Ulta Beauty, Inc.

Good afternoon and welcome to Ulta Beauty's conference call to discuss results for the second quarter of fiscal 2022. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. We ask that you please limit yourself to one question and then re-enter the queue for any additional questions. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And as a reminder, this conference call is being recorded. And it is now my pleasure to introduce Ms. Kylie Rawlins, Vice President of Investor Relations. Thank you, Ms. Rawlins. Please proceed.

Thanks, John. Good afternoon, everyone, and thank you for joining us today for our discussion of Ulta Beauty's results for the second quarter of fiscal 2022. Hosting our call are Dave Kimball, Chief Executive Officer, and Scott Sutterston, Chief Financial Officer. Keisha Steelman, Chief Operating Officer, will join us for the Q&A session. This afternoon, we announced our financial results for the second quarter. A copy of the press release is available in the investor relations section of our website. Before we begin, I'd like to remind you that the statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those projected in such statements due to a number of risks and uncertainties. all of which are described in the company's filings with the SEC. We caution you not to place undue reliance on these forward-looking statements, which speak only as of today, August 25, 2022. We have no obligation to update or revise our forward-looking statements, except as required by law, and you should not expect us to do so. We'll begin this afternoon with prepared remarks from Dave and Scott. Following our prepared comments, we'll open the call for questions. To allow us to accommodate as many questions as possible during the hour scheduled for this call, we respectfully ask that you please limit your time to one question. As always, the IR team will be available for any follow-up questions after the call. Now I'll turn the call over to Dave. Dave?

Thank you, Kylie, and good afternoon. We appreciate your continued interest in Ulta Beauty. The Ulta Beauty team delivered outstanding performance again this quarter. For the second quarter, net sales increased 16.8% to $2.3 billion. Operating profit increased to 17% of sales, and diluted EPS increased 25% to $5.70 per share. We continue to be very pleased with the broad-based strength of our business. For the quarter, all major categories exceeded our expectations, and we increased our market share in Prestige Beauty versus last year based on point-of-sale data from the MPD group. Sales in stores and digital channels also exceeded our expectations, with both channels delivering solid comp growth in the quarter. And we saw healthy sales gain from members across all income demographics. Consumer engagement with beauty remains strong, reflecting a deep emotional connection with the category as well as the continued importance of self-care and wellness. This healthy engagement paired with solid operational execution from our teams fueled our results. Before we talk about the results, I want to recognize and thank our Ulta Beauty associates. Their collaborative commitment to serving our guests, caring for each other, and executing our plans with absolute excellence has enabled us to continue navigating a dynamic environment and deliver outstanding results. The strength in our business, despite a turbulent environment, reflects the power of our differentiated model and our ability to capitalize on the strength of the overall beauty category. Our unique, enduring value proposition continues to drive our success, and our strategic framework anchors our focus as we look forward. This afternoon, I want to share an update on our strategic progress. Our first strategic priority is to drive disruptive growth through an expanded definition of all things beauty. We engage and delight beauty enthusiasts with a curated, differentiated assortment focused on inclusivity and leading trends. And this approach continues to deliver results. From a category perspective, fragrance and bath, skin care, hair care, and makeup all exceeded expectations. delivering double-digit comp growth against the second quarter last year. We are encouraged that the vast majority of our comparable sales growth was fueled by growth from both core and newness, with a modest benefit from recently executed price increases. As we have discussed on previous calls, we have received a large number of price increases from our brand partners in the first half of this year. Given ongoing cost pressures facing our brand partners, we expect to receive additional increases as we move throughout the rest of the year. Turning to the performance of our core categories, starting with our largest category, makeup. Compared to the second quarter of 2021, both prestige and mass makeup delivered double-digit comp growth. As consumers participated in more in-person activities, traveled and increasingly used makeup as a form of self-expression. Guests continue to engage with new brands like Fenty Beauty, REM Beauty, and recently launched About Face by Halsey, while new products from established brands like Clinique, NYX, e.l.f., and ColourPop also contributed to the sales growth. In addition, the ongoing expansion of MAC and Chanel Beauté into more stores contributed to the strong prestige performance. Hair care, our second largest category, Delivered another quarter of double-digit growth, driven by newness and strong engagement in our semi-annual Gorgeous Hair event, a strategic event designed to acquire new guests, increase existing member spend, and drive salon penetration. New brands like Olaplex, as well as new product launches from Way and Living Proof, contributed to the category growth in the quarter. And the initial launch of Dyson's latest Airwrap styling tool, with new features and attachments, sold out quickly. Guests continued to engage with core professional brands like Redken and Pureology, and our salon back bar takeovers drove strong growth with Joico and recently launched Andrew Fitzsimmons. Skincare was one of our best performing categories this quarter, with both Prestige and Mass delivering double-digit comp growth, driven by new brands and product innovations. Newness continued to appeal to guests with newer brands such as Drunk Elephant, Fresh, Supergoop, and recently launched Vacation, as well as new products from Peach & Lily, Osea, and Hero Cosmetics, contributing to category growth during the quarter. SkinFatuation, our monthly skincare program, which works to demystify skincare with educational content and focused themes, delivered nice growth for established brands like Tula, SunBum, Kula, and Good Molecules. The fragrance category again delivered strong double-digit comp growth on top of extraordinary growth last year. Compelling newness and strong engagement with our Mother's Day and Father's Day events contributed to this performance. Recently launched Ulta Beauty exclusive Billie Eilish and Charlie D'Amelio Born Dreamer, as well as new scents from Gucci, YSL, and Dior, drove meaningful sales growth. While our monthly Fragrance Crush program drove greater engagement with established brands like Valentino and Armani. In addition to driving core category growth, we are investing in three cross-category platforms to increase guest engagement and expand our market share. We know consumers seek beauty brands that are good for the world and align with their values, and Conscious Beauty at Holta Beauty continues to resonate with guests as it addresses these interests. At the end of the second quarter, 290 brands offered certified products in at least one conscious beauty pillar, including newly certified brands Born Dreamer, About Face, Essie, and Good Light. To increase the visibility of conscious beauty and to make it easier for guests to identify products that align with what is important to them, this quarter we refreshed the landing page on Ulta.com and added digital badging to all product pages. Now guests can quickly identify certified brands and products across our conscious beauty pillars, whether shopping in stores or on our digital channels. Moving to our efforts to expand and support our assortment of BIPOC brands, we are committed to diversifying our assortment so all guests can see themselves reflected at Ulta Beauty. In addition to continuing to expand our portfolio of BIPOC brands and enhance our marketing support for these brands, we are focused on driving structural change within the beauty industry. As the leader in beauty, we believe we have a responsibility to take tangible steps to create foundational industry change through the investment of capital and resources. As such, next month, we will officially launch our Muse Accelerator program, focused on early-stage BIPOC brands. Through this program, we will provide eight diverse leaders, founders, and entrepreneurs with resources, mentorship, and support to prepare them for retail readiness. I look forward to sharing more about our inaugural class on future calls. Finally, we continue to enhance our wellness shop to support guests as they prioritize self-care. This quarter, we expanded the shop to additional stores, and now roughly 750 stores offer guests an elevated, cohesive presentation of wellness products to help them easily navigate their personal journey. Today, we offer a curated Omni assortment of more than 140 brands, including newly launched brands Womaness and Ollie, and more than 700 SKUs to help our guests feel their best inside and out. Moving now to our ongoing efforts to evolve the omnichannel experience through a connected physical and digital ecosystem, all in your world. Store traffic trends were strong again this quarter as guests returned to in-store shopping and services. While store traffic remains slightly below pre-pandemic levels, the trend continues to improve. Our services business delivered another quarter of double-digit comp growth, primarily due to increased capacity and new service offerings. In addition, we implemented modest price increases for core services in May. Notably, member engagement with services accelerated from the first quarter, reflecting our ongoing efforts to amplify our salon services and encourage first-time trial through our member love offers. As guests returned to stores, They are also engaging in our digital channels. After lapping the tremendous digital acceleration prompted by COVID, our e-commerce channel returned to more normalized growth, delivering mid single digit comp growth for the quarter. We continue to incentivize guests to try alternative delivery options for e-commerce orders, while also investing to improve the guest experience. During the quarter, BOPUS increased 32% to 25% of e-commerce sales, compared to 20% last year. Importantly, we saw a significant improvement in guest satisfaction with the BOPUS experience, reflecting the engagement and focus of our store associates. While limited to 12 markets, guests are also increasing their use of our same-day delivery options. and we continue to be pleased with the AOV and profitability metrics of this fulfillment capability. Between focus, same-day delivery, and ship from store, more than a third of our digital orders were fulfilled by stores. We continue to expand and enhance our guest experience across all channels. In our digital channels, our teams continue to deliver a more seamless experience through what we call our digital store of the future. This quarter, we introduced new, more engaging product pages on both olta.com and our mobile app. We are also improving our physical store experience. Next month, we plan to introduce a new front-of-store presentation that will allow us to enhance our ability to support more editorial storytelling around newness, events, and trends, And later this fall, we will introduce a new layout and select stores to elevate key growth categories, unify the presentation of skincare and makeup, and enhance the services experience. Longer term, we are exploring innovative ways to connect our digital and physical stores and deliver forward-thinking guest experiences. This quarter, we officially launched Prisma Ventures, a $20 million fund focused on investing in early-stage startups and emerging tech entrepreneurs who will shape the future of retail and beauty. To date, the fund has partnered and invested in a variety of startups to enable greater personalization, including Hot AI, AdeptMind, Revia, and Restyle. and we recently announced an investment in Lume, a startup that provides robotic lash extensions, opening new intersections between beauty and robotics. Finally, we continue to enhance and expand our partnership with Target. During the second quarter, we opened 59 Ulta Beauty at Target shops, ending the quarter with 186 locations. During the quarter, we refreshed the assortment, expanding the fragrance offering, launched two black-owned brands, Sunday to Sunday and Melanin Hair Care, and introduced newness from existing brand partners, including Benefit, Morphe, and Tula. As we anniversary the initial launch of this innovative partnership and reflect on the progress made, we continue to be pleased with overall guest engagement, and we are encouraged by the behavior of new members who enter our ecosystem through this new channel. The foundation of our partnership is strong. and we are focused on driving further loyalty conversion to unlock even greater value as we scale. Now, let me give you an update on some of the steps we're taking to drive love, loyalty, and emotional connection with Ulta Beauty. We have been on a multi-year journey to create a stronger, more emotional connection with our guests and bring our brand purpose to life. Beauty is inherently inclusive. Every individual is unique, and beauty can help celebrate this uniqueness. As the leader in the category, we want to move beauty forward, making it a force for good for all and inspiring everyone to discover their own possibilities through the power of beauty. Building on our previous brand equity work, we are launching a new brand equity campaign, Beauty And. to celebrate the expansive nature of beauty and empower people to embrace their endless possibilities. The campaign will launch with content across paid, owned, and earned media with unique elements that we believe will prompt new culturally relevant conversations about beauty and inspire greater inclusivity and positivity in our industry and the world. This campaign has performed performed extraordinarily well in consumer testing, and I'm proud of the efforts Ulta Beauty is making to change the way the world sees beauty. Turning to our loyalty program, we ended the quarter with 38.2 million active members in our Ultimate Rewards loyalty program, 10% above the second quarter last year. In addition to converting new members and reengaging lapsed members, We are maintaining healthy retention rates, especially among our Diamond and Platinum members. Overall spend per member increased again this quarter, driven by both increased trip frequency and higher average ticket. And our channel metrics remain steady, with in-store-only members totaling 76% of members and omnichannel-only members totaling 17%. Over the last several years, we have expanded our CRM capabilities and developed stronger lifecycle marketing strategies that allow us to drive loyal shopping behaviors more precisely through promotional activity. Today, we are leveraging predictive decisioning to target strategic member segments with personalized communications and offers to increase frequency and drive higher lifetime value. We are seeing encouraging engagement in these offers resulting in increases in spend per member. As promotional intensity increases in beauty and across retail, these capabilities enable us to rely less on mass market promotions and leverage more targeted and profitable offers. In May, we launched UB Media, our new retail media network, and the response from brand partners has been tremendous. Our brand partners are excited about the opportunity to leverage the power of our exclusive first-party data to transform the ways they connect with beauty enthusiasts. Our team is ramping up well, and we remain excited about the opportunity to unlock a new income stream and drive sales as we enable our brand partners to engage consumers more effectively. In closing, I am incredibly pleased with the strength we have seen across our business so far this year. Our operational and financial performance is a testament to the power of our values-based culture, our business model, and the important role beauty plays in our customers' lives. We recognize beauty is not immune to macroeconomic challenges, but the category's deep emotional connection has historically resulted in stronger resilience compared to other discretionary categories. And as our results illustrate, we believe this is even more true today, given the importance of self-care and wellness. As we look to the future, we know there will be challenges, particularly with the wide-ranging impact of rising inflation, both on our business and our guests. But we remain confident in the resilience of the beauty category and our ability to lead the beauty category and drive long-term profitable growth. And now, I will turn the call over to Scott for a discussion of the financial results. Scott?