Ulta Beauty Business Analysis 2016

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$7,618,000

Gross Profit Margin 2015 %

Gross Profit $1,384,333 35.27%

Net Sales $3,924,116

Net Profit Margin 2015 %

Net Income $320,008 8.15%

Net Sales $3,924,116

(Table 3)

Asset turnover ratio 2015 %

Net Sales $3,924,116 175.89%

Average total assets $2,230,918

(Table 4) Efficiency

Receivables

Turnover Ratio 2015 %

Net Sales $3,924,116 60.37%

Acct receivables $64992/365

Times per Year 365/%= 6.04 days

(Table 5)

2015 %

Current assets $1,375,713 347%

Current Liabilities $396,227

(Table 6) Liquidity

DEBT RATIO 2015

Total Liabilities $2,230,918

Total Assets $ 2,230,918

(Table 7) Solvency

RETURN ON ASSETS 2015

Net Income $320,008 14.34%

Total Assets $2,230,918

(Table 8)

These results from these formulas show a company’s abilities, historical behavior and any opportunities. Ulta is currently in good financial standing. Their assets are higher than their liabilities plus their owner’s equity. The profitability ratio indicates a company’s ability to make money. The values sought to make this determination are the company’s gross and net profit margin, and the ratios: efficiency, receivables turnover, current ratio of liquidity, operating cash flow to current debt ratio, debt to equity and solvency ratio. Ulta is very strong in these areas as well.

The gross profit margin measures how well a company buys and sells merchandise at a profit. This margin can serve as a source for funding the company’s savings. As shown in table 2, for both years Ulta has had around 35% which allows this to be put back into the company for grow profits, or to save.

The next ratio to review is net profit margin; (table 3) which shows how much of every dollar of sales generated is money that the company actually counts as earnings.

The asset turnover ratio is a formula used to find out a company’s efficiency. These numbers are indicative of how well a company uses its assets to generate revenue. It is important that this number be a high percentage because this money is used to make more money and will help the future growth of the company. Receivables turnover ratio is the formula that reflects a company’s ability to manage credit lines both extending and collecting on debt (Table 5). This shows that Ulta collects on receivables, and looking at year over year, even though the amount increased Ulta improved the collection.

Then Liquidity ratio is used to discover the amount of assets Ulta has and could utilize to meet short-term obligations (table 6). Ulta has been using cash for their capital expenditures turning this into assets. The working capital benefits are enhanced because Ulta collects cash from sales the same day from customers and pay vendors every 30 days.

The net value of property and equipment for Ulta is $847,600, with total assets of $2,230,918, showing great margins and very little debt. Ulta has also grown the e-commerce portion of their business by 11.8% accounting for 5.6% of sales.

Investments

Ulta’s short-term investments as of January 30, 2016 and January 31, 2015, consist of $130,000 and $150,209, respectively, in certificates of deposit. These short-term investments are carried at cost, which approximates fair value and are recorded in the Consolidated Balance Sheets in Short-term investments. The contractual maturity of the Ulta’s investments was less than twelve months at January 30, 2016.

Ulta granted 294 stock options during fiscal 2015. The compensation cost that has been charged against income for stock option grants was $7,899, $9,078, and $10,214 for fiscal 2015, 2014, and 2013, respectively. The weighted-average grant date fair value of options granted in fiscal 2015, 2014 and 2013 was $56.44, $32.38 and $34.31, respectively. The total fair value of stock options issued that vested during fiscal 2015, 2014 and 2013 was $8,236, $8,799 and $10,544, respectively. At January 30, 2016, there was approximately $23,032 of unrecognized compensation expense related to unvested stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately three years. The total intrinsic value of options exercised was $36,610, $15,032 and $49,404 in fiscal 2015, 2014 and 2013, respectively.

Shareholder Value Creation

Another helpful measure of firm performance is shareholder value creation. Since it is the shareholders who have invested in the company and ultimately own it, their only interest in the company is how well it is making them money. The stock market is used to determine how well a company is performing externally in the market against its competitors.

Market capitalization is the total dollar market value of a company’s outstanding shares. This is determined by taking the total outstanding shares and multiplying it by the dollar value of a single share. As of June 10th, 2016, Ulta has 62.45M outstanding shares each valued at $239.98 giving them a market capital of $14.99B. Ulta’s biggest competitors are Regis Corp, Macy’s, and Sephora USA, Inc. Regis has 46.32M outstanding shares each valued at $12.99 giving them a market capital of $601.66M. Macy’s has 308.40M outstanding shares each valued at $33.24 giving them a market capital of $10.25B. Sephora is privately held so there is no way to compare them in the stock market. This comparison shows that while Macy’s has almost five times the number of shares that Ulta has, their individual