into beauty as a comfort and escape from the stress of macro uncertainty and we expect this emotional connection will support the categories resilience going forward.
Keisha: Our teams are working through all of these dynamics to ensure that we are well positioned to deliver on our guests' evolving needs and are working in close partnership with our brands to mitigate potential impacts of higher tariffs.
Keisha: In March I shared our Ulta beauty unleashed plan, which is designed to accelerate our performance and enable us to achieve our long term goals and reassert our leadership position today.
Keisha: Today I'll share progress, we've made and highlight the key components of our strategy that drove our first quarter performance.
Keisha: Let me begin with all of our efforts to drive our core business growth, where we're focused on driving excellence in all areas of our operations and strengthening our go to market approach.
Keisha: Our teams have sharpened their focus on delighting, our guests with every interaction and ensuring our stores are fully stocked staff to clean and inviting.
Keisha: Our teams executed well, particularly for key events and holidays delivering a very successful 21 days of beauty campaign, along with strong Valentine's day, and Easter performance and drove comp growth across many of our major categories.
Keisha: I am incredibly proud of our store and field teams, whose collective efforts drove improved in store conversion and guest satisfaction and positive comp sales growth in stores for the first time in more than a year.
Keisha: From a category perspective fragrance was our strongest performing category delivering double digit growth, primarily driven by newness in women's and gender neutral fragrance brands spring in Valentine's day sets and continued strength in men's fragrance.
Keisha: New and exclusive brands XO, Chloe by Chloe Kardashian, and noise as well as newness and Valentino and Billy I wish contributed to strong category performance.
Keisha: Sales in this kidney care and wellness category increased in the high single digit range driven by robust growth in body care Center and wellness.
Keisha: Prestige skin care was flat for the quarter, while mass skincare decreased modestly.
Keisha: New brands, including touch deter him and in U S as well as trend relevant brands may lease and exclusive K beauty brand pizza and Lilly resonated with guests well expansions of so they should narrow and touch land also contributed to category growth.
Keisha: The hair care category was roughly flat for the quarter with growth in hair color and accessories offset by decreases in hair care tools and mass hair care.
Keisha: Professional hair care was flat with growth from newness offset by a timing shift of a key promotional event noon.
Keisha: Newness was fueled by the much anticipated debut of Beyonce Sacred hair care line in early April which included a unique services activation.
Keisha: Comp sales in the makeup category decreased slightly driven by mass makeup as strong newness from exclusive Grand Morphy and Ulta Beauty collection did not fully offset headwinds from certain brands, which lapsed strong newness and social engagement in the period last year.
Keisha: Prestige makeup was flat for the quarter guest engagement with newer brands area No big up ended as well as exclusive nunez for Mac Este Lauder inland calm offset headwinds from brands, which have experienced increased distributions. Additionally.
Keisha: Additionally, our spring 'twenty, one day of beauty event delivered strong growth for participating brands.
Keisha: Finally services delivered low single digit comp driven by Salon, and specialty services, including ear piercing and makeup services.
Keisha: We also brought beauty to life in our stores through our always on eventing strategy, which was amplified in our online channels with new tools that aim to drive greater awareness and sales.
Keisha: We hosted more than 20000 in store events during the quarter many in partnership with our brands.
Keisha: Moving to marketing, we're evolving and re imagining our go to market strategy to spark excitement and awareness deepen engagement and attack the attract and retain loyalty members.
Keisha: This quarter, our integrated marketing delivered bold relevant campaigns that elevated brand visibility and drove traffic across all channels.
Keisha: We activated key moments with precision our Super Bowl campaign, which celebrated women in sports delivered a record level of social impressions and engagement.
Keisha: Amplifying reach and cultural relevance on the biggest stage in pop culture.
Keisha: 21 days of beauty and spring haul generated strong traffic and conversion powered by creator led content that build anticipation and drove significant increases in member penetration.
Keisha: Following the successful launch of Beyonce, Sacred we announced Ulta beauty as the official beauty retail partner of our Cowboy cargo tour, a powerful collaboration featuring curated beauty looks exclusive product assortments and immersive brand experiences across two of our markets.
Keisha: And finally in April we hosted our inaugural Ulta beauty World and experiential beauty event, giving about 1400, Ulta beauty fans and influencers the opportunity to explore the best of beauty through live demos with our brands brand founder meet and greets and interactive experiences across makeup skin care care frame.
Keisha: Rents in wellness.
Keisha: We are bringing the Ulta beauty brand to life in new and exciting ways and our guests are responding.
Keisha: We expanded our active loyalty member base to a record $45 million up 3% year over year, while also driving higher engagement records, social impressions and meaningful earned media value.
Keisha: Turning to brand building during the quarter, we launched 19, new brands, many of which are exclusive to Ulta beauty.
Keisha: Newly launched brands like Tata Milk makeup Iliad, salt hair, all performed well and drove strong guest engagement at.
Keisha: At the same time exclusive brands are driving growth, including Dibs beauty and Influencer led makeup brand along with a new up a viral K beauty brand and Smith, a clean vegan crudes quilty free fragrance brand with accessible price points.
Keisha: We're pleased to see that our brand building efforts are resonating with guests and we're optimistic about new brand launches and Activations planned for Q2 and the rest of the year.
Keisha: Turning to digital and personalization.
Keisha: We're accelerating our capabilities to deepen guest connection and drive performance, we've expanded automation and real time content delivery across key digital channels, allowing us to respond faster personalize it scale and enhance the overall guest experience.
Keisha: We also rolled out new features including split cart capabilities and new shop, My store App functionality that provides guests real time visibility to store assortment and inventory.
Keisha: These efforts are translating into stronger engagement increased relevance and measurable business impact.
Keisha: We look forward to building on our momentum in adding new digital enhancements in the coming quarters.
Keisha: Moving to our second strategic priority to scale, new and accretive businesses to capitalize on key growth opportunities and ensure that we remain resilient in a rapidly changing world.
Keisha: As we look to the near term actions, we've taken to scale, our new businesses. During the first quarter, we supported our wellness efforts with the launch of nine new wellness brands online, including several nutrition focused supplement an ingestible brands like garden of life Women's care brand Hatch Mama and sleep related fan.
Keisha: Favorite non pod.
Keisha: We also continued to enhance and expand our retail media network UV media.
Keisha: We capitalized on key opportunities for co branded ads to support 21 days of beauty, which drove engagement and incremental AD revenue.
Keisha: In addition, we began piloting new AD products like connected television and streaming audio and brand support capabilities like our new self service tool to provide faster more transparent performance insights.
Speaker Change: At the same time, we're making investments to drive our long term expansion. Our international efforts are progressing through our partnerships. We are targeting our first store openings in Mexico City, Kuwait City in Dubai later this year Andrew.
Speaker Change: And our online marketplace initiative announcement in March has driven meaningful brand interest and we remain on track for launch in the second half of this year.
Speaker Change: Finally, moving to our third strategic priority to realign our foundation for the future by streamlining our cost structure optimizing our ways of working and re energizing our culture.
Speaker Change: Our teams are adapting well to our new ways of working and we are steadily advancing our optimization efforts during the quarter, we leveraged new AI and machine learning capabilities to drive supply chain efficiencies and launch scheduling enhanced payroll management tools to optimize our efforts and support our cost savings goals.
Speaker Change: We also announced that Lauren friendly will join Ulta Beauty next week on June 3rd as Chief merchandising and digital officer Loren will have responsibility for our merchandising e-commerce wellness and marketplace strategies and will play an important role and are leading our brand building efforts.
Speaker Change: With more than two decades of global beauty and retail expertise, having most recently served as CEO of Revolution beauty Lauren is a proven strategic leader with deep industry expertise, a global perspective, and a passion for beauty and we are thrilled to have her join the team.
Speaker Change: My sincere thanks to Monica Arnatto, who will retire next month for shaping at the Bes World class assortment and category and our innovation and her support during this transition we wish Mike all the best in her retirement.
Speaker Change: On our last quarterly earnings call I talked about our focus on Reenergizing our culture.
Speaker Change: I truly believe that we have the best talent and culture in retail and reigniting. This critical competitive advantage has been a key priority.
Speaker Change: In April we brought together our field leaders, including more than 1400 general managers, along with corporate in D. C leaders and brand partners at our annual field leadership conference to celebrate our recent wins educate on how we can better serve our guests and align our plans for the future.
Speaker Change: Walked away so inspired by the passion of the Ulta beauty team the shared excitement of our brand partners and a renewed energy to drive our next phase of growth together.
Speaker Change: It was a great reminder of the power of culture, and they know that when we tap into this unique advantage that makes ulta beauty. So special we are unstoppable.
Speaker Change: To recap we are encouraged by the progress we made in the quarter and the Green shoots we're seeing as a result of the strategic actions, we're taking together they reinforce my confidence in the power of our team our model and our plans to drive our long term growth.
Speaker Change: As we look to the future we are executing our go to market investments to position stronger growth in 2026 and beyond the.
Speaker Change: The operating environment is fluid and we will stay prudent and agile to navigate the ever evolving landscape, while uncertainty presents risk. It also provides opportunities and we are confident in our model and the diverse assortment uniquely position us to win.
Speaker Change: There is still work to be done and it will take time to drive sustained improvement, but I know that we have the right team and plans in place to build on our momentum and drive sustainable long term growth.
Speaker Change: And with that I'll turn it over to Paula to cover the financial results for the quarter and our financial outlook before we take your questions Paula.
Paula: Thanks, Keisha and good afternoon, everyone I'll begin with a discussion of our first quarter results and then share more about how we were thinking about the rest of the year.
Paula: Starting with the quarter, the Ulta beauty team delivered strong performance, reflecting better than expected growth from comparable sales favorable shrink results and lower than planned investments in.
Paula: Net sales increased four 5% to $2 8 billion compared to $2 7 billion last year during.
Paula: During the quarter, we opened six new stores relocated two stores and remodeled four stores.
Paula: Comparable sales increased two 9% driven by a two 3% increase in average ticket and a 0.6% increase in transactions.
Paula: Other revenue decreased 4 million to 56 million, primarily due to lower loyalty point redemptions and lower income from our credit card program.
Paula: Looking at the cadence of sales growth accelerated as we moved through the quarter, reflecting strong guest engagement with product newness in our marketing and promotional events.
Paula: Echoing <unk> comments, we continue to strengthen our go to market strategies and optimize our promotions to drive profitable growth.
Paula: In the first quarter, we eliminated less productive or overlapping offers leveraged our member data deploy new targeted offers an optimized key promotional events like spring Hall, and our spring share of it.
Paula: These efforts created distinct calls to action.
Paula: Insured guests clarity and supported stronger operational execution.
Paula: As a result.
Paula: <unk> growth was more balanced and the impact to gross margin from promotional offers was lower than last year.
Paula: From a channel perspective, our stores and digital channels contributed to growth with e-commerce sales, increasing about 10% and comp stores delivering growth in the low single digit range.
Paula: For the quarter gross margin decreased 10 basis points to 39, 1% compared to 39, 2% last year.
Paula: The decrease was primarily due to deleverage of store and supply chain fixed costs and lower other revenue, which were partially offset by lower shrink.
Paula: In addition to ongoing benefits from investments and secure fragrance fixtures associate training and process improvements, we saw meaningful progress, especially in select regions that were more challenged in the first quarter last year.
Paula: Moving to expenses SG&A increased six 7% to $711 million.
Paula: As a percentage of sales SG&A increased 50 basis points to 24, 9% compared to 24, 4% last year.
Paula: S G&A deleverage due in large part to higher store payroll and benefits and increased store expenses, which were primarily offset by corporate overhead leverage.
Paula: Store payroll and benefits expense increased primarily due to increased selling hours to support guest experience higher average wage rates and increased health care costs.
Paula: The growth of store expenses was largely related to brand launches and in store initiatives.
Paula: Corporate overhead leverage for the quarter as we lapped improve implementation costs associated with key infrastructure investments last year.
Paula: Additionally, some investment spending initially planned for the first quarter is now expected to shift into later quarters.
Paula: Operating profit was $402 million compared to $401 million last year.
Paula: As a percentage of sales operating margin decreased 60 basis points to 14, 1% of sales.
Paula: Diluted earnings per share increased three 6% to $6 70.
Paula: Moving to highlights from the balance sheet and cash flow statement, we ended the quarter with $455 million in cash and cash equivalents total inventory increased 11, 3% to $2 1 billion, primarily reflecting additional inventory to support new brand launches.
Paula: Investments to improve merchandize in stocks in key growth categories and the impact of 56 net new stores.
Paula: Capital expenditures were $79 million for the quarter, reflecting investments in new and existing stores merchandise fixtures and supply chain investments.
Paula: Depreciation increased 11% to $72 million compared to $65 million last year, primarily due to new store and supply chain investments.
Paula: In the first quarter, we returned $359 million of capital to our shareholders through the repurchase of 987000 shares.
Paula: At the end of the quarter, we had $2 3 billion remaining under our current $3 billion repurchase authorization.
Paula: Turning now to our updated outlook. We believe it is prudent to take a cautious approach to our guidance for fiscal 2025.
Paula: While the beauty category has historically been resilient through economic downturn, it has not been immune to consumer pressure the.
Paula: The operating environment continues to be very dynamic and the evolving global trade landscape has created more uncertainty related to consumer wallet crushers, especially for the second half of the year.
Paula: For the year, we have updated our sales expectations to reflect our first quarter results as well as more uncertainty in the second half.
Paula: We now expect net sales will be between 11, 5 billion and $11 7 billion with comp sales growth in the range of flat to up one 5%.
Paula: This outlook reflects the comp growth in the second half could be in the range of down low single digits to up modestly.
Paula: We continue to expect operating profit will deleverage in the low double digit range with operating margin between 11, seven and 11, 8% of sales.
Paula: Reflecting our sales expectation and how we are now forecasting the flow of investment spend we expect operating margin will be more pressured in the second half of the year than the first half.
Paula: For modeling purposes, our assumptions for the drivers of gross margin deleverage in SG&A growth have not changed since we provided our initial outlook in March.
Paula: Reflecting these assumptions, we now anticipate diluted EPS for the year will be between $22 65 and.
Paula: And $23 20 per share.
Paula: Before closing I want to provide some additional context on how we are thinking about the potential impact on our business from the evolving tariffs and global trade landscape.
Paula: For context in fiscal 2024, only about 1% of our merchandise receipts were direct imports. The remaining receipts came from our portfolio of 600 brands and we intend to continue to work closely with our brand partners to navigate the evolving environment and limit the financial.
Paula: Impact on our business.
Paula: Beyond merchandise, we have some exposure and indirect spend areas like fixtures and store supplies. However, we are confident we can mitigate any cost increases.
Paula: In closing.
Paula: We are encouraged by the improved results our team delivered in the first quarter and we are being prudent about managing the business as we look to the rest of fiscal 2025, we intend to invest to strengthen our competitive position and drive long term profitable growth, while also continuing to be thoughtful.
Paula: About pacing and prioritization of our investments.
Paula: And now I'll turn the call over to the operator to moderate the Q&A.
Speaker Change: We will now begin Q&A for today's session, we will be utilizing the raise hand feature if you'd like to ask a question simply click on the raise hand button at the bottom of your screen. If you have dialed in please press star nine to raise their hand and star 620.
Speaker Change: Once you've been called on please on mute yourself and begin to ask your questions. Please limit to one question and one follow up before jumping back in the queue. Thank you we will now pause a moment to assemble the queue.
Speaker Change: Our first question will come from <unk> <unk> with Oppenheimer. Please go ahead.
Speaker Change: Afternoon, and thanks for taking my question.
Paula: I just wanted to just go back to your <unk> plan. It appears it appears to me that <unk> got good traction to date and maybe its ahead of plan. So just curious if theres anything surprising with the outbreak on block grants.
Paula: Versus your initial expectations.
Paula: Thanks for <unk> for the question I would just say that first of all I couldn't be any prouder than the Ulta beauty team for really being focused on what the LTV. On these plan is what what I would say is Q1 reflects our collective effort of the team and our commitment to really improving our overall process.
Paula: We have really sharpened our execution in this quarter a couple of areas I would call out the first one would be our in store execution really being focused on our guest experience.
Paula: Paul had mentioned, we've been supporting cement incremental payroll hours in our stores and it's it's showing is paying off our in stocks also improved through the quarter.
Paula: Can't help but you don't so so so it's been great to see the in stock levels continuing to come back up and then you know all this marketing efforts, which I was speaking of oven in my prepared remarks is that we're doing some things differently.
Paula: Earned media value, how we're communicating with the gas power really reactivating. The Ulta beauty brand itself is is resonating.
Paula: We had some learnings from last year's 21 days of beauty event, and we had a little bit clearer message more distinct calls to action stronger execution, and then assortment newness does play a role in beauty and the sacred launch coming in April we had some newness in Mack Sims.
Paula: Some expansions and lived tented have magic dibs, and a rollout of Solvay Janeiro. It did really have a nice halo effect for our stores. So again I would just say that I'm really proud of the team's efforts I am encouraged by the actions that everyone's taking as part of this ultra V. The English planet, it's resonating with the guests will really focusing on.
Paula: On executing our plans and building on the success from this quarter and laying out the groundwork to drive long term sustainable growth for the future.
Paula: Great. Thank you.
Speaker Change: Our next question will come from Olivia Tong with Raymond James. Please go ahead.
Olivia Tong: Great. Thanks, good afternoon.
Olivia Tong: My first question is around the full year outlook of flat to one and a half.
Olivia Tong: Obviously suggests a pretty big deceleration after a very strong quarter. So can you talk about the key drivers of that and the cadence by quarter.
Paula: Then on pricing and promotion.
Paula: Given the tariff backdrop several companies are planning to raise prices. How do you think about pricing and promotion for you. You mentioned second half margins are more pressured is that strictly related to tariffs or are you expecting promo to start to move upwards. After a good strong Q1. Thank you.
Speaker Change: Thanks, Olivia I'll take that from a guidance perspective, and I'll start with sales.
Speaker Change: We as I as I shared we expect our comp sales growth in a range of flat to up one 5% and we've raised the upper end to reflect our Q1 performance, but we've held the low end at flat to reflect the more uncertainty in the second half.
Paula: Just for context, we expect comps in the first half will be in the low single digit range and then in the range of down low single digits to up modestly in the second half.
Paula: We're encouraged by our Q1 performance, we're recognizing that one quarter doesn't make a trend and that the environment is pretty dynamic that we're operating in and so we believe it's prudent to continue to take a cautious approach to our guidance.
Paula: And then I think your second question was related to promo pricing and promo what I would say is the the.
Paula: From a.
Paula: Promotional perspective, we still we are expecting promotions to be rational.
Paula: Barring any major economic event, we expect the promotional environment to stay rational obviously things could deteriorate.
Paula: The consumer deteriorate, but what we're focusing in on or with many of the things that we talked about earlier, which is.
Paula: Really focused on promo optimization and clarity of our option are our offers and making sure that we're driving optimal and profitable growth through our promotional strategies.
Paula: From a pricing perspective.
Paula: We are we're working with our brand partners and right now with the environment is still is still pretty pretty dynamic.
Paula: Our like I said before our guidance assumes that we're not anticipating any any major changes that we won't be able to mitigate.
Speaker Change: Our next question will come from Susan Anderson with Canaccord Genuity. Please on mute and ask your question.
Susan Anderson: Hi, Good evening. Thanks for taking my question I was wondering if you can maybe just talk about the newness and innovation pipeline as we kind of head in.
Speaker Change: Through the summer into the back half of the year end holiday I guess are you expecting.
Speaker Change: The continued ramp up and newness and innovation as we go throughout the year and if Theres anything else you could also share about just with new products coming out.
Speaker Change: Well. Thank you Susan for your question what I did share earlier is that we are pleased with what we see that's coming up in the second quarter in the back half of the year.
Speaker Change: Really want to share specifics around what those newness items are but what I can say is that it's a nice balance of cross category newness. So it's not all on just one category and there was a nice blend of exclusivity in the newness pipeline also which is really important to us as we're continuing to build.
Speaker Change: Our momentum our brand building efforts and what our merchants are doing the work that they're doing with our brand partners has been phenomenal and I'm very very pleased with what I see in the direction that we're heading it. So I do think that we've got a nice <unk>.
Speaker Change: <unk> of newness and exclusivity within the newness and it's balanced across the portfolio.
Speaker Change: Great. Thank you.
Speaker Change: Our next question will come from current Borgmeyer with Piper Sandler.
Borgmeyer: Hi, Thanks, so much for taking the question I'd like to touch a little bit on the improvements in demand that you saw throughout the quarter and how on your chin higher kind of like attributing that that growth from.
Borgmeyer: As we think about <unk>.
Borgmeyer: Improvement in the consumer environment, you've had a lot of consumer engagement initiatives going on several of them that you have been investing in so how are you going about market improvement versus your own initiatives and then even competitive intensity throughout the quarter and how that impacted the growth space.
Borgmeyer: Yeah, I'll I'll start so let's talk I'll start with the competitive intensity <unk> beauty has always been a very competitive category because it's got attractive margins and it's attracted a variety of people in the category, but Julian wellness is really what we do.
Borgmeyer: The Ulta beauty unleashed plan is designed to really help us accelerate and amplify our differentiation.
Borgmeyer: Pipeline of newness coming I guess I feel gives us confidence in us continuing to be able to drive share again. This was the first time in a while that we were able to really drive share across the categories. So I'm pleased with that.
Borgmeyer: When you look at just our category performance. It was really bought balanced across the portfolio.
Borgmeyer: The trends that we're seeing.
Borgmeyer: In makeup hair care skin care wellness and fragrance.
Borgmeyer: In care wellness and pregnant praises Lynch, where our stronger driver categories, but.
Borgmeyer: We really feel that we're moving in the right direction there sure.
Borgmeyer: Hair care and makeup is are two categories that we already own a lot of share so for us to continue to leverage and grow those two categories is a little bit harder for us, but I still feel like there are some green shoots for us to continue to grow if you look at the industry as a whole.
Borgmeyer: And the beauty category, well will you see it kind of normalizing after several years of pretty extraordinary growth the beauty category within the industry grew low single digits in Q1 mass growth was fairly consistent in prestige flowed that remained overall positive, but we expect overall that beauty will grow in line with the historical average.
Borgmeyer: Over the next.
Borgmeyer: A few years of that 2% to 5%, which is what we shared at our October analyst day film.
Bill: Thank you Bill for the question Ryan I appreciate it.
Borgmeyer: <unk>.
Speaker Change: Our next question will come from Christopher <unk> with Jpmorgan. Please go ahead.
Borgmeyer: Yeah.
Speaker Change: Christopher Your line is open feel free to mute.
Speaker Change: There you go.
Speaker Change: Hear me now yeah, we can hear you Chris.
Chris: Thank you Joe.
Speaker Change: So I wanted to follow up on that last question I mean, obviously.
Speaker Change: Share performance is Theres puts and takes about you saw were at Kohl's I think they call one.
Borgmeyer: Half of the year since launching all these stores. So some of that is the fading of that headwind, which you've talked about for a while now some of that seems to be execution in stocks digital marketing digital so maybe you could disaggregate how much do you think it was just maybe just the speed of this headwind versus.
Speaker Change: You are better actually Jen and related to that can you talk a little bit about.
Borgmeyer: How much the ERP disruption hurt the second second quarter, and how youre thinking about that.
Borgmeyer: Where the business is now and how that proceeds forward. Thank you.
Borgmeyer: Yeah, well, what I would say, it's really hard to quantify exactly what the drivers are but I'm a big believer in controlling what you can control and what we're seeing improvements in the trend of those stores that were impacted by a physical points of distribution, we kind of expected that and we built that into our plan.
Borgmeyer: Do believe that the lapping of the new openings and the impact of our operational efforts those are contributing to our overall performance.
Borgmeyer: In regards to the ERP disruption that we had.
Borgmeyer: In fact, you know again I as I mentioned earlier in a response you got to have product to be able to sell it to the guest and we're just doubling down and making sure that we're giving the very best guest experience that we can in our stores, making sure that we have great marketing campaigns to drive the traffic into the store and making sure that we have the <unk>.
Borgmeyer: <unk> for the guest when they're coming in.
Borgmeyer: And giving a great great guest experience and again its kind of retail 101, it's about being.
Borgmeyer: Being focused on controlling what we can control in a pretty dynamic and ever changing environment out there but.
Borgmeyer: I do believe this was the quarter second quarter was when we were starting to really hit the challenges a little bit with our in stocks and we do think that theres some upside potential.
Borgmeyer: <unk> two next year and then.
Borgmeyer: Last year in the second quarter.
Borgmeyer: We did have a lot more promo activity that was happening June and July were a little tougher for us from.
Borgmeyer: From a sales comp perspective, and we are also seeing.
Borgmeyer: That yeah, we've got better marketing plans in place from some learnings that we have last year.
Borgmeyer: And I would also say just even kind of the cadence of sales that we saw.
Borgmeyer: The first quarter this year.
Borgmeyer: But can you remember the gates, a little softer and we started to see pick up in March and then April and we are seeing stronger trends coming in may but its.
Borgmeyer: Summer is a tough tough month for a quarter for beauty.
Borgmeyer: <unk> Q2 was one of our tougher quarters.
Borgmeyer: From a comp perspective, and there's a there's a lot of unknowns out there while we're executing better we're having better marketing campaigns and we are also going to be in stock. There's a lot of uncertainty out there with the consumer and their wallet and how theyre going to spend but all of the things that we can control and that we're leaning into to make sure that we're positioned.
Borgmeyer: <unk> to perform as best as we can I feel like we're hitting on all of those cylinders.
Borgmeyer: Thanks, very much best of luck.
Borgmeyer: Thank you.
Speaker Change: Our next question comes from Simeon Siegel with BMO capital markets. Please go ahead.
Simeon Siegel: Hi, Thanks, Hi, everyone. Good afternoon, nice job can you hear me.
Simeon Siegel: How are you thinking about ticket versus transactions embedded within the full year guide and just in general as you think about the top line opportunities going forward.
Simeon Siegel: Paul I think you mentioned corporate overhead expense retirement, Jeff could you just quantify that or give us any order of magnitude. Thanks guys.
Simeon Siegel: Okay. So I can take the I can take the ticket.
Simeon Siegel: In Q1, we saw an increase in average ticket and it was primarily driven by an increase in our average selling price.
Simeon Siegel: And that was offset by fewer units per transactions and as we think about that average ticket the increase is really.
Simeon Siegel: With the selling price driven by kind of shifts in category and brand.
Simeon Siegel: Brand mix and as well it was reflective of lower promotional reality that we saw in the quarter.
Simeon Siegel: What I would say is we don't necessarily forecast or provide.
Simeon Siegel: The specifics around what we're what we're expecting or planning from a ticket and transaction perspective, because obviously there is many things that contribute to the ticket and the transaction performance.
Simeon Siegel: And then from a corporate overhead perspective.
Simeon Siegel: Really what I would say is.
Simeon Siegel: You know we.
Simeon Siegel: We were we were thoughtful about the pacing and the prioritization of what this is an investment year. We shared we talked about we talked about.
Simeon Siegel: That we're investing this year to really orientate ourselves for future future long term term growth.
Simeon Siegel: And.
Simeon Siegel: Our spin was.
Simeon Siegel: It came out of the gate, so a little as we thought about the.
Simeon Siegel: The timing of some of these wins is shifts in project timelines and resource plans. It's typical we that was a little slower coming out of the gate and in Q1. It started to tick back up at the end of the quarter and that is that's been as is kind of.
Simeon Siegel: Moving are shifting into the later part of the year. So that was one of the major drivers were for the corporate overhead.
Speaker Change: Great. Thanks, a lot best of luck for the rest of the year Russia.
Speaker Change: Thanks Damian.
Speaker Change: Our next question will come from Kate Mcshane with Goldman Sachs.
Kate Mcshane: I Hope you can hear me.
Speaker Change: One of your comments on the call was that.
Speaker Change: There was still an offset from brands that had expanded their points of distribution and it impacting your business.
Speaker Change: Just given the initiatives you are doing are you seeing a more muted impact from that increased distribution and how do you think as increased distribution is kind of maybe part of doing business now the industry could be maybe better segmented or if that's something that you would expect.
Speaker Change: Well. Thanks for the question I would just say you know beauty and wellness is what we do and when a lot of other players are trying to come into this space. This is where we are the experts we are a leading loyalty program. Our omni channel channel offering is anchored in that human connection that in store and digital.
Speaker Change: <unk>.
Speaker Change: Powerful connection that combo really does set us apart and we do leverage our deep in proprietary understanding of the beauty guests to create absolutely the best and most personalized digital experience in beauty also that in combo with our newness and the confidence that we've got in our pipeline. It just creep.
Speaker Change: This halo effect again, the category has always been competitive and as I shared earlier, while we are seeing some trends in some of these stores that were impacted by physical points in distribution. We're just going to continue to lean in to where it is that we just do well, we do really well in our stores, we're continuing to invest in.
Speaker Change: Our digital channels, we are elevating our personalization.
Speaker Change: Leaning into wellness and our brand building and it's hitting on all of those cylinders that are part of the Ulta beauty.
Speaker Change: I believe that's going to help us continue to be really successful this year and beyond.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Oliver Chen with Cowen and company. Please go ahead.
Speaker Change: Hi, there. Thank you for taking our question. This is Katie on for Oliver we'd like to touch a little bit on the marketing strategy. What do you think has really worked better than expected and where do you see more opportunity to leverage social media. Thank you.
Speaker Change: Okay. Thank you for the question again, it's really taking.
Speaker Change: Taking our deep knowledge and understanding of our loyalty member base, and elevating that personalization that connectivity and communicating with them in the ways that they best.
Speaker Change: Suited I would say the one thing that's changed a little bit in the last year is it more recently is that were really activating under our master brand of Ulta beauty and that we're talking a lot more about ulta beauty as the place to go and connecting the possibilities of beauty when.
Speaker Change: You come in and you shop with US it's not just a bunch of brands in our store, it's about shopping Ulta beauty and trusting us because we've done a lot of work and we've helped cure rate that branded shortly for you.
Speaker Change: Just you know activating and <unk> and being very very focused on our earned media value and how we can really.
Speaker Change: Activating off what I call authentic ways versus overly produced ways that are genuine and have that connection with the guest makes all the difference in the world, We've got to be where it's socially relevant and where it makes sense for us to be like Super Bowl, we really never had an activation like we did before.
Speaker Change: Part of the Cowboy Carter to <unk>, that's something we've never done before the Ulta beauty World, where I mean, I myself was almost tired of seeing so many points of presence on my check talk and.
Speaker Change: My eye instant ground, because we pretty much taken over because of the excitement of our super fans that were out there along with Influencers and I think that the.
Speaker Change: Whole area in Florida, rather convention next year is sold out people are just really excited and I think when you can create that kind of energy and excitement in a true authentic way that connects with the guest and they view Ulta beauty now.
Speaker Change: This is the place to go to buy just things that a place to go to help you feel better about yourself, that's where the magic really happens. So I'd say, that's what the difference I feel is happening right now today.
Speaker Change: Very helpful. Thank you.
Speaker Change: Our next question comes from Cristina <unk> from Deutsche Bank. Please go ahead.
Speaker Change: Hi, good afternoon, and congrats on a great quarter, hopefully you can hear me she.
Speaker Change: He shot I wanted to get your vision for <unk> brand and product strategy, just how do you think about opportunities for better brand curation.
Speaker Change: And also better personalization with loyalty to really give guests that great experience that you referenced it seems like you're already on your way, but would just love to get your thoughts in terms of further unlocking opportunities and then secondly, just if you can help contextualize how you be media can help you stand out with your brands and an increasingly competitive field. Thank you.
Speaker Change: Great well. Thank you for the question Kristina I'll start with the brand building for us because it's just kind of follows from my previous response is that you know well.
Speaker Change: Really focused on targeting 20 high potential exclusive brands.
Speaker Change: That are enhancing where he enhancing some investment.
Speaker Change: We're looking at those cross functional ecosystem, that's going to support the brand growth and an elevated joint business planning and that includes the stores.
Speaker Change: Unlocking our associates in the stores from a brand education bespoke marketing levers just to name a few.
Speaker Change: We launched several exclusive brands in the first quarter that I mentioned earlier sacred in a new but we've also got some expansions in some growth categories or brands that we carry like half magic lived tinted in dibs, but we're balancing it is not just on.
Speaker Change: Exclusive brands or new brands. It's also established brands like Mac and Este Lauder and more fee that we can continue to lean in and really help them authentically grow brand building is very important to Ulta beauty and we're gonna be continuing to invest in these brand building capabilities to really accelerate and support acquisition.
Speaker Change: Of the high growth in exclusive brands well really building upon these establish a merchandising brands at the same time.
Speaker Change: In regards to this personalization.
Speaker Change: We're just going to continue to invest in our capabilities to increase our relevance. It's a very iterative process as we roll out because we are tweaking in real time their frequency and we're seeing what really works and resonate with the guests. We have this partnership with Adobe that we've just launched that really does it enhance our ability to deliver.
Speaker Change: Tailored offers experiences and communication across multiple channels in the right moment that makes sense for the guests by doing this it allows us to leverage our understanding of the guest journey and their Ulta beauty profiles and how they behave in the segmentation and also helps us predict there they're shopping decisions. So.
Speaker Change: The fact that we've got 45 million loyalty members in our database of very rich ability for us to leverage our marketing campaigns and then the last question. You had you had a three parter on me here Cristina is around giving media.
Speaker Change: And what I would say what we've leaned in to your media is really all comes down to three things, it's about better reporting for our brands, we've heard loud and clear they need to understand when they're investing what are they getting back for that investment. We've got proprietary tools that are now sharpened or rolling out and hearing great brand feedback the second is having any <unk>.
Speaker Change: <unk> products in ways that they can really partner with us.
Speaker Change: C. J T V is a connected TV is a great example of that and streaming audio we're going to continue to lean into that and the third is just really expanding our reach with non endemic.
Speaker Change: Promotional products and services and our partnership with what is allowing us to do that so those are the three things that we're really leaning into we're happy with the progress we made in the quarter and we're going to continue to lean into that you'd be media in the future.
Speaker Change: Okay. Thank you great color best of luck.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Mark all trigger with RW Baird. Please go ahead.
Speaker Change: Thank you for taking my question.
Speaker Change: First the 10% growth in e-commerce, the strongest we've seen in a while maybe speak to some of the drivers to acceleration there that are unique to ecommerce.
Speaker Change: You'll see Adobe unlock that you just referenced and then just any margin implications to consider as you begin to drive some mix shift back to e-commerce.
Speaker Change: Yeah. Thank you Mark for the question I would just I would say that.
Speaker Change: Our enhancements that we're continuing to lean into like split Kirk split cart.
Speaker Change: Both the shop my store, we're continuing to invest in our e-commerce platform, along with being really thoughtful around how we're communicating value and keeping engagement on our app, specifically more than 60% of our E. Commerce sales are now coming from the App.
Speaker Change: With our investments that we've made to be a little bit more fluid. We can in real time, if we were running a promotion. We see is that resonating we can in real time adjust and change how we're showing that app to our guests.
Speaker Change: And you know, it's just it depends the power of the speed and the agility and what do we can be a lot more agile is really helping us in that channel. We have another launch that's coming up really soon that I'm very excited about and that's our subscribe and save online replenishment is another key category I think that's going to help us really can.
Speaker Change: To drive our e-commerce business, but you know.
Speaker Change: It's not just the E com that we're focused on it's also the stores stores, 80% of our sales are still coming through our store channel. So we want to make sure that we're we're continuing to keep all channels live and active in and continue to keep them engaged.
Mark: And then Mark I'll just add.
Speaker Change: With regards to margin implications from E Commerce growth I mean, what I would say is we came into the year expecting e-commerce growth.
Speaker Change: And we have seen it for a couple of years and that was one of the reasons why we've been really intentional about improving channel profitability, we've expanded our.
Speaker Change: Our various fulfillment.
Speaker Change: Fulfillment.
Speaker Change: The options, which helped to mitigate margin pressures and so as I think about kind of gross margin and gross margin pressure or the channel mix isn't the largest.
Speaker Change: Driver of.
Speaker Change: Of that.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Michael Lasser with UBS. Please go ahead.
Michael Lasser: Good evening. Thank you so much for taking my question.
Speaker Change: Can you comment a little more on the momentum into the current quarter.
Speaker Change: What you are.
Speaker Change: Hum.
Speaker Change: Hum.
Speaker Change: Further perpetuate your caution into the back half of the year, meaning what would cause your comps go negative outside of the macro and if you maintain your mine took momentum how should we think about the flow through.
Speaker Change: If you do better than what's embedded in your guidance. Thank you.
Speaker Change: I'll start and maybe Paul can add some color. It is still early and while we're very encouraged by the strong progress it's going to take a little bit of time to see like what's going to happen here. We're operating right now in a very dynamic environment, we have limited visibility to the global trade landscape, which is continuing to evolve and change there's a lot of uncertainty out there.
Speaker Change: And as we've all seen things can change really quickly consume.
Speaker Change: Consumers are cautious and value focused as they're managing their ongoing wallet pressures and while they tell us that they intend to prioritize beauty and wellness, that's what they say, but they could also do something very different depending on the environment. So we're being really prudent is what I would say and that our outlook is reflecting the current <unk>.
Speaker Change: <unk> and is a bit risk adjusted to reflect the reflect the increased uncertainty of the macro environment and our expectations and we wouldn't see what's going to happen to continue to drive sustained improvement in our performance before we really fully realize the benefits that we've been investing in and there's just so much unpredictability out there.
Speaker Change: With with the guest and where they're going at the end of getting up spending their wallet dollars.
Paula: Anything you would add Paula.
Speaker Change: Okay.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you Michael.
Speaker Change: Our next question comes from Michael Baker with D. A Davidson. Please go ahead.
Speaker Change: Hi.
Speaker Change: While we are all set hopefully you can hear me with this new online system.
Speaker Change: I wanted to ask about competition I know others have asked it but I'll ask it another way we get is always competitive but it does seem like it's less competitive from sephora because of the timing of the rollout.
Speaker Change: What they reported today, but it seems really aside from the online competition Amazon, maybe Walmart marketplace, maybe could talk could talk has gotten more intense so bigger.
Speaker Change: Bigger picture is it more competitive now than it has been less competitive the same probably never be the same as always going to be more or less.
Speaker Change: Can you sort of put that in context for us.
Speaker Change: Yeah, I don't think it's gotten any less competitive I wouldn't I would also say I don't know that it's gotten any more I think it's probably pretty consistent from a competitive environment. What has changed is when we were going against and cycling through so many points of physical distribution, we've definitely set we're cycling.
Speaker Change: Through that right now so that's that's one thing from a competitive intensity that that probably is a little bit different for us right now than it was before I'm really pleased that we're leading into our own marketplace right now and I am excited about sharing more as we get a little bit closer to launch, but you know online.
Speaker Change: It's been challenging brick and mortar has been challenging but again beauty and wellness is what we do this is our expertise.
Speaker Change: I feel like we set ourselves apart when we are able to have exclusivity is in our stores. When we're investing in all of these what I'm, calling like beauty Tainment type experiences around these events that where we're doing these are highly thought through a lot of them are brand partnered events that are happening happening are stores that there's.
Speaker Change: This activation and I think that sets us apart.
Speaker Change: There's a little bit different but I would say that the competitive intensity has always been there.
Speaker Change: I think the big thing, that's maybe changed as we've been cycling through the brick and mortar expansion specifically in prestige and we're kind of on the other end of that right now.
Speaker Change: And Michael I would just add that our ability to compete.
Speaker Change: Is better this year because of the progress that we're seeing and we're making with our Ulta beauty unleashed plan.
Speaker Change: I think Leila will take one more question. Please.
Speaker Change: Your last question will come from Ashley Hogan with Jefferies. Please go ahead.
Speaker Change: Hi, This is sidney on for Ashley Thanks for taking our question it looks like prestige actually kind of outperformed math and skin and make up can you just share how you understand that trend do you think about it is trade up is it more brand or innovation driven any color that would be helpful. Thank you.
Speaker Change: Yeah, I'll, just talk a little bit about category performance. So our category performance and our trend is improving we had the strongest performance of makeup since Q3 of 2023.
Speaker Change: And mass makeup was less negative in the low single digits digits and prestige makeup was flat.
Speaker Change: We're working in partnership with our brands to help build the brand pipeline to continue to support our growth.
Speaker Change: But the category trends are there the trends are still out there and there's no makeup makeup look is still a turned out there, which actually does take quite a few products to get the luckily they're not.
Speaker Change: But you know I feel like you know makeup itself we're leaning in we've got some good newness that's coming in the category in the future. Some exclusivity so I like where we're sitting in the best position for makeup specifically as we've had in quite some time.
Speaker Change: I also would say that we haven't really seen anything that would suggest that consumers are trading down.
Speaker Change: I've also heard that Theres like this concern of the stockpiling out there we're not seeing anything.
Speaker Change: That's differing in that behavior.
Speaker Change: The other key indicators that I think is a positive that would be interesting for you guys to understand it better spend per member is fairly consistent across all income cohorts. So we're not even seeing great disparity between higher income income consumers in lower income consumers. So.
Speaker Change: While consumer confidence and sentiment has maybe been a little bit weekend, we continue to see strong duty engagement overall.
Speaker Change: Alright.
Speaker Change: And thank you for the last question Sidney.
Speaker Change: Thank you all for joining us today I'm going to close by saying fiscal 2025 is off to a solid start we're encouraged by the positive indicators in our business. The environment is dynamic and it will take time to fully realize the benefits of the Ulta beauty unleash plans, but I am confident that we are on the right path to drive sustainable long term growth and value creation.
Speaker Change: I want to close by thanking our dedicated associates for embracing our plans and delivering for our guests each and every day and I also want to thank our brand partners for their continued support we look forward to speaking to you all again when we report results for the second quarter at the end of August have a good evening everyone.
Speaker Change: Thank you for joining this concludes today's call you may now disconnect.