Ulta Beauty, Inc.

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 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 Wallins, Vice President of Investor Relations. Ms. Walens, please proceed.

Thank you, Alicia. And good afternoon, everyone. Thank you for joining us for a discussion of Ulta Beauty's fourth quarter and fiscal 24 results. Hosting our call today are Keisha Seelman, Chief Executive Officer, and Paula Oyubo, Chief Financial Officer. Before we begin, I'd like to remind you of the company's safe harbor language. Many of our remarks today will contain forward-looking statements and would speak only as of today, March 13, 2025. We refer you to our earnings release and SEC filings, where you will find a number of factors which could cause actual results to differ materially from those forward-looking statements. Keisha will begin our call with key highlights from our Fiscal 24 results and share our priorities for Fiscal 25. Then Paula will review our fourth quarter results in more detail and discuss our outlook for fiscal 25. Following our prepared remarks, we will open the call for questions. Our call will be a little longer than usual this time, and so to allow us to accommodate as many questions as possible during the hour scheduled for this call, we respectfully ask that you limit your time to one question. If you have additional questions, please re-queue. And as always, the IR team will be available for any follow-up questions after the call. Before I turn the call over to Keisha, I want to share that both Paula and Keisha are fighting seasonal colds, and you may notice that their voices are a bit raspy this afternoon. And with that, I'll turn the call over to Keisha. Keisha?

Thank you, Kylie, and good afternoon, everyone. I've had the pleasure of participating in these calls over the last few years as COO, and I'm excited to host my first call as CEO today. I appreciate your continued interest in Ulta Beauty and look forward to engaging with each of you. Today I'll provide my perspective on the strength of our business, highlight where I focused my first 60 days as CEO, and share some of our 2024 achievements, and discuss how I'm thinking about our long-term growth opportunities and prioritizing our actions. It all starts with our mission. Simply put, there's magic in our mission. Every day, we seek to use the power of beauty to bring to life the possibilities that lie within each of us. We have a unique opportunity to serve beauty enthusiasts at nearly every stage of life and in so many milestone moments, from their first date to their first job interview to their wedding day and so many moments in between. It's a mission uniquely suited for all to beauty, one I feel very privileged to steward, and I know that no one can bring this mission to life the way we can. While I've been at Alta Beauty for more than a decade, in my first 60 days as CEO, I made it a priority to spend meaningful time with our brand partners, guests, leadership team, and store associates to assess the state of our business, including where we're winning and where we have opportunities. I've made organizational changes to streamline decision-making and align our teams around guest-centric goals, and I've leaned in where we have immediate opportunities to improve our execution. all through the lens of protecting and nurturing the culture that we believe makes us so special. I step into this role with incredible optimism because it's evident to me that the foundational advantages of our business model are strong and more relevant than ever. We have an unmatched breadth of assortment. We provide convenient and engaging omnichannel accessibility. We've built meaningful brand equity and a leading loyalty program. We have a strong financial foundation with stable operating cash flow, and we have more than 58,000 talented associates who are the heart of our company and represent our brand to our guests every day. The beauty landscape has fundamentally changed. Guest expectations continue to rise, and the pace of change is accelerating. The competitive environment in beauty has never been more intense. For the first time, we lost market share in the beauty category in 2024. I am aware of the challenges that we face. Some of them are external while others we own. Our business is bigger and we've managed unprecedented category growth and it is more complex as we've expanded our assortment and added new fulfillment choices like buy online, pick up in store, ship from store, and same day delivery. These capabilities are driving guest engagement and enhance accessibility but have also resulted in execution challenges particularly in product transitions and launches, as we leverage new tools and processes. As a result, our in-store presentation and guest experience today are not as strong as we would like. These are opportunities well within our control. We've identified specific gaps and we're working quickly to address, and I'm leaning in with our teams and brand partners to improve in-store presentation and inventory levels to deliver a better guest experience. It's clear to me that how we've operated must change to ensure that we capture the opportunities in front of us. We are focusing to ensure the guest is at the center of everything we do, and we intend to move faster, invest strategically, and optimize our business to achieve our long-term goals to drive profitable growth and market share. I'll dive into our long-term plan to achieve these objectives shortly. But first, let's review the progress made in 2024. We're proud to have finished the year ahead of our expectations. Paula will share more about our financial performance in a few minutes, but I want to highlight just a few of our key 2024 achievements, including enhancing our assortment through the relaunch of our Ulta Beauty collection and the launch of 40 new brands, including exclusive brands like ExoChloe, Noise, Wynn Beauty, and guest favorites like Charlotte Tilbury, ILIA, and Tatcha. Expanding accessibility through the opening of 60 net new stores 100 new Ulta Beauty at Target shop-and-shop locations, and improved digital functionality. We also initiated plans to launch in Mexico and most recently announced our expansion into the Middle East in 2025. Relaunching and growing our loyalty program 3% to a record high of 44.6 million members, driving significant gains in brand love and social engagement through compelling marketing and advertising efforts, and completing several transformational infrastructure investments, including the upgrade of our ERP system, digital store, and data ecosystem. Looking forward, we remain optimistic about the strength and resilience of the beauty category. We are mindful that consumers are navigating a dynamic macro environment, but we continue to expect healthy consumer engagement in beauty. While the category has normalized, we believe in the positive dynamics within the category. including a strong and growing connection between beauty and wellness, increased digital usage, a strong innovation pipeline, and consumer engagement. And we expect these dynamics will support continued category growth in the low to mid-single-digit range over the next few years. Now, I want to share how we're prioritizing our actions as we look to deliver a stronger guest experience and value to our stakeholders. The long-term strategies and financial targets that we outlined in our October Investor Day will continue to guide our path forward. To bring further focus to our efforts, we've aligned our plan around three main priorities. First, drive core business growth. Second, scale new accretive businesses. And third, realign our foundation for the future. We're calling our plan Alta Beauty Unleashed. We recognize the need to move quickly and we will be deliberate about pacing and prioritization to ensure that we can execute well and manage the short-term financial impact. Turning to our first priority, driving core business growth. We have a strong model and have identified significant opportunities to unlock further advantages. This means continuing to push for excellence in all areas of our operations and strengthening our go-to-market approach. with the guests always at the center of everything we do. As I shared earlier, our teams are focused on opportunities to sharpen our execution and get back to the basics of running excellent stores that are easy to navigate, fully stocked, appropriately staffed, clean, and inviting. Beyond a return to best-in-class execution, in 2025, we will focus primarily on three initiatives to drive core growth, brand building, personalization, and digital accelerations. We will enhance our assortment through further investments in brand building with a particular focus on exclusive emerging and established brands. We've kicked off 2025 with an exciting start with the announcement of several notable brand launches. These include fan favorite Milk Makeup and the innovative K-Beauty skincare brand Anua, exclusive to Ulta Beauty. And we're thrilled about the upcoming retail debut of Beyonce's hair care brand Sacred. also exclusive to Ulta Beauty, which we will bring to life in unique ways through our salons. We'll continue to build this momentum throughout the year and into 2026. We will deepen guest engagement through accelerated personalization, increasing automation and real-time content across digital channels. We will accelerate our digital efforts, delivering new enhanced features on our app and website aimed at elevating the guest experience. Second, we intend to scale new and creative businesses to capitalize on key growth opportunities and ensure that we remain resilient in a rapidly changing world. In 2025, we'll focus on four initiatives, accelerating our focus on wellness, launching a new marketplace, which will expand our e-commerce presence and allow us to offer a broader array of beauty and wellness products to our guests, build upon our international presence, And we also plan to introduce several key enhancements to our Ulta Beauty Media offering, including new product innovation that provides brands with new ways to reach consumers, along with enhanced closed-loop measurements. Finally, turning to our third objective, realigning our foundation for the future. To successfully achieve our long-term growth ambitions, reassert our leadership position, and deliver value to our stakeholders, we must optimize ways of working and streamline our cost structure. It starts by focusing on the heart of our company, our teams, and our culture. At our core, I believe that we have the very best talent and culture in retail, and we're taking steps to reenergize this critical competitive advantage by optimizing the ways of working and positioning our leadership team to meet the needs of our evolving business. We've made several organizational changes to accelerate decision-making, remove friction, and align teams and resources around guest-centric goals. This includes taking steps to optimize our corporate and field support staff, reducing management layers, and shifting resources to higher growth-driving areas. Additionally, I've made several changes to our executive leadership team to better focus on our key priorities. To support a stronger guest experience in stores, we've centralized all store functions under Amy Bayer-Thomas, and Ulta Beauty Veteran, who will serve in the newly created role of Chief Retail Officer. With this change, Amy will add real estate and store design to her existing scope, which includes leadership of our store teams and the loss prevention organization. To align our transformation efforts with our cost optimization initiatives, Mike Maresca, who joined our team in 2023, will add enterprise-wide responsibilities to his scope and will now serve as Chief Technology and Transformation Officer. Amy and Mike are transformational leaders who are guest and associate-centric and results-driven, and they will continue to impact our organization with broader scope that results our strategic focus and vision for the future. To facilitate a stronger omnichannel assortment of all things beauty and wellness, we've brought our digital and e-commerce teams together with our merchandising and planning teams under Monica Arnotto, who now serves as Chief Merchandising and Digital Officer. As you may know, Monica announced her plans to retire later this spring. Monica has been a great partner to me, and her vision has elevated our assortment, enhanced our brand partnerships, and driven meaningful market share growth. I look forward to sharing an update on her successor very soon. We've also promoted Kelly Mahoney to Chief Marketing Officer to advance our brand, personalization, and loyalty efforts. Kelly is uniquely qualified for this role. Her understanding of the beauty enthusiast is unmatched. And in her 10 years with Ulta Beauty, she has played a pivotal role in evolving and expanding the Ulta Beauty Rewards loyalty program to more than 44 million members. Additionally, Jodi Carl, our general counsel, chief risk and compliance officer, has shared her intention to retire later this spring after more than 10 years of service to Ulta Beauty. An energetic and passionate leader, Jodi has been a true business partner and I want to thank her for her contributions. After conducting a nationwide search, I'm pleased to announce that Renee Cazares, previously Chief Legal Officer from Academy Sports, will be joining our team next month as Chief Legal Officer. Renee and Jody will work together to ensure a seamless transition. Today, I've shared our plan to make important guest-facing investments, which are necessary to improve our competitiveness and reaccelerate long-term share growth. These investments will pressure profitability in 2025, but we believe they are critical to driving long-term sustainable growth in a competitive, innovative category. However, we cannot sustain this level of annual expense growth and achieve our long-term profitability goals. Discipline management of our cost structure is an ongoing area of focus. As we've shared at our Investor Day in October, we are targeting cost optimization of $200 million to $250 million over the next three years. Since 2019, we've delivered $550 million in cost savings from optimization efforts across merchandising, real estate, and operational process improvements. And I am confident that we can deliver our cost-future saving targets. We're in the early stages of these efforts and will provide regular updates on our progress. Our Altar Beauty Unleashed plan positions us to reassert our leadership position. building on our strengths by fueling growth of our core business, scaling new accretive businesses that further our differentiation, and relining our foundation for the future. While sales growth is the ultimate performance indicator, we are closely tracking a series of KPIs for each of our focus areas, including in-store conversion, member growth and retention, and app engagement. Over the coming quarters, we'll provide more details of our plan and updates on our progress. In closing, I'm incredibly optimistic of the future of Ulta Beauty. 2025 will be an important year as we improve our execution and lay the groundwork to deliver on our long-term financial targets, including net revenue growth of 4% to 6%, mid-single-digit operating profit growth, and low double-digit EPS growth. It will take time for us to fully see the impact of our efforts, but with our exceptionally talented team leading the charge, I believe we are taking the right steps to drive profitable growth and market share leadership in beauty and wellness over the long term. And with that, I'll turn it over to Paula for some specific quarter results and our financial outlook before we take some questions. Paula?