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Our guests can satisfy all of their beauty needs at Ulta Beauty.
−Removed: Our stores, website, and mobile applications offer more than 25,000 products from approximately 500 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.
+Added: Our stores, website, and mobile applications offer more than 25,000 products from more than 600 well-established and emerging beauty brands across a variety of categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.
Our bright and open store environment and easy to shop website and mobile applications encourage our guests to discover new products and services.
−Removed: We believe we offer the widest selection of beauty categories, including prestige and mass cosmetics, fragrance, haircare, skincare, bath and body products, professional hair products, and salon styling tools.
+Added: We believe we offer the widest selection of beauty categories, including prestige and mass cosmetics, fragrance, haircare, prestige and mass skincare, bath and body products, professional hair products, and salon styling tools.
We also offer a full-service salon in every store featuring hair, skin, makeup, and brow services.
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We believe our focus on delivering a compelling value proposition to our guests across all of our product categories drives guest loyalty.
−Removed: We offer a comprehensive loyalty program, Ultamate Rewards, and target promotions through our Customer Relationship Management (CRM) platform.
+Added: We offer a comprehensive loyalty program, Ultamate Rewards, and target communications and promotions through our Customer Relationship Management (CRM) platform.
We also offer frequent promotions and coupons, in-store events, and gifts with purchase.
+Added: Today, we offer guests a variety of ways to shop for beauty, including in our stores, through our mobile applications, and on ulta.com.
+Added: We also provide convenient fulfillment options including buy online pick-up in store, buy online pickup curbside, ship from store, and ship to home.
Our stores are predominantly located in convenient, high-traffic locations such as power strip centers.
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Our store design, fixtures, and open layout provide the flexibility to respond to consumer trends and changes in our merchandising strategy.
−Removed: As of February 1, 2020, we operated 1,254 retail stores across 50 states, as well as an e-commerce website and mobile applications.
+Added: As of January 30, 2021, we operated 1,264 retail stores across 50 states, as well as an e-commerce website and mobile applications.
We were founded in 1990 as a beauty retailer at a time when prestige, mass, and salon products were sold through distinct channels — department stores for prestige products;
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The following description of our business should be read in conjunction with the information contained in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 and our Financial Statements and Supplementary Data included in Item 8 of this Annual Report on Form 10-K.
−Removed: We are committed to executing our strategic imperatives to drive long-term growth and sustainable competitive advantages.
−Removed: Drive growth across beauty enthusiast consumer groups.
We target beauty enthusiasts across multiple demographics and shopping behaviors.
−Removed: With the unique needs and perspectives of our beauty enthusiast consumer groups, we have evolved how we connect with each group.
−Removed: We believe we can drive guest acquisition across beauty enthusiast consumer groups by evolving our brand purpose and marketing mix, expanding our efforts to target specific consumer groups, and driving our leadership as a diversity-forward brand.
−Removed: As we sharpen our brand positioning, we are increasing awareness of the Ulta Beauty brand by communicating our brand differentiation through broad scale advertising.
−Removed: We leverage a wide range of marketing tactics including digital, television, direct mail, social media, and public relations to drive brand engagement, deepen the guest connection to Ulta Beauty, and strengthen our authority in the beauty category.
−Removed: We also plan to continue to drive brand awareness and traffic by making human connections in more innovative and meaningful ways by continuing to transform our marketing mix towards channels of the future.
−Removed: Deepen Ulta Beauty love and loyalty.
−Removed: We believe we can expand Ulta Beauty’s reach, relevancy, and engagement with our guests by evolving the value proposition of our Ultamate Rewards program, increasing total membership in the program, building strategic partnerships that create incremental value for our guests, and using our customer data to deliver personalized member experiences.
−Removed: We have more than 34 million active Ulta Beauty guests enrolled in our Ultamate Rewards loyalty program.
−Removed: Loyalty member transactions represent more than 95% of our annual total net sales, and our data demonstrates that loyalty members shop with higher frequency and spend more per visit as compared to non-members.
−Removed: We intend to continue to innovate this program to keep it relevant, exciting, engaging, and growing.
−Removed: Our vision is to personalize messaging, communication, and experiences across every touch point:
−Removed: in-store, online, and through digital (including mobile) and print channels.
−Removed: Deliver a one of a kind, world class beauty assortment.
−Removed: Assortment is at the center of our value proposition and represents a core differentiator within the market.
+Added: Beauty enthusiasts have a deep emotional connection with beauty, and historically, this connection has not diminished in softer economic environments.
+Added: Our proprietary consumer research confirms engagement with the beauty category remains strong, but the unprecedented challenges faced as a result of the COVID-19 pandemic will likely have sustained effects on the category.
+Added: Health and safety concerns are elevated, consumers have quickly adopted new shopping behaviors, operating costs are increasing, and many retailers have faced financial challenges, resulting in increased store closures.
+Added: Recognizing the impact these changes will have on the beauty category, we intend to leverage the strengths of our operating model and investments to position Ulta Beauty for continued success post-COVID.
+Added: Specifically, we are focused on accelerating efforts in the following key areas to expand our long-term market share gains and extend our competitive advantages.
+Added: Build omnichannel operations that more deeply connects guests across channels.
+Added: Our guest insights and loyalty program member data confirm that our guests prefer to transact in physical stores, where they can discover and interact with products and other beauty enthusiasts.
+Added: In addition, our guests are increasingly engaging online to research, discover new products, and purchase.
+Added: Our omnichannel guests are extremely valuable, spending nearly three times more than retail-only guests.
+Added: To drive increased guest engagement across all channels, we are leveraging a multifaceted approach to communicate, engage, and transact, and we are expanding our fulfillment capabilities, including buy online and pickup in-store and curbside pickup.
+Added: Our vision is to offer industry-leading omnichannel experiences that engage our guests and unlock the combined potential of our physical and digital channels.
+Added: Reimagine how guests experience and discover Beauty .
+Added: Beauty enthusiasts value the human connection and the physical experience of beauty.
+Added: The Ulta Beauty guest experience is differentiated by our broad array of categories, brands, and price points, immersive digital tools, multiple shopping options, high quality services, and friendly, well-trained associates.
+Added: The COVID-19 pandemic has increased focus on personal safety and impacted how guests test products and experience beauty.
+Added: As a result, we are reimagining the guest experience and product discovery process and exploring ways technology, services, and the role of our associates can evolve to deliver fun, interactive, easy, and functional experiences for our guests.
+Added: Our vision is to become the most loved destination for beauty enthusiasts by reimagining the end-to-end guest experience, facilitating inspiration, discovery, and experimentation, and serving as a trusted guide, regardless of channel.
+Added: Drive market share growth through the deployment of winning category strategies.
+Added: Assortment is the center of our value proposition and represents a core differentiator within the market.
We engage beauty enthusiasts to discover and play across all categories with an enticing assortment focused on innovation and leading trends, differentiation and exclusivity, and speed to market.
We believe our broad selection of merchandise across categories, price points, and brands offer a unique shopping experience for our guests.
−Removed: Guests can find everything they need in one shopping trip with our approximately 500 brands offered, eliminating the need to go to multiple departments stores, specialty stores, salons, drug stores, mass merchandisers, and pure play e-commerce companies that may sell the same or similar products.
−Removed: We continue to evolve our assortment to meet our guests’ desire for new and exclusive products.
−Removed: We also continue to upgrade and enhance the Ulta Beauty Collection, our private label, which offers products in key categories such as cosmetics, skincare, and bath.
+Added: Guests can find everything they need in one shopping trip with our offering of more than 600 brands, eliminating the need to go to multiple departments stores, specialty stores, salons, drug stores, mass merchandisers, and pure play e-commerce companies that may sell the same or similar products.
Because of our broad array of categories, brands, and price points, we appeal to a wide range of consumers of all ages, demographics, and lifestyles.
−Removed: Lead the in-store and beauty services experience transformation.
−Removed: The Ulta Beauty guest experience today is differentiated by our broad array of categories, brands, and price points, high quality services, and friendly, well-trained associates.
−Removed: Our strategic vision is to transcend our competition by creating an immersive store experience that brings beauty to life in ways others cannot, by weaving together the best of products and services, focusing on human connection, and delivering a meaningful guest experience.
−Removed: Ulta Beauty is a leading salon authority that provides high quality and consistent services from our licensed stylists and estheticians, with a focus on hair, skin, makeup, and brows.
−Removed: Our service offering is an important platform because it creates a means to connect more closely with our guests and to elevate their experience in our stores.
−Removed: Our strategy is to drive awareness and trial of our services with new guests as well as accelerate the frequency of existing guests’ visits.
−Removed: We believe focusing on guest satisfaction, increasing effectiveness of promotions, and optimizing staffing, scheduling, and training will make our services business an even stronger differentiator in our stores.
−Removed: Reinvent beauty digital engagement.
−Removed: Our strategic vision is to build industry leading digital experiences that engage our guests through our differentiated assortment, personalization, convenience, and interactive experiences.
−Removed: Our omnichannel guests are extremely valuable, spending nearly three times more than retail-only guests.
−Removed: To increase this engagement, we have a multifaceted approach to communicate, engage, and transact across all channels and touch points.
−Removed: By creating digital experiences that are visual and immersive, and seamlessly merging content and commerce, we aim to be the unmatched source of personalized beauty information and make the beauty shopping experience fun, interactive, easy, and functional.
−Removed: Deliver operational excellence and drive efficiencies.
−Removed: Our strategic vision is to manage end-to-end speed, quality, and efficiency to deliver exceptional guest experiences, while leveraging efficiencies of scale to drive profit improvement.
−Removed: Through our cost optimization program, Efficiencies For Growth, we plan to achieve cost savings in four work streams:
+Added: We continue to change our assortment to reflect evolving beauty trends and innovation and to meet our guests’ desire for new products.
+Added: Our vision is to engage and delight beauty enthusiasts with a curated beauty assortment focused on exclusivity and leading trends.
+Added: Deepen Ulta Beauty love and loyalty.
+Added: We have 30.7 million active Ulta Beauty members enrolled in our Ultamate Rewards loyalty program.
+Added: Loyalty member transactions represent more than 94% of our annual total net sales, and our data demonstrates that loyalty members shop with higher frequency and spend more per visit as compared to non-members.
+Added: While recent disruption from the COVID-19 pandemic has impacted recent member growth, we believe we can expand Ulta Beauty’s reach, relevancy, and engagement with our guests by evolving the value proposition of our Ultamate Rewards program, increasing total membership in the program, building strategic partnerships that create incremental value for our guests, and using our customer data to deliver personalized member experiences.
+Added: Our vision is to continue to innovate and integrate the Ultamate Rewards program in meaningful ways and personalize the guest experience across all touchpoints to create stronger member connection, engagement, and loyalty.
+Added: Drive holistic cost optimization.
+Added: Similar to other retailers, we are experiencing cost pressures from macroeconomic trends, including rising wage rates and higher transportation and shipping costs.
+Added: In addition, we are managing ongoing headwinds from channel and category mix shifts.
+Added: Through our cost optimization program, Efficiencies For Growth, we are targeting and delivering cost savings in four work streams:
category performance improvement, indirect procurement, end-to-end operations, and real estate.
−Removed: These operating efficiencies will help us fund investments required for future growth.
−Removed: Invest in talent that drives a winning culture.
+Added: As we look forward, we are moving beyond process optimization to develop a cost structure that will enable us to weather future economic challenges while also supporting investments for future growth.
+Added: Our vision is to deliver profitable growth and competitive advantage by optimizing our cost structure to
+Added: enable scale and growth, developing agile operating processes that support rapid testing, learning and implementation, and building new capabilities tailored to win in a rapidly evolving omnichannel world.
+Added: Develop our talent and strengthen our culture.
Leadership, culture, and engagement of our associates are key drivers of our performance.
+Added: We have developed and sustained a world-class, guest-centric, values-based, high performance culture.
We have an experienced management team that brings a creative merchandising approach and a disciplined operating philosophy to our business.
We believe that beauty is for everyone, regardless of age, size, ability, skin tone, culture, or gender.
−Removed: We strive to provide an environment where every associate feels they can fully contribute and every guest is optimally served, regardless of differences.
−Removed: Our well-trained, non-commissioned store associates are highly engaged and deliver a differentiated guest experience.
−Removed: We continue to expand the depth of our team at all levels and in all functional areas to support our growth.
−Removed: We operate within the large and growing U.S.
+Added: Our vision is to provide an environment where every associate feels they can fully contribute and realize their full potential.
+Added: We operate within the large U.S.
beauty products and salon services industry.
−Removed: This market represents approximately $150 billion in sales, according to Euromonitor International and IBIS World Inc.
−Removed: The approximately $89 billion beauty products industry includes cosmetics, haircare, fragrance, bath and body, skincare, salon styling tools, and other toiletries.
−Removed: We estimate that Ulta Beauty has only an 8% share of the $89 billion beauty product industry.
+Added: In 2020, this market represented approximately $150 billion in sales, according to forecasted Euromonitor International and IBIS World Inc.
+Added: In 2020, the beauty products industry totaled approximately $92 billion and included cosmetics, haircare, fragrance, bath and body, skincare, salon styling tools, and other toiletries.
+Added: We estimate that Ulta Beauty had only a 7% share of the $92 billion beauty product industry.
Within this market, we compete across all major categories as well as a range of price points by offering prestige, mass, and salon products.
Our assortment strategy is built to maximize our opportunity in this industry.
−Removed: The approximately $61 billion salon services industry consists of hair, skin, and nail services.
−Removed: We estimate that Ulta Beauty has less than 1% share of this industry.
+Added: In 2020, the salon services industry totaled approximately $58 billion and included hair, skin, and nail services.
+Added: We estimate that Ulta Beauty had less than 1% share of this industry.
We have full-service hair salons and skin services in substantially every store and operate brow bars in most of our stores, as well as makeup services through our salons.
−Removed: Our research indicates that Ulta Beauty continues to increase market share across all categories.
−Removed: However, our research also indicates that the cosmetics category in the overall U.S.
−Removed: market experienced declines in 2019.
−Removed: Beauty cycles are impacted by demographics, trends, and product innovation.
+Added: Due to COVID-19 related restrictions, we were unable to offer skin and makeup services for most of fiscal 2020.
+Added: We have plans to resume services as soon as it is safe to do so.
+Added: Although our business was impacted by temporary store closures due to COVID-19, our research indicates that Ulta Beauty continues to increase market share across most prestige beauty categories in the overall U.S.
+Added: COVID-19 and its various impacts have changed consumer behavior and consumption of beauty products due to the closures of offices, retail stores and other businesses and the significant decline in social gatherings.
+Added: In addition, beauty cycles are impacted by demographics, trends, and product innovation.
While demographic trends continue to be favorable, we believe a lack of incremental product innovation has resulted in a challenging cycle for the cosmetics category, as innovation brought to the market has not resulted in incremental product purchases.
−Removed: Despite the overall market decline in the cosmetics category, we remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains for Ulta Beauty.
+Added: Despite the overall beauty market decline in 2020 due to COVID-19 impacts, we expect the beauty category will return to growth as consumers recover from the impacts of COVID-19, and we remain confident that our differentiated and diverse business model, our commitment to strategic investments, and our highly engaged associates will continue to drive market share gains for Ulta Beauty.
Our major competitors for prestige and mass products include traditional department stores, specialty stores, drug stores, mass merchandisers, and the online capabilities of national retailers and brands, as well as pure-play e-commerce companies.
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Our competitors for salon services and products include chain and independent salons.
+Added: Our retail channels
+Added: We are committed to meeting guests where and how they want to shop and strive to offer guests a compelling shopping experience through our stores, website, and mobile applications.
Our retail stores are predominantly located in convenient, high-traffic locations such as power strip centers.
Our typical store is approximately 10,000 square feet, including approximately 950 square feet dedicated to our full-service salon.
−Removed: Our retail store concept, including physical layout, displays, lighting, and quality of finishes, has evolved over time to match the rising expectations of our guests and to keep pace with our merchandising and operating strategies.
+Added: Our retail store concept, including physical layout, displays, lighting, and quality of finishes, has evolved over time to reflect the rising expectations of our guests and to keep pace with our merchandising and operating strategies.
We offer a full range of services in all of our stores, focusing on hair, skin, makeup, and brow services.
Our current Ulta Beauty store format includes an open and modern salon area and a skin treatment room or dedicated skin treatment area on the sales floor.
−Removed: In addition, the majority of our stores offer brow services on the sales floor.
+Added: In addition, most of our stores offer brow services on the sales floor.
The salon features a concierge desk, approximately five to ten stations, and a shampoo and hair color processing area.
We employ highly skilled, licensed professional stylists and estheticians who offer services as well as educational experiences, including consultations, styling lessons, makeup applications, skincare regimens, and at-home care recommendations.
−Removed: During our fiscal year ended February 1, 2020 (fiscal 2019), 74% of new stores opened in existing shopping centers and 26% opened in new shopping centers.
+Added: Due to COVID-19 restrictions, we operated at approximately 50% capacity for salon and brow services and were unable to offer skin and makeup services for most of fiscal 2020.
+Added: We have plans to resume skin and makeup services as soon as it is safe to do so.
+Added: During our fiscal year ended January 30, 2021 (fiscal 2020), 74% of new stores opened in existing shopping centers and 26% opened in new shopping centers.
Almost all new stores were opened in existing markets compared to new markets.
−Removed: As of February 1, 2020, we operated 1,254 stores across 50 states.
+Added: As of January 30, 2021, we operated 1,264 stores across 50 states.
+Added: During the first half of fiscal 2020, new store activity was temporarily paused due to COVID-19.
+Added: New store openings resumed in the third quarter of fiscal 2020.
In addition to opening new stores, we also remodeled, relocated, or refreshed (in-store fixtures and merchandising upgrades) certain stores, as shown in the following table:
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Stores refreshed
−Removed: Our real estate vision is to make Ulta Beauty accessible and convenient to more consumers across a variety of markets, a key part of how we plan to expand our market share over time.
−Removed: We believe that over the long term, we have the potential to grow our store base to between 1,500 to 1,700 Ulta Beauty stores in the United States.
+Added: Our real estate vision is to make Ulta Beauty accessible and convenient to more consumers across a variety of markets, a key driver of how we plan to expand our market share over time.
+Added: We believe that over the long term, we have the potential to grow our store footprint to between 1,500 to 1,700 Ulta Beauty stores in the United States.
We plan to further penetrate existing suburban markets, expand our presence in small markets, and further develop urban markets.
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Our net investment required to open new stores and the net sales generated by new stores may vary depending on a number of factors, including geographic location.
−Removed: While we have opportunity to expand our footprint within the U.S., in fiscal 2019 we announced our decision to expand internationally and establish Ulta Beauty as a global brand, with our first market entry in Canada.
−Removed: Omnichannel strategy
−Removed: In addition to store expansion, we expect to significantly grow our omnichannel capabilities.
+Added: Digital platform.
+Added: In addition to store expansion, we continue to expand our digital capabilities.
Our e-commerce platform has two key roles:
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and driving traffic to our stores, website, and native applications.
−Removed: Our omnichannel guests are extremely valuable, spending nearly three times as much as retail-only guests.
−Removed: We continue to develop and add new website and mobile features and functionality, marketing programs, new products and brands, and omnichannel integration points.
+Added: Our omnichannel guests are extremely valuable, historically spending nearly three times as much as retail-only guests.
+Added: We continue to develop and add new website and mobile features and functionality, marketing programs,
+Added: new products and brands, and omnichannel integration points.
We intend to establish ourselves as a leading online beauty resource by providing our guests with a rich online experience for information on key trends and products, editorial content, expanded assortments, interactive experiences, including virtual try-on capabilities, and social media content.
−Removed: We also continue to improve our order fulfillment capabilities with increased speed of delivery through new distribution centers and efficient processes designed for e-commerce order fulfillment.
+Added: We continue to improve our order fulfillment capabilities with increased speed of delivery through existing distribution centers, fast fulfillment centers (e-commerce only), select retail stores, and more efficient processes designed for e-commerce order fulfillment.
+Added: To support our e-commerce operations, during 2020 we opened the Jacksonville fast fulfillment center, expanded e-commerce operations in the Chambersburg, Greenwood and Dallas distribution centers, and expanded the ship-from-store program to 115 stores.
+Added: These investments have increased our e-commerce shipping capacity and improved delivery speed to guests.
Our omnichannel capabilities such as “Buy Online, Pick-up in Store” and “Store 2 Door,” which provides the ability for customers to order in-store and have products delivered to their homes, are available in all stores.
+Added: In response to COVID-related constraints, in fiscal 2020 our digital and store teams launched a new curbside pickup option for guests.
+Added: We also expanded our store locator functionality to include greater visibility to store specific service offerings, in-store and curbside hours, and to communicate the opening status of local stores.
+Added: In the Ulta app, we now provide store-specific occupancy levels for greater transparency and guest safety.
+Added: In support of our strategic priorities, we have formed a long-term partnership with Target Corporation to create Ulta Beauty at Target, a “shop-in-shop” concept that will offer a limited assortment of established and emerging prestige brands online and in approximately 100 Target locations beginning in the second half of 2021 (with plans to scale to hundreds more over time).
Merchandising
We offer one of the most extensive product and brand selections in our industry, including a broad assortment of branded and private label beauty products in cosmetics, fragrance, haircare, skincare, bath and body products, and salon styling tools.
−Removed: A typical Ulta Beauty store carries more than 25,000 products from approximately 500 well-established and
−Removed: emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.
+Added: A typical Ulta Beauty store carries more than 25,000 products from more than 600 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.
We present these products in an open-sell environment using centrally produced planograms (detailed schematics showing product placement in the store) and promotional merchandising planners.
−Removed: Our merchandising team continually monitors beauty and fashion trends, historical sales trends, and new product launches to keep Ulta Beauty’s product assortment fresh and relevant to our guests.
+Added: Our merchandising team continually monitors beauty and fashion trends, historical sales trends, and new product launches to keep Ulta Beauty’s product assortment fresh and relevant and to ensure that our assortment reflects the diversity of our guests.
We believe our broad selection of merchandise, from moderate-priced brands to higher-end prestige brands, creates a unique shopping experience for our guests.
+Added: Certain beauty enthusiast consumer groups are growing more interested in choosing products that will support their overall health and wellness.
+Added: These groups are focused on the connection between their own personal well-being and the well-being of workers, animals, communities, and the environment, and they are increasingly supporting brands whose products and actions align with their own values.
+Added: Reflecting this growing importance of these trends, in fiscal 2020 we launched Conscious Beauty at Ulta Beauty TM in all stores, on Ulta.com and on our app.
+Added: This holistic initiative provides transparency for guests to help them choose brands and products that reflect their personal values and individual needs.
+Added: Through this initiative, we are certifying brands across four key pillars:
+Added: Clean Ingredients, Cruelty Free, Vegan, and Sustainable Packaging.
+Added: We also highlight brands whose philanthropic efforts are critical to their business through the positive impact pillar.
+Added: Displayed in stores on an endcap constructed of recycled and recyclable materials, the program launched with 187 brands.
+Added: As of January 30, 2021, more than 230 brands participated in the program, with more than half certified in more than one pillar.
+Added: As part of the launch, we published our “Made Without List,” an evolving ingredient standard for clean beauty products, and established the Conscious Beauty Advisory Council, a coalition of experts at the forefront of clean beauty, product development, and packaging sustainability.
+Added: With the help of our
+Added: Advisory Council, we will ensure that Conscious Beauty at Ulta Beauty TM will continue to evolve and grow as expectations and standards for clean beauty continue to change.
We believe our private label, the Ulta Beauty Collection, is a strategically important opportunity for growth and profit contribution.
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Ulta Beauty manages the full development cycle of these products from concept through production to deliver differentiated packaging and formulas that enhance our brand image.
+Added: The Ulta Beauty Collection has been certified in the Clean Ingredients and Cruelty Free pillars within the Conscious Beauty at Ulta Beauty™ program.
We also offer products such as Tarte Double Duty Beauty cosmetics, IT Brushes for Ulta Beauty, and CHI for Ulta Beauty hair care appliances that are permanently exclusive to Ulta Beauty.
−Removed: Similarly, we offer a number of products that are exclusive for a limited period of time or are offered in advance of our competitors, such as Kylie Cosmetics, Morphe, Colourpop, Pattern, and Florence.
−Removed: During 2019, we launched “Sparked at Ulta Beauty,” which is a platform designed to feature a curated, ever-evolving selection of emerging brands, across all categories, in select stores and on ulta.com.
+Added: Similarly, we offer a number of products that are exclusive for a limited period of time or are offered in advance of our competitors, such as Morphe, Colourpop, Pattern, and Florence.
The Ulta Beauty Collection and permanent Ulta Beauty exclusive products represented approximately 5.5% of our total net sales in fiscal 2020.
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(4) services;
−Removed: and (5) other, which includes nail products, accessories, other revenue sources such as the private label credit card and co-branded credit card programs, and deferred revenue related to the loyalty program and gift card breakage.
+Added: and (5) other, which includes nail products, accessories, other revenue sources such as the private label and co-branded credit card programs, and deferred revenue related to the loyalty program and gift card breakage.
The following table sets forth the approximate percentage of net sales attributed to each category for the periods presented:
Fiscal year ended
+Added: (Percentage of net sales)
Skincare, bath, and fragrance
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Other (nail products, accessories, and other)
−Removed: Our merchandising team consists of a Chief Merchandising Officer who oversees category Vice Presidents who in turn oversee Divisional Merchandise Managers and their team of buyers.
−Removed: Our merchandising team works with our centralized merchandise planning and forecasting group to ensure consistent execution across our store base and e-commerce platform.
−Removed: Our planogram department assists the merchants and inventory teams to keep new products flowing into stores on a timely basis.
+Added: Our merchandising team consists of a Chief Merchandising Officer who oversees the Senior Vice President of Cosmetics and category Vice Presidents who in turn oversee Divisional Merchandise Managers and their teams of buyers.
+Added: Our Chief Merchandising Officer also oversees our centralized merchandise planning and forecasting group to ensure consistent execution across our store base and e-commerce platform and our planogram team.
+Added: Our planogram team assists the merchants and inventory teams to keep new products flowing into stores on a timely basis.
All major product categories undergo planogram revisions on a regular basis, and adjustments are made to assortment mix and product placement based on current sales trends.
−Removed: Our visual department works with our merchandising team to develop strategic placement of promotional merchandise, functional and educational signage, and creative product presentation standards in all of our stores.
−Removed: All stores receive a centrally produced promotional merchandising planner to ensure consistent implementation of our marketing programs.
+Added: Our visual team works with our merchandising team to develop strategic placement of promotional merchandise, functional and educational signage, and creative product presentation standards in all of our stores.
+Added: All stores receive centrally produced promotional merchandising planners to ensure consistent implementation of our marketing programs.
Planning and allocation
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This group serves as a strategic partner to, and provides financial oversight of, the merchandising team.
−Removed: The merchandising team creates a sales forecast by category for the year.
+Added: merchandising team creates a sales forecast by category for the year.
Our merchandise planning group creates an open-to-buy plan, approved by senior executives, for each product category.
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To ensure our inventory remains productive, our planning and replenishment group, along with senior executives, monitor the levels of clearance and aged inventory in our stores on a weekly basis.
−Removed: Vendor partnerships
−Removed: We have strong, active relationships with our more than 400 vendor partners.
−Removed: Our top ten vendor partners, such as Estée Lauder Companies, L’Oréal, and Shiseido among others, represented approximately 61% and 62% of our total net sales in fiscal 2019 and our fiscal year ended February 2, 2019 (fiscal 2018), respectively.
−Removed: We believe our vendor partners view us as a significant distribution channel for growth and brand enhancement, and we work closely with them to market both new and existing brands.
+Added: Brand partnerships
+Added: We have strong, active relationships with our more than 400 brand partners.
+Added: Our top ten brand partners, such as Estée Lauder Companies, L’Oréal, and Shiseido among others, represented approximately 56% and 61% of our total net sales in fiscal 2020 and our fiscal year ended February 1, 2020 (fiscal 2019), respectively.
+Added: We believe our brand partners view us as a significant distribution channel for growth and brand enhancement, and we work closely with them to market both new and existing brands.
+Added: All brand partners and respective subcontractors and their facilities are subject to Ulta Vendor Standards, as applicable, which set forth the ethical, legal, social, and workplace standards to meet in order to do business with Ulta Beauty.
+Added: In addition to complying with Ulta Vendor Standards, many brand partners have committed to help advance our mission to maintain the beauty of our environment and minimize our impact on the world around us by offering sustainable packaging.
Marketing and advertising
−Removed: We employ a multi-faceted marketing strategy to increase brand awareness, drive traffic to our stores, website, and mobile applications, acquire new guests, improve guest retention, and increase frequency of shopping.
+Added: We employ a multi-faceted marketing strategy to increase brand awareness, drive traffic to our stores, website, and mobile applications, acquire new loyalty program members, improve guest retention, increase frequency of shopping, and increase spend per member.
We communicate with our guests and prospective guests through multiple vehicles, including print advertising, digital and social media, and television and radio.
−Removed: These vehicles highlight the breadth of our selection of prestige, mass, and salon beauty products, new products and services, and special offers.
+Added: These vehicles highlight the breadth of our selection of prestige, mass and salon beauty products, new products and services, and special offers, as well as build our emotional connection with guests.
Our comprehensive public relations strategy enhances Ulta Beauty’s reputation as a beauty destination, increases brand awareness, supports our charitable efforts related to the Ulta Beauty Charitable Foundation, and drives awareness of new products, in-store events, and new store openings.
−Removed: Our loyalty program, Ultamate Rewards, is an important tool to increase retention of existing guests and to enhance their loyalty to the Ulta Beauty brand.
−Removed: Approximately 34 million active loyalty program members generated more than 95% of Ulta Beauty’s total net sales in fiscal 2019.
−Removed: Our data demonstrates that loyalty members shop with higher frequency and spend more per visit as compared to non-members.
+Added: The Ultamate Rewards loyalty program is an important tool to increase retention of existing guests and to enhance their loyalty to the Ulta Beauty brand.
+Added: Our CRM platform enables sophisticated analysis of the customer data in our loyalty member database as well as greater personalization of our marketing campaigns and day-to-day communications.
+Added: Our data demonstrates that loyalty members spend more per visit as compared to non-members.
+Added: The 30.7 million active loyalty program members generated approximately 94% of total net sales in fiscal 2020.
Ultamate Rewards enables customers to earn points based on their purchases.
Points earned are valid for at least one year and may be redeemed on any product we sell or service we provide.
−Removed: Our CRM platform enables sophisticated analysis of the customer data in our loyalty member database as well as greater personalization of our marketing campaigns.
To enhance our loyalty program, we offer co-branded and private label credit cards.
The credit cards drive higher wallet share and greater loyalty from our rewards members, provide increased consumer insights, and offer attractive economics.
−Removed: We continue to expand our gift card program to increase distribution to thousands of retailers through partnerships with third parties.
+Added: Furthermore, we continue to expand our gift card program to increase distribution to thousands of retailers through partnerships with third parties.
We are directing a growing percentage of our marketing expense towards digital, social media, and streaming advertising.
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Retail stores
−Removed: Our current Ulta Beauty store format is typically staffed with a general manager, a salon manager, two associate managers, a full-time prestige manager, a part-time operations manager, and approximately twenty full- and part-time associates, including approximately four to eight prestige consultants and five to ten licensed salon professionals.
+Added: Our current Ulta Beauty store format is typically staffed with a general manager, a services manager, and three associate managers, along with approximately twenty full- and part-time associates, including approximately four to eight prestige consultants and five to ten licensed salon professionals.
The management team in each store reports to the general manager.
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Members of store management receive bonuses depending on their position and based upon various performance metrics.
−Removed: Each general manager reports to a district manager, who in turn reports to a Regional Vice President of Operations, who in turn reports to a Senior Vice President of Store Operations, who in turn reports to the Chief Store Operations Officer and President, International, who in turn reports to the Chief Executive Officer.
−Removed: Each store team receives additional support from time to time from recruiting specialists for the retail and salon operations, regionally based human resource managers, a field loss prevention team, salon technical trainers, management trainers, and vendor partners.
+Added: Each general manager reports to a District Manager, who in turn reports to a Regional Vice President of Operations, who in turn reports to a Senior Vice President of Stores, who in turn reports to the Chief Store Operations Officer, who in turn reports to the Chief Executive Officer.
+Added: Each store team receives additional support from time to time from recruiting specialists for the retail and salon operations, regionally based talent development managers, a field loss prevention team, service district educators and service district leaders, and brand partners.
Ulta Beauty stores are open seven days a week, typically eleven hours a day, Monday through Saturday, and seven hours on Sunday.
Our stores have extended hours during the holiday season.
+Added: Due to COVID-19, for most of fiscal 2020 our store hours were shortened, on average, to nine hours a day, Monday through Saturday.
Salon services
−Removed: A typical salon is staffed with five to ten licensed salon professionals, including a salon manager, six or more stylists, and one or two estheticians.
+Added: A typical salon is staffed with five to ten licensed salon professionals, including six or more stylists and one or two estheticians.
Our most productive salons have a guest coordinator and an assistant manager.
−Removed: Our salon technical trainers and vendor partner education classes create a comprehensive educational program for approximately 9,700 Ulta Beauty salon professionals.
−Removed: Training and development
−Removed: Our success is dependent in part on our ability to attract, train, retain, and motivate qualified associates at all levels of the organization.
−Removed: We have developed a corporate culture that enables individual store managers to make store-level operating decisions, and we consistently reward high performance.
−Removed: We are committed to continually developing our associates and providing career advancement opportunities.
−Removed: Our associates and management teams are essential to our store expansion strategy.
−Removed: We use a combination of existing managers, promoted associates, and outside hires to support our new stores.
−Removed: All of our associates participate in an interactive new-hire orientation through which each associate becomes acquainted with Ulta Beauty’s mission, vision, and values.
−Removed: We train and educate our new store managers, prestige beauty advisors, and sales associates on our beauty products and services, our policies and procedures, opening and closing routines, guest service expectations, loss prevention practices, and our culture.
−Removed: We provide continuing education to salon professionals and retail associates throughout their careers at Ulta Beauty.
−Removed: Our learning management system and our digital workplace system allows us to provide ongoing training to all associates to continually enhance their product knowledge, technical skills, and guest service expertise.
−Removed: In contrast to the sales teams at traditional department stores, our retail sales teams are not commissioned.
−Removed: Our prestige beauty advisors are trained to work across all prestige lines and within our prestige boutiques (sets of custom-designed fixtures configured to prominently display certain prestige brands within our stores), where guests can receive makeup demonstrations, skin analysis, and assistance in selecting the products and services that suit them best.
+Added: Our services district educators and brand partner education classes create a comprehensive educational program for approximately 4,800 Ulta Beauty salon professionals.
Our vision is to develop an expanded and optimized end-to-end supply chain that improves operational efficiency, performance, and guest experience.
This includes enhanced systems and processes as well as a modernized distribution center network to support our new store and e-commerce growth.
−Removed: Currently, we operate four distribution centers that support both stores and e-commerce demand and one fast fulfillment center dedicated to support e-commerce demand.
−Removed: Inventory is shipped from our suppliers to our distribution centers and fast fulfillment center.
+Added: We operate four distribution centers that support both stores and e-commerce demand, and two fast fulfillment centers that support e-commerce only.
+Added: In addition, 115 stores fulfill e-commerce orders as part of our ship-from-store program.
+Added: Inventory is shipped from our suppliers to our distribution centers and fast fulfillment centers.
We carry more than 25,000 products and replenish our stores with such products primarily in eaches (i.e., less-than-case quantities), which allows us to ship less than an entire case when only one or two of a particular product is required.
−Removed: Our distribution centers and fast fulfillment center use distribution management and distribution control software systems to maintain and support product purchase decisions.
−Removed: Store replenishment order selection is performed using pick-to-light processing technologies.
+Added: Our distribution centers and fast fulfillment centers use warehouse management software systems to manage inventory to support product purchase decisions.
Product is delivered to stores using a broad network of contract and local pool (final mile) carriers.
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Our technology also includes a company-wide network that connects all corporate users, stores, and our distribution center infrastructure and provides communications for continual polling of sales and merchandise movement at the store level.
+Added: Our Security Operations Center constantly and proactively monitors our network and application landscape for threats and anomalies.
+Added: We have established processes for sharing data and performing third-party risk assessment and regular
+Added: disaster recovery planning and testing.
+Added: Our security approach also includes multiple layers of defense and testing of controls.
+Added: All Ulta Beauty associates have a role as stewards of company data, and we educate them on how to keep data safe.
+Added: As part of our annual Code of Business Conduct training, we train associates on how to keep devices and data safe in public places;
+Added: how to avoid security threats and phishing scams;
+Added: how to maintain a secure workplace;
+Added: and everyday practices that help maintain the security of corporate digital devices, data and systems.
We intend to leverage our technology infrastructure and systems where appropriate to gain operational efficiencies through more effective use of our systems, people, and processes.
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All In One Place.
−Removed: ®”, “The Possibilities are Beautiful ® ”, and “21 Days of Beauty ® ” have significant value and are important to building brand recognition.
+Added: ®” , “The Possibilities are Beautiful ® ”, “21 Days of Beauty ® ”, and “Conscious Beauty at Ulta Beauty TM ” have significant value and are important to building brand recognition.
Government regulation
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Finally, products such as styling tools (e.g.
−Removed: blow dryers and curling irons) are regulated by the CPSC, which has strict requirements including the requirement to report
−Removed: certain product defects.
+Added: blow dryers and curling irons) are regulated by the CPSC, which has strict requirements including the requirement to report certain product defects.
The labeling and packaging of all of these products may also be subject to the requirements of the Fair Packaging and Labeling Act and state specific requirements.
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In our store leases, we require our landlords to obtain all necessary governmental approvals and permits for the site to be used as a retail site, and we also ask them to obtain any governmental approvals and permits for our specific use (but at times the responsibility for obtaining governmental approvals and permits for our specific use falls to us).
−Removed: We require our landlords to deliver a certificate of occupancy for any work they perform on our buildings or the shopping centers in which our stores are located.
−Removed: We are responsible for delivering a certificate of occupancy for any remodeling or build-outs that we perform and are responsible for complying with all applicable laws in connection with such construction projects or build-outs.
−Removed: As of February 1, 2020, we employed approximately 18,000 associates on a full-time basis and approximately 26,000 associates on a part-time basis.
−Removed: We have no collective bargaining agreements.
−Removed: We have not experienced any work stoppages and believe we have good relationships with our employees.
+Added: As applicable, we require our landlords to deliver a certificate of occupancy for any work they perform on our buildings or the shopping centers in which our stores are located.
+Added: If required by the municipality, we are responsible for delivering a certificate of occupancy for any remodeling or build-outs that we perform and are responsible for complying with all applicable laws in connection with such construction projects or build-outs.
+Added: Human capital management
+Added: We believe our associates, with their combined skills, knowledge, experiences, and commitment to serving our guests, are among our most important resources and are critical to our continued success.
+Added: The following table sets forth the approximate number of associates employed as of:
+Added: Total associates
+Added: We have no collective bargaining agreements and have not experienced any work stoppages.
+Added: We believe we have good relationships with our associates.
+Added: Diversity and inclusion
+Added: Our goal is to create an inclusive environment where every associate feels he or she can be his or her authentic self and every guest is optimally served, regardless of differences .
+Added: A critical way we achieve this is by educating all associates on the lived experiences of their peers and key moments in time that have cultural or heritage significance, as well as the unconscious beliefs and biases that shape our behavior today.
+Added: We accomplish this through open discussion forums, interactive educational experiences, and opportunities to engage with our communities.
+Added: In addition, we aim to ensure that all in-store experiences are equitable, fair, and unbiased.
+Added: We take action to support this goal by conducting mandatory trainings for in-store associates and providing weekly learning opportunities to focus on guest perspectives and reinforce key takeaways.
+Added: We offer similar training across the organization to help key decision-makers and associates in their own learning journeys and support our Champion Diversity value and inclusion competency.
+Added: The following table sets forth key metrics as of January 30, 2021:
+Added: People of color
+Added: Oversight and management
+Added: We strive to make sure that our associates are at the heart of every decision we make.
+Added: The Chief Human Resources Officer, along with the entire executive team, is responsible for developing and executing the Company’s human capital strategy.
+Added: This includes the attraction, acquisition, development, and engagement of talent and the design of associate compensation and benefits programs.
+Added: Our human capital objectives and initiatives, including the risks related to compensation policies and practices, management development and leadership succession, diversity and inclusion
+Added: policies and practices, and implementation and compliance monitoring of our Code of Business Conduct, are also overseen by individual Board committees as described in our Corporate Governance Guidelines.
+Added: We believe open and honest two-way communication is critical to maintaining strong associate engagement.
+Added: Our executive team reviews associate engagement and satisfaction surveys to monitor associate engagement and satisfaction with their role, their leader, and the Company as a whole.
+Added: Our leadership team also hosts roundtable sessions to dive deeper on specific topics as well as additional forums, including department town halls, store and distribution center visits, and other small group gatherings.
+Added: Training and development
+Added: Our success is dependent, in part, on our ability to attract, train, retain, and motivate qualified associates at all levels of the organization.
+Added: We are committed to continually developing our associates and providing career advancement opportunities.
+Added: Our associates and management teams are essential to our store expansion strategy.
+Added: We use a combination of existing managers, promoted associates, and outside hires to support our new stores.
+Added: The majority of our promotions are internal.
+Added: As we continue to promote and develop from within, we are building a bench of associates and leaders who know our company inside and out.
+Added: All of our associates participate in an interactive new-hire orientation through which each associate becomes acquainted with Ulta Beauty’s mission, vision, and values.
+Added: Through our learning management system and our digital workplace system, we provide continuing education to associates throughout their careers at Ulta Beauty.
+Added: Additionally, our leadership development program prepares promising future leaders for new levels of responsibility.
+Added: Compensation and benefits
+Added: Our commitment to our associates and their well-being is one of our highest priorities.
+Added: We have assembled a suite of benefits that affirms and supports all that our associates contribute every day, including :
+Added: ● Health care coverage is offered to those who work more than 30 hours a week in any position.
+Added: Coverage extends to eligible dependents, including spouses, same-sex partners and children under the age of 26.
+Added: We offer comprehensive medical plans that empower associates to choose the coverage that best suits them.
+Added: ● 401(k) plan with up to a 4% company match.
+Added: ● Disability and life insurance.
+Added: ● Company-paid short-term disability pay at 80% of pay.
+Added: ● Additional insurance options, including legal, pet, home, and auto.
+Added: ● Tuition reimbursement program.
+Added: ● Paid time off, including an extended illness bank.
+Added: ● Discounts on retail products and salon services.
+Added: In addition, we believe wellness, like beauty, is more than skin deep, so we offer mental health resources, such as counseling services and access to apps;
+Added: financial wellness planning and guidance;
+Added: and health apps and educational resources for soon-to-be parents.
+Added: Since 2017, the Ulta Beauty Charitable Foundation (UBCF) has supported the Associate Relief Program to assist associates facing unforeseen financial hardship.
+Added: The Associate Relief Program provides short-term financial support to pay off medical bills or support temporary housing.
+Added: During 2020, we expanded the criteria for receiving funding to include those in need of extra assistance as a result of COVID-19.
Our business is subject to seasonal fluctuation.
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You should carefully consider the following risks and all of the other information contained in this Annual Report on Form 10-K before making an investment in our common stock.
−Removed: The coronavirus (COVID-19) will have a negative impact on our business, financial condition, profitability, cash flows and supply chain, as well as consumer spending.
−Removed: On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic.
−Removed: Federal, state and local governments have since implemented various restrictions, including travel restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions and limitations on business operations.
−Removed: In response to government recommendations and for the health and safety of our associates (i.e., employees) and guests, we announced on March 17, 2020 our decision to temporarily close all stores across the U.S.
−Removed: While too early to quantify, our sales and results of operations will be negatively impacted by this decision.
−Removed: Even after our stores are re-opened, the virus could also negatively impact our results of operations by continuing to weaken demand for our products and services and/or by disrupting our supply chain.
−Removed: As events are rapidly changing, we are unable to accurately predict the impact that COVID-19 will have on our business, financial condition, profitability, cash flows and supply chain due to uncertainties including, but not limited to, the duration of the closing of our stores, the duration of quarantines, shelter-in-place and other travel restrictions within U.S.
−Removed: and other affected countries, the severity of the virus, the duration of the outbreak and the public’s response to the outbreak and its eventual aftermath.
−Removed: Epidemics, pandemics like COVID-19, natural disasters, or other catastrophes or crises could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Epidemics, pandemics, or other public health crises, natural disasters, such as hurricanes, tornados, wildfires, earthquakes, and mudslides, as well as acts of violence or terrorism, could result in physical damage to our properties, the temporary closure of stores and/or distribution and fast fulfillment centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods both to and from our distribution and fast fulfillment centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers.
−Removed: Accordingly, if one or more epidemics, pandemics, natural disasters, and/or acts of violence or terrorism were to occur, it could have a material adverse effect on our business, financial condition, profitability, and cash flows or may require us to incur increased costs.
−Removed: The health of the economy in the channels we serve may affect consumer purchases of discretionary items such as beauty products and salon services, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Our results of operations may be materially affected by conditions in the capital markets and the economy generally, both in the U.S.
−Removed: and internationally.
−Removed: We appeal to a wide demographic consumer profile and offer an extensive selection of beauty products sold directly to retail consumers and premium salon services.
−Removed: Uncertainty in the economy could adversely impact consumer purchases of discretionary items across all of our product categories, including prestige beauty products and premium salon services.
−Removed: Factors that could affect consumers’ willingness to make such discretionary purchases include:
−Removed: general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit, consumer confidence in future economic conditions, and risks, or the public perception of risks, related to epidemics or pandemics like COVID-19.
−Removed: In the event of a prolonged economic downturn or acute recession, consumer spending habits could be adversely affected, and we could experience lower than expected net sales.
−Removed: In addition, a general deterioration in economic conditions could adversely affect our commercial partners including our vendor partners as well as the real estate developers and landlords who we rely on to construct and operate centers in which our stores are located.
−Removed: A bankruptcy or financial failure of a significant vendor or a number of significant real estate developers or shopping center landlords could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Additionally, volatility and disruption to the capital and credit markets in the recent global recession had a significant, adverse impact on global economic conditions, resulting in recessionary pressures and declines in consumer confidence and economic growth, which, in turn, led to declines in consumer spending.
−Removed: Reduced consumer spending could cause changes in customer order patterns and changes in the level of merchandise purchased by our customers, and may signify a reset of consumer spending habits, all of which may adversely affect our business, financial condition, profitability, and cash flows.
+Added: Business, Operational and Strategic Risks
We may not be able to sustain our growth plans and successfully implement our long-range strategic and financial plans, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: In addition, we intend to continue to open new stores, which could strain our resources and have a material adverse effect on our business, financial condition, profitability, and cash flows.
Our continued and future growth largely depends on our ability to implement our long-range strategic and financial plans and successfully open and operate new stores on a profitable basis.
There can be no assurance that we will be successful in implementing our growth plans or long-range strategic imperatives, including our Efficiencies for Growth cost optimization program, and our failure to do so could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: We intend to continue to grow our number of stores for the foreseeable future.
−Removed: Our continued expansion places increased demands on our financial, managerial, operational, supply-chain, and administrative resources.
−Removed: For example, our planned expansion will require us to increase the number of people we employ, as well as to monitor and upgrade our management information and other systems, and our distribution infrastructure.
−Removed: These increased demands and operating complexities could cause us to operate our business less efficiently and could have a material adverse effect on our business, financial condition, profitability, and cash flows.
If we are unable to gauge beauty trends and react to changing consumer preferences in a timely manner, our sales may decrease.
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● recognize and define product and beauty trends;
−Removed: ● anticipate, gauge, and react to changing consumer preferences (including relating to sustainability of product sources, ingredient transparency, and animal welfare) in a timely manner;
+Added: ● anticipate, gauge, and react to changing consumer preferences (including relating to sustainability of product sources and packaging, ingredient transparency, and animal welfare) in a timely manner;
● translate market trends into appropriate, saleable product, and service offerings in our stores and salons in advance of our competitors;
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If we are unable to anticipate and fulfill the merchandise needs of the consumer, our net sales may decrease and we may be forced to increase markdowns of slow-moving merchandise, either of which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: We may be unable to compete effectively in our highly competitive markets.
−Removed: The markets for beauty products and salon services are highly competitive with few barriers to entry.
−Removed: We compete against a diverse group of retailers, both small and large, including regional and national department stores, specialty retailers, drug stores, mass merchandisers, high-end and discount salon chains, locally owned beauty retailers and salons, online capabilities of national retailers, pure-play e-commerce companies, catalog retailers, and direct response television, including television home shopping retailers and infomercials.
−Removed: We believe the principal bases upon which we compete are the breadth of merchandise, our value proposition, the quality of our guests’ shopping experience, and the
−Removed: convenience of our stores as one-stop destinations for beauty products and salon services.
−Removed: Many of our competitors are, and many of our potential competitors may be, larger and have greater financial, marketing, and other resources and therefore, may be able to adapt to changes in customer requirements more quickly, devote greater resources to the marketing and sale of their products, generate greater national brand recognition, or adopt more aggressive pricing policies than we can.
−Removed: As a result, we may lose market share, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Our comparable sales and quarterly financial performance may fluctuate for a variety of reasons, which could result in a decline in the price of our common stock.
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In that event, the price of our common stock may decline.
−Removed: For more information on our quarterly results of operations, see Note 18 to our consolidated financial statements, “Selected quarterly financial data (unaudited),” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
−Removed: A reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our stores are located could significantly reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: As a result of our real estate strategy, most of our stores are located in off-mall shopping areas known as power centers.
−Removed: Power centers typically contain three to five big-box anchor stores along with a variety of smaller specialty tenants.
−Removed: As a consequence of most of our stores being located in such shopping areas, our sales are derived, in part, from the volume of traffic generated by the other destination retailers and the anchor stores in power centers where our stores are located.
−Removed: Customer traffic to these shopping areas may be adversely affected by the closing of such destination retailers or anchor stores, or by a reduction in traffic to such stores resulting from a regional or global economic downturn, an outbreak of flu or other viruses (such as COVID-19), a general downturn in the local area where our store is located, or a decline in the desirability of the shopping environment of a particular power center.
−Removed: Such a reduction in customer traffic would reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: We may respond by increasing markdowns, initiating marketing promotions, or transferring product to other stores to reduce excess inventory, which would further decrease our gross profits and net income.
−Removed: Any significant interruption in the operations of our distribution facilities could disrupt our ability to deliver merchandise to our stores in a timely manner, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Any significant interruption in the operations of our distribution centers could disrupt our ability to deliver merchandise to our stores in a timely manner, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
We distribute products to our stores without supplementing such deliveries with direct-to-store arrangements from vendors or wholesalers.
We are a retailer carrying over 25,000 beauty products that change on a regular basis in response to beauty trends, which makes the success of our operations particularly vulnerable to disruptions in our distribution infrastructure.
−Removed: Any significant interruption in the operation of our supply chain infrastructure, such as disruptions in our information systems, disruptions in operations due to fire, natural disasters, or other catastrophic events (such as the recent outbreak of COVID-19) labor disagreements, or shipping and transportation problems, could drastically reduce our ability to receive and process orders and provide products and services to our stores, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Any significant interruption in the operation of our supply chain infrastructure, such as disruptions in our information systems, disruptions in operations due to fire, natural disasters, or other catastrophic events (such as COVID-19), labor disagreements, or shipping and transportation problems, could drastically reduce our ability to receive and process orders and provide products and services to our stores and guests, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: In addition, shipping and transportation costs represent a component of our cost structure and an increase in shipping and transportation costs could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Our e-commerce platform exposes us to certain additional risks which could adversely affect our results of operations.
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Although we believe that our omnichannel participation is a distinct advantage for us due to synergies and the potential for new customers, supporting product offerings through these channels can create issues that have the potential to adversely affect our results of operations.
−Removed: For example, if our e-commerce platform successfully grows, it may do so in part by attracting existing guests, rather than new guests, who choose to purchase products from us online or through our mobile applications rather than from our physical stores, thereby reducing the financial performance of our stores.
+Added: For example, if our e-commerce platform successfully grows, it may do so in part by attracting existing guests, rather than new guests, who choose to purchase products from us online or through our
+Added: mobile applications rather than from our physical stores, thereby reducing the financial performance of our stores.
In addition, offering different products through each channel could cause conflicts and cause some of our current or potential internet or mobile customers to consider competing distributors of beauty products.
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In addition, if we are unable to make, improve, or develop relevant guest-facing technology in a timely manner, our ability to compete and our results of operations could be adversely affected.
−Removed: Cybersecurity breaches and other disruptions could compromise our information, result in the unauthorized disclosure of confidential guest, employee, Company and/or business partners’ information, damage our reputation, and expose us to liability, which could negatively impact our business.
−Removed: In the ordinary course of our business, we collect, process, and store sensitive and confidential data, including our proprietary business information and that of our guests, suppliers and business partners, and personally identifiable information of our guests and employees, in our data centers and on our networks.
−Removed: The secure processing, maintenance, and transmission of this information is critical to our operations.
−Removed: We rely on commercially available systems, software, tools, and monitoring to provide security for processing, transmission, and storage of confidential information.
−Removed: Despite the security measures we have in place and continual vigilance in regard to the protection of sensitive information, our systems and those of our third-party service providers may be vulnerable to security breaches, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors, or other similar events.
−Removed: Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen.
−Removed: Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, damage our reputation, and cause a loss of confidence in our business, products, and services, which could adversely affect our business, financial condition, profitability, and cash flows.
−Removed: We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems or any material disruption of our information systems could negatively impact financial results and materially adversely affect our business operations, particularly during the holiday season.
−Removed: We are increasingly dependent on a variety of information systems, including management, supply chain and financial information, and various other processes and transactions, to effectively manage our business.
−Removed: We have also identified the need to expand and upgrade our information systems to support historical and expected future growth.
−Removed: The failure of our information systems to perform as designed or breaches of security could have an adverse effect on our business and results of our operations.
−Removed: Any material disruption of our systems could disrupt our ability to track, record, and analyze the merchandise that we sell and could cause delays or cancellation of customer orders or impede the manufacture or shipment of products, the processing of transactions, our ability to receive and process e-commerce orders, and/or the reporting of financial results.
−Removed: Our e-commerce operations are increasingly important to our business.
−Removed: The Ulta.com website and our mobile applications serve as an effective extension of Ulta Beauty’s marketing and prospecting strategies (beyond catalogs, newspaper inserts, and national advertising) by exposing potential new customers to the Ulta Beauty brand, product offerings, and enhanced content.
−Removed: As the importance of our website, mobile applications, and e-commerce operations to our business grows, we are increasingly vulnerable to downtime and other technical failures.
−Removed: Our failure to successfully respond to these risks could reduce e-commerce sales and damage our brand’s reputation.
Increased costs or interruption in our third-party vendors’ overseas sourcing operations could disrupt production, shipment, or receipt of some of our merchandise, which could result in lost sales and could increase our costs.
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Additionally, the various product manufacturers could, in the future, decide to utilize other distribution channels for such products, therefore widening the availability of these products in other retail channels, which could negatively impact the revenue we earn from the sale of such products.
−Removed: The capacity of our distribution and order fulfillment infrastructure and the performance of our distribution and fast fulfillment centers may not be adequate to support our historical growth and expected future growth plans, which could prevent the successful implementation of these plans or cause us to incur excess costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: We currently operate four distribution facilities, which house the distribution operations for Ulta Beauty retail stores together with the order fulfillment operations of our e-commerce platform, and one fast fulfillment center (e-commerce only).
+Added: The capacity of our distribution and order fulfillment infrastructure and the performance of our distribution centers and fast fulfillment centers may not be adequate to support our historical growth and expected future growth plans, which could prevent the successful implementation of these plans or cause us to incur excess costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: We currently operate four distribution centers, which house the distribution operations for Ulta Beauty retail stores together with the order fulfillment operations of our e-commerce platform, and two fast fulfillment centers (e-commerce
In 2014, we began a multi-year supply chain project, which focused on, among other things, adding capacity and system improvements to support expanded omnichannel capabilities.
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Our failure to effectively upgrade and expand our distribution capacity on a timely basis to keep pace with our anticipated growth in stores and the performance of our distribution centers could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: We rely on our good relationships with vendor partners to purchase prestige, mass, and salon beauty products on reasonable terms.
−Removed: If these relationships were to be impaired, or if certain vendor partners were to change their distribution model, or are unable to supply sufficient merchandise to keep pace with our growth plans, we may not be able to obtain a sufficient selection or volume of merchandise on reasonable terms, and we may not be able to respond promptly to changing trends in beauty products, either of which could have a material adverse effect on our competitive position, business, financial condition, profitability, and cash flows.
−Removed: We have no long-term supply agreements with vendor partners and, therefore, our success depends on maintaining good relationships with our vendor partners.
−Removed: Our business depends to a significant extent on the willingness and ability of our vendor partners to supply us with a sufficient selection and volume of products to stock our stores.
−Removed: Some of our prestige vendor partners may not have the capacity to supply us with sufficient merchandise to keep pace with our growth plans.
+Added: We rely on our good relationships with brand partners to purchase prestige, mass, and salon beauty products on reasonable terms.
+Added: If these relationships were to be impaired, or if certain brand partners were to change their distribution model, or are unable to supply sufficient merchandise to keep pace with our growth plans, we may not be able to obtain a sufficient selection or volume of merchandise on reasonable terms, and we may not be able to respond promptly to changing trends in beauty products, either of which could have a material adverse effect on our competitive position, business, financial condition, profitability, and cash flows.
+Added: We have no long-term supply agreements with brand partners and, therefore, our success depends on maintaining good relationships with our brand partners.
+Added: Our business depends to a significant extent on the willingness and ability of our brand partners to supply us with a sufficient selection and volume of products to stock our stores.
+Added: Some of our prestige brand partners may not have the capacity to supply us with sufficient merchandise to keep pace with our growth plans.
We also have strategic partnerships with certain core brands, which have allowed us to benefit from the growing popularity of such brands.
Any of our other core brands could in the future decide to scale back or end its partnership with us and strengthen its relationship with our competitors, which could negatively impact the revenue we earn from the sale of such products.
−Removed: If we fail to maintain strong relationships with our existing vendor partners, or if we fail to continue acquiring and strengthening relationships with additional vendor partners of beauty products, our ability to obtain a sufficient amount and variety of merchandise on reasonable terms may be limited, which could have a negative impact on our competitive position.
−Removed: During fiscal 2019 and fiscal 2018, merchandise supplied to Ulta Beauty by our top ten vendor partners accounted for approximately 61% and 62% of our net sales, respectively.
+Added: If we fail to maintain strong relationships with our existing brand partners, or if we fail to continue acquiring and strengthening relationships with additional brand partners of beauty products, our ability to obtain a sufficient amount and variety of merchandise on reasonable terms may be limited, which could have a negative impact on our competitive position.
+Added: During fiscal 2020 and fiscal 2019, merchandise supplied to Ulta Beauty by our top ten brand partners accounted for approximately 56% and 61% of our net sales, respectively.
There continues to be vendor consolidation within the beauty products industry.
−Removed: The loss of or a reduction in the amount of merchandise made available to us by any one of these key vendors, or by any of our other vendor partners, could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: The loss of or a reduction in the amount of merchandise made available to us by any one of these key vendors, or by any of our other brand partners, could have a material adverse effect on our business, financial condition, profitability, and cash flows.
Use of social media may adversely impact our reputation.
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As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees, or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition, profitability, and cash flows.
+Added: If we fail to retain our existing senior management team or attract qualified new personnel, such failure could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Our business requires disciplined execution at all levels of our organization.
+Added: This execution requires an experienced and talented management team.
+Added: If we were to lose the benefit of the experience, efforts, and abilities of key executive personnel, it could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Furthermore, our ability to manage our retail expansion will require us to continue to train, motivate, and manage our associates.
+Added: We will need to attract, motivate, and retain additional qualified executive, managerial, and merchandising
+Added: personnel and store associates.
+Added: Competition for this type of personnel is intense, and we may not be successful in attracting, assimilating, and retaining the personnel required to grow and operate our business profitably.
+Added: Our secured revolving credit facility contains certain restrictive covenants that could limit our operational flexibility, including our ability to open stores.
+Added: We have a $1.0 billion secured revolving credit facility with a term expiring in March 2025.
+Added: Substantially all of our assets are pledged as collateral for outstanding borrowings under the agreement.
+Added: Outstanding borrowings bear interest at either a base rate plus a margin of 0% to 0.125% or the London Interbank Offered Rate plus a margin of 1.125% to 1.25% and the unused line fee is 0.20% per annum.
+Added: The credit facility agreement contains usual and customary restrictive covenants relating to our management and the operation of our business.
+Added: These covenants, among other things, limit our ability to grant liens on our assets, incur additional indebtedness, pay cash dividends and redeem our stock, enter into transactions with affiliates, and merge or consolidate with another entity.
+Added: These covenants could restrict our operational flexibility and any failure to comply with these covenants or our payment obligations would limit our ability to borrow under the credit facility and, in certain circumstances, may allow the lenders thereunder to require repayment.
+Added: Economic, Market and Other External Risks
+Added: The COVID-19 pandemic has had, and will continue to have, a negative impact on our business, financial condition, profitability, cash flows and supply chain, as well as consumer spending.
+Added: On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic.
+Added: Federal, state and local governments have since implemented numerous measures to try to contain the virus, such as travel restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions, and limitations or shutdowns of business operations.
+Added: In response to government recommendations and for the health and safety of our associates (i.e., employees) and guests, on March 19, 2020 we temporarily closed all stores across the U.S.
+Added: As a result of this decision, we experienced a significant reduction in customer traffic and demand which resulted in our sales and results of operations being negatively impacted.
+Added: While we have reopened all stores, the potential temporary reclosing of certain stores in the future is possible.
+Added: COVID-19 could also negatively impact our future results of operations by continuing to weaken demand for our products and services and/or by disrupting our supply chain.
+Added: The COVID-19 pandemic has significantly increased economic and demand uncertainty and has caused an economic slowdown that may continue.
+Added: The pandemic has also led to disruption and volatility in the global capital markets, which may adversely affect our and our suppliers’ liquidity.
+Added: The COVID-19 pandemic has had, and will continue to have, a negative impact on our business, financial condition, profitability, cash flows and supply chain, although the full extent is still uncertain.
+Added: As the pandemic continues to evolve, the extent of the impact on our business, financial condition, profitability, cash flows and supply chain will depend on future developments, including, but not limited to, the potential temporary reclosing of certain of our stores, the potential temporary restrictions on certain of our stores operating hours and/or in store capacity, the duration of potential future quarantines, shelter-in-place and other travel restrictions within U.S.
+Added: and other affected countries, the duration of the pandemic (including any continuing relapses), the actions to contain the virus and/or treat its impact, the duration, timing and severity of the impact on consumer spending, and how quickly and to what extent normal economic and operating conditions can resume, all of which are highly uncertain and cannot be predicted.
+Added: Epidemics, pandemics like COVID-19, natural disasters, or other catastrophes or crises that have and could continue to have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Epidemics, pandemics, or other public health crises, natural disasters, such as hurricanes, tornados, wildfires, earthquakes, and mudslides, as well as acts of violence or terrorism, have resulted in the temporary closure of our stores and, in the future, could also result in physical damage to our properties, the temporary reclosing of our stores, the temporary closing of our distribution centers and fast fulfillment centers, the temporary lack of an adequate work force,
+Added: the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods both to and from our distribution centers and fast fulfillment centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers.
+Added: Accordingly, if one or more epidemics, pandemics, natural disasters, and/or acts of violence or terrorism were to occur (as it is with the COVID-19 pandemic), it has and could continue to have a material adverse effect on our business, financial condition, profitability, and cash flows or may require us to incur increased costs.
+Added: The health of the economy in the channels we serve may affect consumer purchases of discretionary items such as beauty products and salon services, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Our results of operations may be materially affected by conditions in the capital markets and the economy generally.
+Added: We appeal to a wide demographic consumer profile and offer an extensive selection of beauty products sold directly to retail consumers and premium salon services.
+Added: Uncertainty in the economy could adversely impact consumer purchases of discretionary items across all of our product categories, including prestige beauty products and premium salon services.
+Added: Factors that could affect consumers’ willingness to make such discretionary purchases include:
+Added: general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit, consumer confidence in future economic conditions, and risks related to epidemics or pandemics like COVID-19.
+Added: In the event of a prolonged economic downturn or acute recession, consumer spending habits could be adversely affected, and we could experience lower than expected net sales.
+Added: In addition, a general deterioration in economic conditions could adversely affect our commercial partners including our brand partners as well as the real estate developers and landlords who we rely on to construct and operate centers in which our stores are located.
+Added: A bankruptcy or financial failure of a significant vendor or a number of significant real estate developers or shopping center landlords could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Additionally, volatility and disruption to the capital and credit markets may have a significant, adverse impact on global economic conditions, resulting in recessionary pressures and declines in consumer confidence and economic growth, which, in turn, may lead to declines in consumer spending.
+Added: Reduced consumer spending could cause changes in customer order patterns and changes in the level of merchandise purchased by our customers, and may signify a reset of consumer spending habits, all of which may adversely affect our business, financial condition, profitability, and cash flows.
+Added: We may be unable to compete effectively in our highly competitive markets.
+Added: The markets for beauty products and salon services are highly competitive with few barriers to entry.
+Added: We compete against a diverse group of retailers, both small and large, including regional and national department stores, specialty retailers, drug stores, mass merchandisers, high-end and discount salon chains, locally owned beauty retailers and salons, online capabilities of national retailers, pure-play e-commerce companies, catalog retailers, and direct response television, including television home shopping retailers and infomercials.
+Added: We believe the principal bases upon which we compete are the breadth of merchandise, our value proposition, the quality of our guests’ shopping experience, and the convenience of our stores as one-stop destinations for beauty products and salon services.
+Added: Many of our competitors are, and many of our potential competitors may be, larger and have greater financial, marketing, and other resources and therefore, may be able to adapt to changes in customer requirements more quickly, devote greater resources to the marketing and sale of their products, generate greater national brand recognition, or adopt more aggressive pricing policies than we can.
+Added: As a result, we may lose market share, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: A reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our stores are located could significantly reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: As a result of our real estate strategy, most of our stores are located in off-mall shopping areas known as power centers.
+Added: Power centers typically contain three to five big-box anchor stores along with a variety of smaller specialty tenants.
+Added: consequence of most of our stores being located in such shopping areas, our sales are derived, in part, from the volume of traffic generated by the other destination retailers and the anchor stores in power centers where our stores are located.
+Added: Customer traffic to these shopping areas may be adversely affected by the closing of such destination retailers or anchor stores, or by a reduction in traffic to such stores resulting from a regional or global economic downturn, an outbreak of flu or other viruses (such as COVID-19), a general downturn in the local area where our store is located, or a decline in the desirability of the shopping environment of a particular power center.
+Added: Such a reduction in customer traffic would reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: We may respond by increasing markdowns, initiating marketing promotions, or transferring product to other stores to reduce excess inventory, which would further decrease our gross profits and net income.
+Added: Increases in the demand for, or the price of, raw materials used to build and remodel our stores could hurt our profitability.
+Added: The raw materials used to build and remodel our stores are subject to availability constraints and price volatility caused by weather, supply conditions, government regulations, general economic conditions, and other unpredictable factors.
+Added: As a retailer engaged in an active building and remodeling program, we are particularly vulnerable to increases in construction and remodeling costs.
+Added: As a result, increases in the demand for, or the price of, raw materials could have a material adverse effect on our business, financial condition, profitability, and cash flows.
+Added: Our stock repurchase programs could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.
+Added: We may have in place from time to time, a stock repurchase program.
+Added: Any such stock repurchase program adopted will not obligate the Company to repurchase any dollar amount or number of shares of common stock and may be suspended or discontinued at any time, which could cause the market price of our common stock to decline.
+Added: The timing and actual number of shares repurchased under any such stock repurchase program depends on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other market conditions.
+Added: We may affect repurchases under any stock repurchase program from time to time in the open market, in privately negotiated transactions or otherwise, including accelerated stock repurchase arrangements.
+Added: Repurchases pursuant to any such stock repurchase program could affect our stock price and increase its volatility.
+Added: The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.
+Added: There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock.
+Added: Although our stock repurchase program is intended to enhance stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness.
+Added: Regulatory, Legal and Cybersecurity Risks
+Added: Cybersecurity breaches and other disruptions could compromise our information, result in the unauthorized disclosure of confidential guest, employee, Company and/or business partners’ information, damage our reputation, and expose us to liability, which could negatively impact our business.
+Added: In the ordinary course of our business, we collect, process, and store sensitive and confidential data, including our proprietary business information and that of our guests, suppliers and business partners, and personally identifiable information of our guests and employees, in our data centers and on our networks.
+Added: The secure processing, maintenance, and transmission of this information is critical to our operations.
+Added: We rely on commercially available systems, software, tools, and monitoring to provide security for processing, transmission, and storage of confidential information.
+Added: Despite the security measures we have in place and continual vigilance in regard to the protection of sensitive information, our systems and those of our third-party service providers may be vulnerable to security breaches, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors, or other similar events.
+Added: Furthermore, we allow certain of our employees to work from home as a result of the COVID-19 pandemic, as certain of our third-party service providers also allow, and this remote working environment may increase cybersecurity related risks.
+Added: Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen.
+Added: Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, damage our reputation, and cause a loss of confidence in our business, products, and services, which could adversely affect our business, financial condition, profitability, and cash flows.
+Added: We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems or any material disruption of our information systems could negatively impact financial results and materially adversely affect our business operations, particularly during the holiday season.
+Added: We are increasingly dependent on a variety of information systems, including management, supply chain and financial information, and various other processes and transactions, to effectively manage our business.
+Added: We also plan to expand and upgrade our information systems to support historical and expected future growth.
+Added: The failure of our information systems to perform as designed or breaches of security could have an adverse effect on our business and results of our operations.
+Added: Any material disruption of our systems could disrupt our ability to track, record, and analyze the merchandise that we sell and could cause delays or cancellation of customer orders or impede the manufacture or shipment of products, the processing of transactions, our ability to receive and process e-commerce orders, and/or the reporting of financial results.
+Added: Our e-commerce operations are increasingly important to our business.
+Added: The Ulta.com website and our mobile applications serve as an effective extension of Ulta Beauty’s marketing and prospecting strategies (beyond catalogs, newspaper inserts, and national advertising) by exposing potential new customers to the Ulta Beauty brand, product offerings, and enhanced content.
+Added: As the importance of our website, mobile applications, and e-commerce operations to our business grows, we are increasingly vulnerable to downtime and other technical failures.
+Added: Our failure to successfully respond to these risks could reduce e-commerce sales and damage our brand’s reputation.
Litigation and other legal or regulatory proceedings or claims and the outcome of such litigation, proceedings or claims, including possible fines and penalties, could have a material adverse effect on our business and any loss contingency accruals may not be adequate to cover actual losses.
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Ultimately, we could be prevented from commercializing a product or be forced to cease some aspect of our business operations if, as a result of actual or threatened intellectual property infringement claims, we are unable to enter into licenses on acceptable terms.
−Removed: Even if we were able to obtain a license, the rights may be non-exclusive, which would give our competitors access to the same intellectual property.
+Added: were able to obtain a license, the rights may be non-exclusive, which would give our competitors access to the same intellectual property.
The inability to enter into licenses could harm our business significantly.
−Removed: In addition to infringement claims against us, we may become a party to other patent or trademark litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office (USPTO) proceedings before the USPTO’s Trademark Trial and Appeal Board and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our technologies, products purchased from third-party vendors or our Ulta Beauty branded products.
−Removed: Some of our competitors may be able to bear the costs of such litigation or proceedings better than us because of their substantially greater financial resources.
−Removed: Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could impair our ability to compete in the marketplace.
−Removed: Intellectual property litigation and other proceedings may also absorb significant management time and resources, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
If our manufacturers are unable to produce products manufactured uniquely for Ulta Beauty, including Ulta Beauty branded products and gifts with purchase and other promotional products, consistent with applicable regulatory requirements, we could suffer lost sales and be required to take costly corrective action, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
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If we or our third-party manufacturers fail to comply with applicable regulatory requirements, we could be required to take costly corrective action.
−Removed: In addition, sanctions under various laws may include seizure of products, injunctions against future shipment of products, restitution
−Removed: and disgorgement of profits, operating restrictions, and criminal prosecution.
+Added: In addition, sanctions under various laws may include seizure of products, injunctions against future shipment of products, restitution and disgorgement of profits, operating restrictions, and criminal prosecution.
The FDA does not have a pre-market approval system for cosmetics, and we believe we are permitted to market our cosmetics and have them manufactured without submitting safety or efficacy data to the FDA.
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In particular, failure to adequately comply with the following legal requirements could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: ● Our rapidly expanding workforce, growing in pace with our number of stores, makes us vulnerable to changes in labor and employment laws.
+Added: ● Our large workforce makes us vulnerable to changes in labor and employment laws.
In addition, changes in federal and state minimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefits costs, which could hurt our profitability and affect our growth strategy.
−Removed: ● Our salon business is subject to state board regulations and state licensing requirements for our stylists and our salon procedures.
+Added: ● Our salon operations are subject to state board regulations and state licensing requirements for our stylists and our salon procedures.
Failure to maintain compliance with these regulatory and licensing requirements could jeopardize the viability of our salons.
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● Future changes in healthcare reform legislation could significantly impact our business.
−Removed: In addition, greenhouse gases may have an adverse effect on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters.
−Removed: Concern over climate change may result in new or additional legal, legislative, and regulatory requirements to reduce or mitigate the effects of climate change on the environment, which could result in future tax, transportation, and utility increases, which could adversely affect our business.
−Removed: There is also increased focus, including by investors, guests, and other stakeholders on these and other sustainability matters, including the use of plastic, energy, waste, and worker safety.
−Removed: Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to sustainability matters, which could adversely affect our business, financial condition, profitability, and cash flows.
+Added: In addition, concern over climate change and greenhouse gases may result in new or additional legal, legislative, and regulatory requirements to reduce or mitigate the effects of climate change on the environment, which could result in future tax, transportation, and utility increases, which could adversely affect our business.
+Added: There is also increased focus, including by investors, guests, and other stakeholders on these and other environmental, social, governance and sustainability matters, including the use of plastic, energy, waste, and worker safety.
+Added: Our reputation could be damaged if
+Added: we do not (or are perceived not to) act responsibly with respect to these matters, which could adversely affect our business, financial condition, profitability, and cash flows.
The formulation, manufacturing, packaging, labeling, distribution, sale, and storage of our vendors’ products and our Ulta Beauty branded products are also subject to extensive regulation by various federal agencies, including FDA, FTC, CPSC, and various state and local agencies, such as State AGs and District Attorneys.
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Additionally, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketability of our vendors’ products or our Ulta Beauty branded products, resulting in significant loss of net sales.
−Removed: Our failure to comply with federal, state, or local requirements when we advertise our products (including prices) or services, or engage in other
−Removed: promotional activities, in digital (including social media), television, or print may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of our products.
+Added: Our failure to comply with federal, state, or local requirements when we advertise our products (including prices) or services, or engage in other promotional activities, in digital (including social media), television, or print may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of our products.
Our associates or others may engage in misconduct or other improper activities, including noncompliance with our policies and procedures.
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® ,” “Ulta Beauty,” “Ulta,” and other marks incorporating our name and “All Things Beauty.
−Removed: All in One Place ® ,” and “21 Days of Beauty ® ,” copyrights in our website and mobile applications content, rights to our domain name www.ulta.com, and trade secrets and know-how with respect to our Ulta Beauty branded product formulations, product sourcing, sales and marketing and other aspects of our business, and our digital innovations such as try-on applications and artificial intelligence.
+Added: All in One Place ® ,” “21 Days of Beauty ® ,” and “Conscious Beauty at Ulta Beauty TM ,” copyrights in our website and mobile applications content, rights to our domain name www.ulta.com, and trade secrets and know-how with respect to our Ulta Beauty branded product formulations, product sourcing, sales and marketing and other aspects of our business, and our digital innovations such as try-on applications and artificial intelligence.
As such, we rely on trademark and copyright law, trade secret protection, and confidentiality agreements with certain of our employees, consultants, suppliers, and others to protect our proprietary rights.
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Our Ulta Beauty branded products and salon services may cause unexpected and undesirable side effects that could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation, which could have a material adverse effect on our business, financial condition, profitability, and cash flows .
−Removed: Unexpected and undesirable side effects caused by our Ulta Beauty branded products for which we have not provided sufficient label warnings or salon services, which may have been performed negligently, could result in the discontinuance of sales of our products or of certain salon services or prevent us from achieving or maintaining market acceptance of the affected products and services.
+Added: Unexpected and undesirable side effects caused by our Ulta Beauty branded products for which we have not provided sufficient label warnings or salon services, which may have been performed negligently, could result in the
+Added: discontinuance of sales of our products or of certain salon services or prevent us from achieving or maintaining market acceptance of the affected products and services.
Such side effects could also expose us to product liability or negligence lawsuits.
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These events could cause negative publicity regarding our Company, brand, or products, which could in turn harm our reputation and net sales, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: If we fail to retain our existing senior management team or attract qualified new personnel, such failure could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Our business requires disciplined execution at all levels of our organization.
−Removed: This execution requires an experienced and talented management team.
−Removed: If we were to lose the benefit of the experience, efforts, and abilities of key executive personnel, it could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Furthermore, our ability to manage our retail expansion will require us to continue to train, motivate, and manage our associates.
−Removed: We will need to attract, motivate, and retain additional qualified executive, managerial, and merchandising personnel and store associates.
−Removed: Competition for this type of personnel is intense, and we may not be successful in attracting, assimilating, and retaining the personnel required to grow and operate our business profitably.
−Removed: As we grow the number of our stores in new locations, we are subject to local building codes in an increasing number of local jurisdictions.
−Removed: Our failure to comply with local building codes, and the failure of our landlords to obtain certificates of occupancy in a timely manner, could cause delays in our new store openings, which could increase our store opening costs, cause us to incur lost sales and profits, and damage our public reputation.
−Removed: Ensuring compliance with local zoning and real estate land use restrictions across numerous jurisdictions is increasingly challenging as we increase the number of our stores in new locations.
−Removed: Our store leases generally require us to provide a certificate of occupancy with respect to the interior build-out of our stores (landlords generally provide the certificate of occupancy with respect to the shell of the store and the larger shopping area and common areas), and while we strive to remain in compliance with local building codes relating to the interior build out of our stores, the constantly increasing number of local jurisdictions in which we operate makes it increasingly difficult to stay abreast of changes in, and requirements of, local building codes and local building and fire inspectors’ interpretations of such building codes.
−Removed: Moreover, our landlords have occasionally been unable, due to the requirements of local zoning laws, to obtain in a timely manner a certificate of occupancy with respect to the shell of our stores and/or the larger shopping centers and/or common areas (which certificate of occupancy is required by local building codes for us to open our store), causing us in some instances to delay store openings.
−Removed: As the number of local building codes and local building and fire inspectors to which we and our landlords are subject to increases, we may be increasingly vulnerable to increased construction costs and delays in store openings caused by our or our landlords’ compliance with local building codes and local building and fire inspectors’ interpretations of such building codes.
−Removed: Any such increased construction costs and/or delays in store openings could increase our store opening costs, cause us to incur lost sales and profits, and damage our public reputation, which could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Increases in the demand for, or the price of, raw materials used to build and remodel our stores could hurt our profitability.
−Removed: The raw materials used to build and remodel our stores are subject to availability constraints and price volatility caused by weather, supply conditions, government regulations, general economic conditions, and other unpredictable factors.
−Removed: As a retailer engaged in an active building and remodeling program, we are particularly vulnerable to increases in construction and remodeling costs.
−Removed: As a result, increases in the demand for, or the price of, raw materials could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Our secured revolving credit facility contains certain restrictive covenants that could limit our operational flexibility, including our ability to open stores.
−Removed: We have a $1.0 billion secured revolving credit facility with a term expiring in March 2025.
−Removed: Substantially all of our assets are pledged as collateral for outstanding borrowings under the agreement.
−Removed: Outstanding borrowings bear interest at either a base rate plus a margin of 0% to 0.125% or the London Interbank Offered Rate (LIBOR) plus a margin of 1.125% to 1.25% and the unused line fee is 0.20% per annum.
−Removed: The credit facility agreement contains usual and customary restrictive covenants relating to our management and the operation of our business.
−Removed: These covenants, among other things, limit our ability to grant liens on our assets, incur additional indebtedness, pay cash dividends and redeem our stock, enter into transactions with affiliates, and merge or consolidate with another entity.
−Removed: These covenants could restrict our operational flexibility and any failure to comply with these covenants or our payment obligations would limit our ability to borrow under the credit facility and, in certain circumstances, may allow the lenders thereunder to require repayment.
−Removed: The market price for our common stock may be volatile.
−Removed: The market price of our common stock is likely to fluctuate significantly from time to time in response to factors including:
−Removed: ● differences between our actual financial and operating results and those expected by investors;
−Removed: ● fluctuations in quarterly operating results;
−Removed: ● our performance during peak retail seasons such as the holiday season;
−Removed: ● market conditions in our industry and the economy as a whole;
−Removed: ● changes in the estimates of our operating performance or changes in recommendations by any research analysts that follow our stock or any failure to meet the estimates made by research analysts;
−Removed: ● investors’ perceptions of our prospects and the prospects of the beauty products and salon services industries;
−Removed: ● the performance of our key vendor partners;
−Removed: ● announcements by us, our vendor partners, or our competitors of significant acquisitions, divestitures, strategic partnerships, joint ventures, or capital commitments;
−Removed: ● introductions of new products or new pricing policies by us or by our competitors;
−Removed: ● stock transactions by our principal stockholders;
−Removed: ● recruitment or departure of key personnel;
−Removed: ● the level and quality of securities research analyst coverage for our common stock;
−Removed: ● environmental, social, governance, sustainability, and other matters impacting our reputation.
−Removed: In addition, public announcements by our competitors, other retailers, and vendors concerning, among other things, their performance, strategy, or accounting practices could cause the market price of our common stock to decline regardless of our actual operating performance.
−Removed: Increases in costs of mailing, paper, and printing will affect the cost of our catalog and promotional mailings, which could reduce our profitability.
−Removed: Postal rate increases and paper and printing costs affect the cost of our catalog and promotional mailings.
−Removed: In response to any future increases in mailing costs, we may consider reducing the number and size of certain catalog editions.
−Removed: In addition, we rely on discounts from the basic postal rate structure, such as discounts for bulk mailings and sorting by zip code and carrier routes.
−Removed: We are not a party to any long-term contracts for the supply of paper.
−Removed: The cost of paper fluctuates significantly, and our future paper costs are subject to supply and demand forces that we cannot control.
−Removed: Future additional increases in postal rates or in paper or printing costs could have a material adverse effect on our business, financial condition, profitability, and cash flows.
−Removed: Our stock repurchase programs could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.
−Removed: We may have in place from time to time, a stock repurchase program.
−Removed: Any such stock repurchase program adopted will not obligate the Company to repurchase any dollar amount or number of shares of common stock and may be suspended or discontinued at any time, which could cause the market price of our common stock to decline.
−Removed: The timing and actual number of shares repurchased under any such stock repurchase program depends on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other market conditions.
−Removed: We may affect repurchases under any stock repurchase program from time to time in the open market, in privately negotiated transactions or otherwise, including accelerated stock repurchase arrangements.
−Removed: Repurchases pursuant to any such stock repurchase program could affect our stock price and increase its volatility.
−Removed: The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.
−Removed: There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock.
−Removed: Although our stock repurchase program is intended to enhance stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness.
−Removed: Changes in accounting standards and subjective assumptions, estimates, and judgments by management related to complex accounting matters could affect our financial results or financial condition.
−Removed: Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, lease obligations, inventory valuation, vendor allowances, impairment of long-lived tangible assets, customer loyalty program, share-based compensation, tax matters, and litigation, are complex and involve subjective assumptions, estimates, and judgments.
−Removed: Changes in these rules or their interpretation or changes in underlying assumptions, estimates, or judgments could negatively affect our reported or expected financial performance or financial condition.
−Removed: We are a holding company with no operations of our own, and we depend on our subsidiaries for cash.
−Removed: We are a holding company, and we do not have any material assets or operations other than ownership of equity interests of our subsidiaries.
−Removed: Our operations are conducted entirely through our subsidiaries, and our ability to generate cash to meet our obligations or to repurchase stock or pay dividends (if declared by our Board of Directors in the future) is dependent on the earnings of, and receipt of funds from, our subsidiaries through dividends or intercompany loans.
−Removed: The ability of our subsidiaries to generate sufficient cash flow from operations to allow us and them to make scheduled payments on our obligations will depend on their future financial performance, which will be affected by a range of economic, competitive, and business factors, many of which are outside of our control.
Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change in control, even if a sale of the Company would be beneficial to our stockholders, which could cause our stock price to decline and prevent attempts by our stockholders to replace or remove our current management.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.