What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-26 compared with 2023-03-24 · 86 added, 87 removed, 263 unchanged (40% of the section changed)

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Key aspects of our business include:

a differentiated assortment of more than 25,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in more than 1,350 stores predominantly located in convenient, high-traffic locations;

a differentiated assortment of approximately 25,000 beauty products across a variety of categories and price points as well as a variety of beauty services, including salon services, in more than 1,350 stores predominantly located in convenient, high-traffic locations;

engaging digital experiences delivered through our website, Ulta.com, and our mobile applications;

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2) evolve the omnichannel experience through connected physical and digital ecosystems, All In Your World;

3) expand and deepen our presence across the beauty journey, solidifying Ulta Beauty at the Heart of the Beauty Community;

3) expand and deepen our presence across the beauty journey, positioning Ulta Beauty at the Heart of the Beauty Community;

4) drive operational excellence and optimization;

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Current Trends

Impact of COVID-19

We closely monitor the continuing impact of COVID-19 on all facets of our business.

While operations during fiscal 2022 did not appear to be negatively impacted, the COVID-19 pandemic and the conditions and trends that originated during the pandemic could have negative impacts in the future.

The extent of the impact of the pandemic and the conditions and trends that originated during the pandemic on our future business and financial results will depend on, among other things, the potential of temporary restrictions on operating hours, in-store services or reclosing of certain stores or other facilities of ours or our brand partners and other suppliers, supply chain disruptions, increased transportation and shipping costs, higher wholesale costs, increased labor costs, and the duration, timing and severity of the impact of the foregoing on consumer spending.

Industry trend s

Our research indicates that Ulta Beauty has captured meaningful market share across all categories over the last several years.

However, the COVID-19 pandemic and its various impacts changed consumer behavior and consumption of beauty products, at least temporarily, due to the closures of offices, retail stores, and other businesses and the significant decline in travel, entertainment and social gatherings.

The overall beauty market declined in 2020, stabilized in 2021, and expanded in 2022, as consumers resumed in-person shopping while maintaining some of their online shopping behaviors.

The overall beauty market expanded in 2022 and in 2023, supported by healthy consumer engagement with the

beauty 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 over the long term.

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Furthermore, inflationary pressures, as well as other macroeconomic trends, could negatively impact our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with higher costs.

In addition, inflation could materially increase the interest rates on any future debt.

In addition, inflation could cause the interest rates on any future debt to remain at an elevated level or increase.

Basis of presentation

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Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or prior period.

Comparable sales

include retail sales, salon services, and e-commerce.

Comparable sales include retail sales, salon services, and e-commerce.

In fiscal years with 53 weeks, the 53 rd week of comparable sales is included in the calculation.

In the year following a 53-week year, the prior year period is shifted by one week to compare similar calendar weeks.

There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales.

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● distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities, and insurance;

● shipping and handling costs;

● shipping and handling costs for e-commerce orders;

● retail store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, and licenses;

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This presentation of items included in cost of sales may not be comparable to the way in which our competitors or other retailers compute their cost of sales.

Selling, general and administrative expenses include:

Selling, general and administrative (SG&A) expenses include:

● payroll, bonus, and benefit costs for retail store and corporate employees;

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This presentation of items in selling, general and administrative expenses may not be comparable to the way in which our competitors or other retailers compute their selling, general and administrative expenses.

Impairment, restructuring and other costs include long-lived asset impairment charges, restructuring costs associated with store closings, costs associated with the suspension of our Canadian expansion, and employee related severance costs.

Pre-opening expenses include non-capital expenditures during the period prior to store opening for new, remodeled, and relocated stores including rent during the construction period for new and relocated stores, store set-up labor, management and employee training, and grand opening advertising.

Interest (income) expense, net includes both interest income and expense.

Interest income represents interest from cash equivalents and short-term investments with maturities of twelve months or less from the date of purchase.

Interest (income) expense represents interest from cash equivalents, which include highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less from the date of purchase.

Interest expense includes interest costs and facility fees associated with our credit facility, which is structured as an asset-based lending instrument.

Our credit facility interest is based on a variable interest rate structure which can result in increased cost in periods of rising interest rates.

Our credit facility interest is based on a variable interest rate structure which can result in increased cost in periods of rising or elevated interest rates.

Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which we operate stores.

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Our fiscal years are the 52- or 53-week periods ending on the Saturday closest to January 31.

The Company’s fiscal years ended January 28, 2023 (fiscal 2022), January 29, 2022 (fiscal 2021), and January 30, 2021 (fiscal 2020) were all 52-week years.

As of January 28, 2023, we operated 1,355 stores across 50 states.

The Company’s fiscal years ended February 3, 2024 (fiscal 2023), January 28, 2023 (fiscal 2022), and January 29, 2022 (fiscal 2021) were 53, 52, and 52 week years, respectively.

As of February 3, 2024, we operated 1,385 stores across 50 states.

The following tables present the components of our consolidated results of operations for the periods indicated:

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Selling, general and administrative expenses

Impairment, restructuring and other costs

Pre-opening expenses

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Selling, general and administrative expenses

Impairment, restructuring and other costs

Pre-opening expenses

Operating income

Interest (income) expense, net

Interest income, net

Income before income taxes

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Fiscal year 2023 versus fiscal year 2022

Net sales increased $998.7 million, or 9.8%, to $11.2 billion in fiscal 2023 compared to $10.2 billion in fiscal 2022.

The net sales increase was primarily due to increased comparable sales, strong new store performance, an increase of $68.3 million in other revenue and the benefit of an extra week of sales in fiscal 2023.

Net sales for the 53 rd week of fiscal 2023 were approximately $181.9 million.

The total comparable sales increase of 5.7% in fiscal 2023, compared to an increase of 15.6% in fiscal 2022, was driven by a 7.4% increase in transactions and a 1.5% decrease in average ticket.

Gross profit increased $336.6 million, or 8.3%, to $4.4 billion in fiscal 2023, compared to $4.0 billion in fiscal 2022.

Gross profit as a percentage of net sales decreased 50 basis points to 39.1% in fiscal 2023 compared to 39.6% in fiscal 2022.

The decrease in gross profit margin was primarily due to:

● 80 basis points of deleverage in merchandise margins driven by higher promotional activity and category mix, as well as lapping of benefits from price increases;

● 40 basis points of deleverage in inventory shrink;

partially offset by

● 50 basis points of leverage in other revenue primarily due to credit card income growth, an increase in royalty income from our partnership with Target, and higher loyalty point redemptions;

● 20 basis points of leverage of store fixed costs attributed to the impact of higher sales.

Selling, general and administrative expenses

SG&A expenses increased $299.3 million, or 12.5%, to $2.7 billion in fiscal 2023 compared to $2.4 billion in fiscal 2022.

As a percentage of net sales, SG&A expenses increased 50 basis points to 24.0% in fiscal 2023 compared to 23.5% in fiscal 2022.

The deleverage of SG&A expenses was primarily due to:

● 60 basis points of deleverage of corporate overhead primarily due to strategic investments;

● 20 basis points of deleverage of store payroll and benefits due to wage investments;

● 10 basis points of deleverage of store expenses due to ongoing inflationary pressures;

● 10 basis points of deleverage due to higher marketing expenses;

partially offset by

● 50 basis points of leverage due to lower incentive compensation.

Pre-opening expenses

Pre-opening expenses decreased $2.1 million, or 19.7%, to $8.5 million in fiscal 2023 compared to $10.6 million in fiscal 2022.

Interest income, net

Net interest income was $17.6 million in fiscal 2023 compared to $4.9 million in fiscal 2022, due to higher average interest rates on cash balances.

We did not have any outstanding borrowings on our credit facility as of February 3, 2024 and January 28, 2023.

Income tax expense

Income tax expense of $404.6 million in fiscal 2023 represents an effective tax rate of 23.9%, compared to fiscal 2022 income tax expense of $401.1 million and an effective tax rate of 24.4%.

The lower income tax rate is primarily due to a decrease in state income taxes compared to fiscal 2022 and a tax benefit from the income tax accounting for stock-based compensation.

Net income increased $48.6 million to $1.3 billion in fiscal 2023 compared to $1.2 billion in fiscal 2022.

The increase in net income was primarily due to a $336.6 million increase in gross profit, partially offset by a $299.3 million increase in SG&A expenses and a $3.5 million increase in income taxes.

Fiscal year 2022 versus fiscal year 2021

Net sales increased $1.6 billion, or 18.3%, to $10.2 billion in fiscal 2022 compared to $8.6 billion in fiscal 2021.

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Selling, general and administrative expenses

Selling, general and administrative (SG&A) expenses increased $333.8 million, or 16.2%, to $2.4 billion in fiscal 2022 compared to $2.1 billion in fiscal 2021.

SG&A expenses increased $333.8 million, or 16.2%, to $2.4 billion in fiscal 2022 compared to $2.1 billion in fiscal 2021.

As a percentage of net sales, SG&A expenses decreased 40 basis points to 23.5% in fiscal 2022 compared to 23.9% in fiscal 2021.

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Net income increased $256.6 million to $1.2 billion in fiscal 2022 compared to $985.8 million in fiscal 2021.

The increase in net income was primarily due to a $676.0 million increase in gross profit, partially offset by a $333.8 million increase in SG&A expenses and $91.1 million increase in income taxes.

Fiscal year 2021 versus fiscal year 2020

Net sales increased $2.5 billion, or 40.3%, to $8.6 billion in fiscal 2021 compared to $6.2 billion in fiscal 2020.

The net sales increase was primarily due to the favorable impact from stronger consumer confidence, government stimulus payments, and the easing of COVID-19 restrictions, and an increase of $15.1 million in other revenue.

The total comparable sales increase of 37.9% in fiscal 2021, compared to a decrease of 17.9% in fiscal 2020, was driven by a 30.0% increase in transactions and a 6.0% increase in average ticket.

Gross profit increased $1.4 billion, or 72.8%, to $3.4 billion in fiscal 2021, compared to $1.9 billion in fiscal 2020.

Gross profit as a percentage of net sales increased 730 basis points to 39.0% in fiscal 2021 compared to 31.7% in fiscal 2020.

The increase in gross profit margin was primarily due to:

● 300 basis points leverage of fixed costs attributed to the impact of higher sales;

● 190 basis points of improvements in merchandise margins driven by lower promotional activity and cost optimization efforts;

● 140 basis points of leverage due to favorable channel mix shifts;

● 100 basis points of leverage in salon expenses attributed to the impact of higher sales.

Selling, general and administrative expenses

SG&A expenses increased $0.5 billion, or 30.2%, to $2.1 billion in fiscal 2021 compared to $1.6 billion in fiscal 2020.

As a percentage of net sales, SG&A expenses decreased 180 basis points to 23.9% in fiscal 2021 compared to 25.7% in fiscal 2020.

The leverage in SG&A expenses was primarily due to:

● 180 basis points of leverage of corporate overhead due to higher sales;

● 90 basis points of leverage of store payroll and benefits due to higher sales;

● 50 basis points of leverage of store expenses due to higher sales;

partially offset by

● 80 basis points of deleverage due to less employee retention credits received under the Coronavirus Aid, Relief and Economic Security Act (CARES Act);

● 60 basis points of deleverage due to higher incentive compensation.

Impairment, restructuring and other costs

There were no impairment, restructuring and other costs recognized in fiscal 2021 compared to $114.3 million for fiscal 2020, which consisted of $41.9 million due to the impairment of tangible long-lived assets and operating lease assets associated with certain retail stores, $29.1 million related to the suspension of the planned expansion to Canada, $27.5 million related to the permanent closure of 19 stores, and $15.8 million of severance charges.

Pre-opening expenses

Pre-opening expenses decreased $5.5 million, or 36.6%, to $9.5 million in fiscal 2021 compared to $15.0 million in fiscal 2020 due to current year real estate activity and stores expected to open in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021.

Interest expense, net

Interest expense, net was $1.7 million in fiscal 2021 compared to $5.7 million of interest expense, net in fiscal 2020.

Interest expense represents interest on borrowings and fees related to the credit facility.

Interest income results from short-term investments.

We did not have any outstanding borrowings on our credit facility as of January 29, 2022 and January 30, 2021.

Income tax expense

Income tax expense of $310.0 million in fiscal 2021 represents an effective tax rate of 23.9%, compared to fiscal 2020 income tax expense of $55.3 million and an effective tax rate of 23.9%.

The higher income tax expense is primarily due to higher operating income compared to fiscal 2020.

Net income increased $810.0 million to $985.8 million in fiscal 2021 compared to $175.8 million in fiscal 2020.

The increase in net income was primarily due to a $1.4 billion increase in gross profit and a $114.3 million decrease in impairment, restructuring and other costs, partially offset by a $0.5 billion increase in SG&A expenses and $254.7 million increase in income taxes.

The increase in net income was primarily due to a $676.0 million increase in gross profit, partially offset by a $333.8 million increase in SG&A expenses and a $91.1 million increase in income taxes.

Liquidity and capital resources

Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, and borrowings under our credit facility.

The most significant components of our working capital are merchandise inventories and cash and cash equivalents reduced by accounts payable, accrued liabilities, and deferred revenue.

As of January 28, 2023 and January 29, 2022, we had cash and cash equivalents of $737.9 million and $431.6 million, respectively.

The most significant components of our working capital are merchandise inventories, cash and cash equivalents, and receivables, reduced by accounts payable, deferred revenue, and accrued liabilities.

As of February 3, 2024 and January 28, 2023, we had cash and cash equivalents of $766.6 million and $737.9 million, respectively.

Our primary cash needs are for rent, capital expenditures for new, remodeled, and relocated stores, increased merchandise inventories related to store expansion and new brand additions, supply chain improvements, share repurchases, and continued investment in our information technology systems.

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We believe our primary sources of liquidity will satisfy our cash requirements over both the short term (the next twelve months) and long term.

The following table summarizes contractual cash requirements as of January 28, 2023:

The following table summarizes contractual cash requirements as of February 3, 2024:

(In thousands)

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Also included are legally binding minimum lease payments for leases signed but not yet commenced of $122.2 million, which are excluded from operating lease liabilities shown on our consolidated balance sheets.

(2) The unrecognized tax benefit of $4.2 million as of January 28, 2023 is excluded due to uncertainty regarding the realization and timing of the related future cash flows, if any.

(2) The unrecognized tax benefit of $4.1 million as of February 3, 2024 is excluded due to uncertainty regarding the realization and timing of the related future cash flows, if any.

Purchase obligations reflect legally binding agreements entered into by the Company to purchase goods or services.

The amount of purchase obligations relates to commitments for products and services and other goods and service contracts entered into as of January 28, 2023.

The amount of purchase obligations relates to commitments for products and services and other goods and service contracts entered into as of February 3, 2024.

Excluded from purchase obligations are normal purchases and contracts entered into in the ordinary course of business.

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Operating activities

Operating activities consist of net income adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, long-lived asset impairment charges, deferred income taxes, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes.

The increase in net cash provided by operating activities in fiscal 2022 is mainly due to the increase in net income, a smaller increase in merchandise inventories in fiscal 2022, and the timing of receivable collections, partially offset by the timing of payables and a smaller increase in deferred revenue compared to fiscal 2021.

The increase in net income was primarily due to an increase in gross profit resulting from higher sales, partially offset by an increase in SG&A expenses and income taxes.

Merchandise inventories, net were $1.6 billion at January 28, 2023, compared to $1.5 billion at January 29, 2022, representing an increase of $104.2 million or 7.0%.

Operating activities consist of net income adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, deferred income taxes, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes.

The decrease in net cash provided by operating activities in fiscal 2023 compared to fiscal 2022 is mainly due to the timing of accrued liabilities, accounts payable, receivable collections, prepaid income taxes, and prepaid expenses and other current assets and a larger increase in merchandise inventories in fiscal 2023, partially offset by the increase in net income and non-cash lease expense.

Merchandise inventories, net were $1.7 billion at February 3, 2024, compared to $1.6 billion at January 28, 2023, representing an increase of $138.7 million or 8.6%.

The increase in total inventory is primarily due to the following:

● $54 million increase due to the addition of 47 new stores opened since January 29, 2022;

● $69 million increase due to new key brand launches;

● $36 million increase due to the addition of 30 net new stores opened since January 28, 2023;

● $15 million increase primarily due to inventory cost increases;

The increase in net cash provided by operating activities in fiscal 2021 relative to fiscal 2020 was primarily due to the increase in net income and deferred revenue, partially offset by higher merchandise inventories, higher cash outflow from higher income taxes, and lower long-lived asset impairment charges compared to fiscal 2020.

● $13 million increase in distribution center inventory primarily due to the opening of the new market fulfillment center in Greer, SC.

The increase in net income was primarily due to an increase in gross profit resulting from higher sales, partially offset by an increase in SG&A expenses and income taxes.

The increase in non-cash lease expense was primarily due to an increase in tenant allowances.

The increase in net cash provided by operating activities in fiscal 2022 relative to fiscal 2021 was primarily due to the increase in net income, a smaller increase in merchandise inventories in fiscal 2022 compared to fiscal 2021, and the timing of receivable collections, partially offset by the timing of payables and a smaller increase in deferred revenue compared to fiscal 2021.

Investing activities

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Investment activities for capital expenditures were $435.3 million during fiscal 2023, compared to $312.1 million during fiscal 2022.

The increase in net cash used in investing activities in fiscal 2022 relative to fiscal 2021 was primarily due to more capital expenditures compared to fiscal 2021.

The increase in net cash used in investing activities in fiscal 2021 relative to fiscal 2020 was primarily due to less proceeds of short-term investments and more capital expenditures compared to fiscal 2020.

The increase in net cash used in investing activities in fiscal 2023 relative to fiscal 2022 was primarily due to more capital expenditures for new, remodeled, and relocated stores and information technology systems compared to fiscal 2022.

The increase in net cash used in investing activities in fiscal 2022 relative to fiscal 2021 was primarily due to more capital expenditures for new, remodeled, and relocated stores, supply chain, and information technology systems compared to fiscal 2021.

Capital expenditures

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Purchases of treasury shares represent the fair value of common shares repurchased from plan participants in connection with shares withheld to satisfy minimum statutory tax obligations upon the vesting of restricted stock.

The increase in net cash used in financing activities in fiscal 2023 relative to fiscal 2022 was primarily due to an increase in share repurchases and less stock options exercised.

The decrease in net cash used in financing activities in fiscal 2022 relative to fiscal 2021 was primarily due to a decrease in share repurchases.

The increase in net cash used in financing activities in fiscal 2021 relative to fiscal 2020 was primarily due to an increase in share repurchases offset by an increase in stock option exercises, and no activity under our revolving credit facility.

We had no borrowings outstanding under the credit facility at the end of fiscal 2023, 2022 and 2021.

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The 2020 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

In March 2022, the Board of Directors authorized a new share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company may repurchase up to $2.0 billion of the Company’s common stock.

The 2022 Share Repurchase Program authorization revokes the previously authorized but unused amounts from the 2020 Share Repurchase Program.

The 2022 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.

In March 2022, the Board of Directors authorized a share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company could repurchase up to $2.0 billion of the Company’s common stock.

The 2022 Share Repurchase Program authorization revoked the previously authorized but unused amounts from the 2020 Share Repurchase Program.

The 2022 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

A summary of common stock repurchase activity is presented in the following table:

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Total cost of shares repurchased

On March 12, 2024, the Board of Directors authorized a new share repurchase program (the 2024 Share Repurchase

Program) pursuant to which the Company may repurchase up to $2.0 billion of the Company’s common stock.

Share Repurchase Program authorization revokes the previously authorized but unused amounts from the 2022 Share

Repurchase Program.

The 2024 Share Repurchase Program does not have an expiration date and may be suspended or

discontinued at any time.

Credit facility

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and the other lenders party thereto.

The Loan Agreement matures on March 11, 2025, provides maximum revolving loans equal to the lesser of $1.0 billion or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $100.0 million, subject to the consent by each lender and other conditions.

The Loan Agreement matures on March 13, 2029, provides maximum revolving loans equal to the lesser of $800.0 million or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50.0 million subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $200.0 million, subject to the consent by each lender and other conditions.

The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold.

Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement.

Outstanding borrowings bear interest, at the Company’s election, 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 1.250%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20% per annum.

As of January 28, 2023 and January 29, 2022, we had no borrowings outstanding under the credit facility and we were in compliance with all terms and covenants of the Loan Agreement.

Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0.5% to 1.0% or the Term Secured Overnight Financing Rate plus a margin of 1.5% to 2.0%, and a credit spread adjustment of 0.10%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.25% to 0.375% per annum.

As of February 3, 2024 and January 28, 2023, we had no borrowings outstanding under the credit facility and we were in compliance with all terms and covenants of the Loan Agreement.

Our business is subject to seasonal fluctuation.

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Cost is determined using the moving average cost method and includes costs incurred to purchase and distribute goods as well as related vendor allowances including co-op advertising, markdowns, and volume discounts.

We record valuation adjustments to our inventories if the cost of a specific product on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory.

We record valuation adjustments to our inventories if the cost of a specific product on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory as well as for any excess or discontinued inventory.

These estimates are based on management’s judgment regarding future demand, age of inventory, and analysis of historical experience.

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We record a shrink reserve representing management’s estimate of inventory losses by location that have occurred since the date of the last physical count.

This estimate is based on management’s analysis of historical results and operating trends.

This estimate is based on management’s analysis of historical results, including consideration of current loss rates.

We do not believe that there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our inventory reserves.

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We estimate the amount recorded as a reduction of inventory at the end of each period based on a detailed analysis of inventory turns and management’s analysis of the facts and circumstances of the various contractual agreements with vendors.

We record cash consideration expected to be received from vendors in receivables.

We record cash consideration expected to be received from vendors in

We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to calculate our reduction of inventory.

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We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to calculate our impairment charges.

During fiscal 2020, we recognized $72.5 million of impairment of long-lived tangible and right-of-use assets which consisted of $41.9 million due to the carrying values of certain long-lived assets exceeding their respective fair values, $19.6 million related to the suspension of the planned expansion to Canada, and $11.0 million related to the permanent closure of 19 stores.

No impairment charges were recognized in fiscal 2022 or fiscal 2021.

No impairment charges were recognized in fiscal 2023, 2022, and 2021.

Loyalty program

We maintain a customer loyalty program, Ultamate Rewards, which allows members to earn points based on purchases of merchandise or services.

We maintain a customer loyalty program, Ulta Beauty Rewards, which allows members to earn points based on purchases of merchandise or services.

Points earned are valid for at least one year.

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A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets to the amount expected to be realized unless it is more-likely-than-not that such assets will be realized in full.

The estimated tax benefit of an uncertain tax position is

recorded in our consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities.

The estimated tax benefit of an uncertain tax position is recorded in our consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities.

Judgment is required in assessing the future tax consequences of events that have been recognized on our consolidated financial statements or tax returns.

Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements.

Recent accounting pronouncements not yet adopted

See Note 2 to our consolidated financial statements, “Summary of significant accounting policies – Recent accounting pronouncements not yet adopted.”

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.

What changed 10-K

Item 7. Management’s Discussion and Analysis