Ulta Beauty posted yet another strong quarter, as net sales increased 12.9% to $1.74 billion, up from $1.54 billion the year prior and barely missing estimates for $1.75 billion. Comparable sales increased 7%, driven by transaction and average ticket growth, according to a company press release. That's down from an 8.1% increase in the year-ago quarter, and fell just short of expectations for a 7.1% increase, according to MarketWatch.
Net income rose 16.9% to $192.2 million, compared to $164.4 million in the year-ago quarter, beating expectations. Operating income also increased in the double digits, rising 13.2% to $237.5 million from $209.8 million a year ago. Gross profit as a percentage of net sales was 37%, up by 70 basis points, though selling, general and administrative expenses as a percentage of net sales also increased 70 basis points, to 23.1%, due to investments in growth initiatives and store labor, among other things.
The retailer also announced it would be taking Ulta Beauty international in order to "establish Ulta Beauty as a successful global brand," CEO Mary Dillon said in a statement. The first step of that process is launching operations in Canada, according to Dillon.
The big news coming out of Ulta's earnings are the beauty retailer's international expansion plans, kicking off in Canada. The company has been crushing it in the U.S., opening stores at a rate of 100 per year since 2012, a plan which has only just been scaled back.
In 2019, the retailer plans to open 80 stores instead of 100, aiming for a total store count of between 1,500 and 1,700. In the first quarter alone, 22 stores were opened, leaving the retailer's store count at 1,196. The resounding success the retailer has found in the competitive U.S. beauty market no doubt influenced its decision to test the waters elsewhere, and while it's starting small by entering Canada only, Dillon was quick to specify that this move is just the "first step in becoming a global beauty retailer."
"International expansion represents an attractive and incremental long-term growth platform, which extends our core capabilities and leverages our value proposition," Dillon said on a conference call with analysts, noting that the retailer studied multiple countries before settling on Canada. "We believe that the Ulta Beauty value proposition is very relevant and differentiated in multiple geographies around the globe and Canada is an attractive and logical place to start."
Initial launch plans include physical stores and e-commerce, though other details were sparse. Dillon said the company plans to start small, "but are prepared to scale quickly" based on their success.
As far as performance at home goes, fragrance and mass cosmetics were a highlight for the retailer, Dillon said, also calling out prestige iconic brands, prestige skincare, professional haircare products and suncare, among others.
"We continue to gain share across all major categories in both mass and prestige, with Ulta Beauty again driving all the growth in the prestige beauty industry year-to-date, based on NPD data," she said, highlighting top categories. "However, prestige cosmetics is still quite a bit softer than the rest of the portfolio, with spring newness generally underperforming our expectations."
To combat that softness, the retailer is relying on new topical launches, including an Urban Decay Game of Thrones collection and an Aladdin-themed collection from MAC Cosmetics.