Ulta Beauty, Inc.

Good afternoon and welcome to Ulta Beauty's conference call to discuss results for the fourth quarter 2023 earnings results. 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 queue for any additional questions. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kylie Rawlins, Vice President of Investor Relations. Ms. Rawlins, please proceed.

Thank you, Camilla. Good afternoon, everyone, and thank you for joining us for our discussion of our fourth quarter and fiscal 2023 results. Dave Kimball, CEO, will begin the call with key highlights from our quarter and full year results and share our priorities for fiscal 2024. Then Scott Sutterston, CFO, will review our quarterly financial results in more detail. And Paula Oyibo, SVP of Finance and incoming CFO, will discuss our fiscal 2024 outlook. After our prepared comments, we will open the call for questions. Keisha Steelman, President and Chief Operating Officer, will join us for the Q&A session. As a reminder, our fourth quarter and full year fiscal results include an extra week as compared to fiscal 2022. Comments regarding comp sales are based on a comparable number of weeks from the prior year. Before we begin, I'd like to remind you of the company's safe harbor language. 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 violence with the SEC. We caution you not to place undue reliance on these forward-looking statements, which speak only as of today, March 14, 2024. 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. Today's prepared remarks will be longer than usual to allow us to accommodate as many questions as possible. We respectfully ask that you limit your time to one question. If you have additional questions, please re-queue. 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, everyone. We appreciate your interest in Ulta Beauty. The Ulta Beauty team delivered strong performance again this quarter, with sales, operating margin, and EPS all exceeding our internal expectations. Our traffic trends remained healthy, our brand awareness reached all-time highs, and we drove strong member growth and retention. For the quarter, net sales increased 10.2% to $3.6 billion. Operating profit was 14.5% of sales, and diluted EPS was $8.08 per share. Comparable sales increased 2.5%, driven by high single-digit growth from digital channels. Store comps Store comp sales increased slightly as we lapped high teen growth last year. A thoughtfully curated assortment, engaging marketing strategies, and new fulfillment and technology capabilities enabled our teams to deliver mid-single-digit comp growth for the holiday period. Our holiday campaign this year centered around The Gift is Just the Beginning, which underscored our belief in the power of beauty and Ulta Beauty. To support the campaign, we created relevant storytelling which inspired authentic connection, leading to record-breaking impressions, significant growth in shared voice, and strong social engagement. These successful marketing efforts complemented our engaging in-store messaging and events, which focused on bringing beauty-tainment to guests and building the basket. Compelling content combined with successful promotional strategies drove strong new member acquisition and reactivation, while increasing shopping frequency and retention. From a market share perspective, we continued to outpace the growth of the mass market for the 14 weeks ended February 3, 2024, according to Zircona data. Our market share of prestige beauty was more challenged as we lapped strong share growth in 2022 and continued to face pressure from the expansion of beauty distribution points in prestige. While competitive intensity has increased, we remain confident our differentiated model and sales driving strategies will support our ability to capture additional market share over the long term. Turning to performance by category, Skincare was our fastest-growing category, delivering double-digit comp growth. Brands leaning into relevant trends like Bioma, Bubble, and Good Molecules, which is exclusive to Ulta Beauty, delivered strong growth. Dermatologists recommended brands also continued to appeal to consumers, looking for efficacious products from trusted brands, fueling growth for La Roche-Posay, Dermalogica, and Cetaphil. The fragrance and bath category also delivered low double-digit comp growth again this quarter. Nunas from Valentino, Burberry, and Tree Hut, and holiday gift sets from consumer favorites YSL, Gucci, and Billie Eilish contributed to strong performance. In addition, in January, we welcomed Sol de Janeiro, a Brazilian-inspired body care brand to the Ulta Beauty family. Available in 700 stores and online, Sol de Janeiro has quickly become a guest favorite, driving growth in the category. Top sales for the makeup category decreased in the low single-digit range. Softness and prestige cosmetics was partially offset by growth in mass makeup. Lip layering and blush proliferation continue to resonate with beauty enthusiasts, and brands leaning into these trends, including e.l.f., NYX, and exclusive brand Juvia's Place, delivered strong growth. While prestige makeup was challenged in totality as we lapped strong growth last year, luxury brands Dior, Natasha Denona, and Pat McGrath continued to engage guests, and Hourglass, Tarte, and Lancome saw success with compelling holiday offerings. Finally, comp sales for the hair care category decreased in the mid-single-digit range, primarily due to a decline in hair tools and the lapping of strong brain launches in 2022. Products focused on styling and foundational routines drove growth for professional brands, Redken, Kenra, and Biolage. And interest in hair health and treatments drove increased guest engagement with Way, Miel, and Divi. Newer brands, including Shark Beauty and LolaVe, also resonated with guests. Our services businesses delivered high single-digit growth for this quarter, driven by an increase in transactions. In addition to core styling services, specialty offerings including extensions, hair treatments, texture services, and ear piercing drove strong engagement with guests. Turning now to the full year, net sales for the year increased 9.8% to $11.2 billion. Comp sales increased 5.7%. Operating profit was 15% of sales. and diluted EPS increased 8.4% to a record $26.03 per share. In addition to delivering strong financial results, we also made meaningful progress against our strategic priorities. Let me share highlights of advances made this year. Reflecting our efforts to drive growth through all things beauty, we strengthened our assortment with compelling newness and the expansion of strategic cross-category platforms. Using the consumer lens of how guests experience Ulta Beauty through all of our touchpoints, we estimate we maintained our share of the total U.S. beauty product industry. We launched customer-favorite brands, including Dior, Beauty Counter, and Sol de Janeiro, and introduced emerging and exclusive brands, including Half Magic and Polite Society. We launched Luxury at Ulta Beauty, a strategically curated luxury beauty experience, and we expanded our cross-category platforms. We ended the year with more than half of our brand portfolio certified in at least one conscious beauty pillar and continued to drive greater awareness and discovery through unique sample kits and greater marketing support. We expanded our black-owned or founded brands to 50 brands. And welcome to the second cohort of BIPOC brands to our Muse Accelerator Program, a program designed to help early-stage BIPOC brands prepare for retail readiness. Additionally, we expanded the wellness shop to nearly all stores and refreshed the presentation to inspire and educate guests how to integrate wellness into their everyday lives. Turning to our second strategic pillar, All in Your World, we improved the guest experience across all of our touchpoints. We enhanced our physical footprint, opening 33 new stores and renovating or relocating 25 stores. Our services business delivered double-digit comp growth for the year, increasing frequency with members who already engaged in services while also introducing new members to our offering. And we drove greater experiential shopping through more in-store events focused on engaging and educating the guests about new products, new techniques, and the latest beauty trends. We also delivered significant improvements in our digital store experience, We successfully transitioned key guest-facing and commerce elements to a new, modern architecture, delivering a fresh guest experience across both Ulta.com and our app, and providing our teams with new tools to optimize the guest experience. These enhancements, combined with our efforts to drive omnichannel member penetration, resulted in high single-digit growth in e-commerce sales and a 30% increase in member utilization of our app. To support stronger omnichannel experiences, we continue to improve our buy-anywhere, fill-anywhere capabilities. We expanded same-day delivery to all stores and increased our ship-from-store capabilities to 450 stores. Between VOPUS, same-day delivery, and ship-from-store, 37% of our digital orders this year were fulfilled by stores, up from 31% last year. Finally, we strengthened our partnership with Target with the introduction of new brands and the opening of 155 additional Ulta Beauty and Target locations, ending the year with 510 shops. And we deepened guest engagement as reflected in growth of new member conversions, re-engagement of lapsed guests, and greater loyalty account linkage, as well as increased bounce back to Ulta Beauty stores. Moving to our third strategic pillar, expanding and deepening guest engagement and loyalty by operating at the heart of the beauty community. Our marketing strategies, media investments, and brand building efforts resulted in record-level unaided awareness, brand love, and loyalty. To drive awareness and spark deeper connection and engagement, we launched the Joy Project, a multi-year brand equity initiative to make beauty and the world a more joyful place. We expanded our social media engagement across multiple platforms with new trend-setting series and compelling content, which drove strong engagement, positive social sentiment, and share of voice. And we achieved an important milestone. In December, we surpassed 1 million followers on TikTok, reinforcing our position as a social brand leader in beauty. With improved member retention, strong new member acquisition, and healthy reactivation of lapsed members, we expanded our loyalty program by 8%, ending the year with 43.3 million loyalty members who shopped more frequently and spent more with us on average. Leading into the power of our best-in-class loyalty program in January, we rebranded the program to Ulta Beauty Rewards. featuring a stronger birthday experience and a refreshed look in stores and online and across social to drive greater awareness and deepen connection with our members. We are excited to reward our members with even more of what they love and showcase how much we appreciate them. Finally, UB Media, our retail media network, continued to deliver value. This year, we expanded the team, introduced new on-site products, and launched an innovative omnichannel solution which supports the measurement of campaigns across both digital and physical stores. Our fourth strategic pillar is to drive operational excellence and optimization to enable us to capture additional market share, fund guest experience enhancements, and deliver future profitable growth. I am very proud of what our teams accomplished in fiscal 2023, which was an ambitious year of foundational transformation for Ulta Beauty. We completed the retrofit of our Greenwood Distribution Center, began the retrofit of our Dallas Distribution Center, opened our Greer Market Fulfillment Center, and began work on our Bolingbrook Market Fulfillment Center. We successfully transitioned our Jacksonville, Greer, and Chambersburg distribution facilities and key merchandising processes to our new enterprise resource planning platform. And we converted key merchandising and commerce elements of our digital store to a new architecture while maintaining digital operations. We built a new enterprise data platform on Google Cloud infrastructure, establishing a modern ecosystem for future analytics and data-driven decision capabilities. And we completed our rollout of new POS systems, including mobile checkout in all stores. Our teams enable our success, and we continue to invest and protect and cultivate our world-class culture and talent. This year, we introduced a new leadership competency model redesigned our succession planning and talent review processes, expanded our associate development offering, and completed enterprise-wide training to reinforce inclusivity and address unconscious bias. Associate retention improved across stores, distribution centers, and our corporate team. And our 2023 culture survey results reinforce that our overall associate engagement remains strong. Finally, We made progress against our sixth strategic pillar to expand our environmental and social impact. We continue to improve the energy efficiency of stores through LED lighting retrofits, HVAC retrofits and energy management system upgrades and established 2030 emissions reduction goals approved by the science-based target initiative. I am incredibly proud of what our teams accomplished in 2023. Our teams worked through unexpected challenges with agility and grace, and I'm grateful for their steadfast commitment to deliver value for all stakeholders while also enabling new capabilities for future growth. As we look forward, we remain optimistic about the strength and resiliency of the beauty category. Over the last three years, the beauty category has experienced unprecedented growth. In 2024, we expect the category will remain healthy, but the growth will moderate to the mid single-digit range, barring a major economic event. Beauty is an attractive category, and competitive intensity continues to increase as channels blur and distribution expands. To protect and expand our leadership position, this year we expect to advance our transformational agenda with the completion of key projects, while also investing in core traffic and experienced drivers to strengthen engagement and enhance the guest experience. Starting with our go-to-market strategic pillars, we will innovate, evolve, and expand all things beauty to excite and engage the beauty enthusiast. To strengthen our differentiated position, we will continue to expand our assortment with compelling and relevant brand launches like Sol de Janeiro and Charlotte Tilbury, while also building exclusive emerging brands in our pipeline yet to be announced. In addition, this year we will refresh Ulta Beauty Collection and position the brand as the cornerstone of our conscious beauty platform. And we will continue to enhance and amplify luxury at Ulta Beauty and across category platforms. Reflecting the importance of omnichannel engagement, we will invest in the guest experience across all of our touchpoints. We will further expand and enhance our physical footprint through additional new stores, remodels, and relocations. In all stores, we will focus on enhancing the guest experience through friendly and helpful associates, fast and frictionless fulfillment, and engaging services and events, while also improving operational excellence through simplification, prioritization, and optimizing our store teams. We also plan to drive growth across digital platforms as we leverage new capabilities to amplify brand launches and events and drive greater digital discovery and conversion, and expand personalization across our digital platforms. And we will expand and enhance our partnership with Target as we support new Ulta Beauty at Target shops, evolve the assortment, and deepen member engagement through targeted loyalty strategies. Operating at the heart of the beauty community, we intend to expand and deepen guest loyalty and engagement. To support long-term brand equity and drive deeper emotional connection with consumers, we will amplify the Joy Project with a continuous rhythm of engaging activations and drive community through an expanded creator network and affiliate program. We will support brand activations and events to drive new member acquisition, while also leveraging our unique data insights to expand our targeting and member engagements. We will evolve our strategic promotional events to inspire and engage our beauty community, drive trips, and encourage omnichannel engagement, and we plan to expand the impact and value of UB Media. Turning now to our operational excellence and optimization efforts, in fiscal 2024, we plan to complete many of the foundational elements of our transformational agenda, including Project SOAR, Digital Store, and the upgrade of our data management capabilities. We also plan to invest in a new MarTech stack to support our personalization, retail media, and overall e-commerce efforts. Our supply chain optimization journey will continue. As our Bolingbrook Market Fulfillment Center is completed, we continue to retrofit our Dallas Distribution Center, and we begin the retrofit of our remaining full-service DCs in Chambersburg and Fresno. In addition, we intend to leverage our established continuous improvement capabilities to drive additional cost efficiencies with a priority on improving processes to reduce shrink. To protect our culture and cultivate our talent while also enabling future business performance, we will continue to invest in our associates and team. We intend to focus on enrichments to the frontline associate experience enhance associate learning and development, and deepen our DEI impact. Turning to our final strategic pillar, we intend to stay focused on our environmental and social impact. Building on progress made in 2023, we plan to implement our roadmap to achieve our emission reduction goals. Finally, I want to share an update on how we are approaching expansion opportunities outside the U.S. International expansion represents an incremental long-term opportunity for Ulta Beauty to extend our reach and leverage our differentiated value proposition. Today, we are excited to announce our planned market entry into Mexico. The Mexican beauty market is sizable, growing, and has significant beauty opportunity. Our research suggests there is a healthy awareness of the Ulta Beauty brand with local beauty enthusiasts, and we also see strong engagement in stores located in geographically adjacent markets. After extensive evaluation, we prioritized an asset-light partnership approach to enable us to move quickly, and I am excited to announce we have formed a joint venture with Axo, a highly experienced operator of global brands, to launch and operate Ulta Beauty in Mexico in 2025. As a result of this partnership approach, we do not expect this venture to be material to our financials in fiscal 2024. For competitive reasons, we're not sharing more details today, but we'll provide updates as appropriate. In closing, the Ulta Beauty team delivered strong financial performance in fiscal 2023, while also achieving meaningful progress against our strategic priorities. As we look to 2024, I remain excited about the opportunity to enhance our market leadership and drive profitable growth. We operate in a growing category with strong consumer engagement, and I am confident that our proven, differentiated business model, strategic priorities, and outstanding, passionate team will enable us to move beauty forward in ways that create values for our shareholders and have a positive impact on our guests, associates, and the communities we serve. Now, as many of you know, this will be Scott's last earnings call. And I want to recognize and thank Scott for his many contributions to Ulta Beauty. He has been an exceptional partner to me and an inspirational leader for our entire team. Now, today, you will also hear from Paula Evo, who will become our CFO on April 1st. Paula joined Ulta Beauty in 2019 and is a dynamic finance executive with broad industry experience. She understands our business and our guests, and I know she will have a strong impact on our business going forward. And now I will turn the call over to Scott for a discussion of our financial results. Scott.