1 / 27

Analyst: Nan Zhang Zifan Zhou April.18 2019

Analyst: Nan Zhang Zifan Zhou April.18 2019. Summary of ULTA. Industry-Leading Financial Performance. Drivers. Sales Drivers : Loyalty/ initiatives driving higher sales per member AI/ personalization E-commerce New customer acquisition –consumer expansion framework

quiana
Download Presentation

Analyst: Nan Zhang Zifan Zhou April.18 2019

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Analyst: Nan Zhang Zifan Zhou April.18 2019

  2. Summary of ULTA

  3. Industry-Leading Financial Performance

  4. Drivers • Sales Drivers: • Loyalty/ initiatives driving higher sales per member • AI/personalization • E-commerce • New customer acquisition –consumer expansion framework • New brands, success with digitally native brands • Improved guest experience • Salon optimization • Store maturation • Margin Drivers: • Credit card program benefits • Corporate overhead leverage • Rent and occupancy leverage as fleet of stores matures • Working capital improvement • Efficiencies for Growth program

  5. Drive AWARENESS Drive MEMBER RETENTION AND SHARE OF WALLET Drive NEW MEMBER ACQUISITION Real Estate Model: Projects store build out of 1400 to 1700 stores Now 1174 stores

  6. Accelerated Unaided Awareness with Key Consumers African American +15 pts Millennials + 14 pts. Latina +19 pts. Gen Z +20 pts. Connect with a relevant experience Communicate in meaningful ways Deliver the right products and services Source: Hall & Partners, Ulta Beauty Brand Tracker, October 2016 through September 2018

  7. Beauty Enthusiasts’ Purchasing Behavior Majority of guests’ purchases are items they have not purchased before Replenishment-only purchases are limited ~30% 3.5% 90% + 84%

  8. Adapting to the Changing Landscape

  9. Partnering with Digitally Native Brands Exclusive Products represent more than 9% of Sales • Exclusive in brick and mortar • Founder brand rooted in artistry • Launched in 300 stores on an endcap in 2017

  10. Evolution of Brand from Transactional to Emotional Future of retail: Physical, Digital, Emotional • Ulta beauty takes care of me • I get the beauty butterflies when I shop at Ulta • They always know what’s going to work for me! • I shop because it’s convenient • I can redeem my points for good deals...on great products • You have products I want

  11. Growing and Enhancing Most Valuable Asset Driving Rapid Growth as Improved the Guest Experience On-line assortment at parity with store, end-to-end operating foundation Building omni-channel capabilities: Store locator, store 2 door, BOPIS, 3 day shipping Improved site and app experience, launched Glamlab Significant addition of on-line only brands, new on-line checkout

  12. Digital Innovation Stronger Focus on

  13. SWOT ANALYSIS Strengths Weaknesses S W • Increasing Trade Receivables • Distribution Network • Sustained Financial • Growth Multi-Channel Selling O T Opportunities Threats • Increase in Consumer Spending in the US • Growing E-commerce Market in the US • Expanding Retail Market in the US • Labor costs in the US • Intense Competition • Stringent Regulations

  14. Industry

  15. Economic Driver in Cosmetic Industry Source: World Bank Data Source: www.theatlas.com Disposable Income Per capita in U.S. Ulta Beauty has ~7% share of the $87B Beauty Product Market Source: tradingeconomics.com

  16. Retail Stores are performing Strongly

  17. Major Player & Key Ratios

  18. Compare With Sephora • focusing on a combination of their online and in-store experiences and promoting brand engagement through social, mobile and web platforms • Oversea business • help educate shoppers to make better purchasing decisions. • Besides, • bringing together prestige and general brand names • educate these brands on what strategy worked best • loyalty program

  19. Valuation

  20. Key Financial Factors ROIC = Net Operating Profit After Tax ÷ Invested Capital ROCE = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

  21. Financial Targets 2019 - 2021 • Earnings per share growth in the mid-to-high teens percentage range for FY2019- FY2021 • Comparable sales growth in the 5 to 7 percent range • Modest operating margin expansion each year • New investment in supply chain, digital innovation and guest experience offset by savings from a comprehensive, multi-year cost optimization, program, Efficiencies for Growth, targeting $150 to $200 million of savings.

  22. Modeling Assumptions as management guidance • FY18 capex of $375 million • Capex in the range of $400 million • Depreciation and amortization • Tax rate 24% • Share repurchases to contribute approximately 4 points of EPS growth annually

  23. Real Estate is a Core Competency for Ulta Beauty • Balanced, productive real estate portfolio • 1,163 stores in 50 states • 96% of stores are approximately 10,000 sq.ft.

  24. Opportunities to Improve Working Capital • SKU rationalization • Better inventory visibility and markdown tools • Supply chain network on common systems and operating model • Improve supply chain and store end-to-end operations (EFG) GOAL TO INCREASE INVENTORY TURNS BY ~50 BPS OVER THE NEXT 5 YEARS

  25. DCF Model

  26. Recommendation Current Price: 350.88 Target Price: 351.64 • The Price is highly Volatile • RSI Currently is close to 70 Put it on the watchlist and wait to enter at a cheaper position

More Related