Ulta Beauty (ULTA) 10-K risk factor changes: FY2012 vs FY2011

_The [removed: recent] global economic crisis and volatility in global economic conditions and the financial markets as well as declines in consumer spending may adversely affect our [removed: liquidity and] [added: business,] financial [removed: condition._][added: condition, profitability, and cash flows._]

While this decline has [removed: recently] moderated, the level of consumer spending is not where it was prior to the global recession, and economic conditions could lead to further declines in consumer spending in the future.

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[added: Reduced] consumer spending could cause changes in customer order patterns and changes in the level of inventory purchased by our customers, and may signify a reset of consumer spending habits, all of which may adversely affect our [removed: industry, business and] [added: business,] financial [removed: condition][added: condition, profitability and cash flows.]

[removed: While global credit and financial markets appear to be recovering from extreme disruptions] experienced over the past few years, uncertainty about continuing economic stability remains.

Continued turbulence in the United States and international markets and economies and declines in consumer spending may adversely affect our [removed: liquidity and financial condition, including our] ability to refinance maturing liabilities and access the capital markets to meet liquidity [removed: needs.][added: needs, and could adversely affect our business, financial condition, profitability and cash flows.]

[removed: _Continued economic uncertainty] [added: As a result, we] may [removed: affect consumer purchases of discretionary beauty products and salon services,] [added: lose market share,] which could [removed: delay our growth strategy and] have a material adverse effect on our business, financial condition, profitability and cash [removed: flows._][added: flows.]

We believe the principal bases upon which we compete are the quality of merchandise, our value proposition, the quality of our customers’ shopping experience and the convenience of our stores as one-stop destinations for [added: beauty products and salon services.]

[removed: As a result, we may lose market share, which] [added: Any of these events] could have a material adverse effect on our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations.][added: cash flows.]

| | [removed: •] [added: Ÿ] | [added: |] recognize and define product and beauty trends; |

| | [removed: •] [added: Ÿ] | [added: |] anticipate, gauge and react to changing consumer demands in a timely manner; |

| | [removed: •] [added: Ÿ] | [added: |] translate market trends into appropriate, saleable product and service offerings in our stores and salons in advance of our competitors; |

| | [removed: •] [added: Ÿ] | [added: |] develop and maintain vendor relationships that provide us access to the newest merchandise on reasonable terms; and |

| | [removed: •] [added: Ÿ] | [added: |] distribute merchandise to our stores in an efficient and effective manner and maintain appropriate in-stock levels. |

If we are unable to anticipate and fulfill the merchandise needs of the regions in which we operate, 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 [removed: condition] [added: condition, profitability] and [removed: results of operations.][added: cash flows.]

_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 [removed: condition] [added: condition, profitability] and [removed: results of operations._][added: cash flows._]

[removed: In addition, if we were to lose the benefit] of [removed: the experience, efforts and abilities of] other key executive personnel, it could have a material adverse effect on our business, financial condition [added: profitability] and [removed: results of operations.][added: cash flows.]

_We intend to continue to open new stores, which could strain our resources and have a material adverse effect on our [removed: business and] [added: business,] financial [removed: performance._][added: condition, profitability and cash flows._]

During fiscal [removed: 2010,] [added: 2011,] we opened [removed: 47] [added: 61] new stores.

During fiscal [removed: 2010,] [added: 2011,] the average investment required to open a typical new store was approximately $0.9 million.

These increased demands and operating complexities could cause us to operate our business less [removed: efficiently,] [added: efficiently and could] have a material adverse effect on our [removed: operations and] [added: business,] financial [removed: performance] [added: condition, profitability] and [removed: slow our growth.][added: cash flows.]

_The capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans, which could prevent the successful implementation of these plans or cause us to incur costs to expand this infrastructure, which could have a material adverse effect on our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations._][added: cash flows._]

Our failure to [added: open our third distribution center in fiscal 2012 or to] expand our distribution capacity on a timely basis to keep pace with our anticipated growth in stores could have a material adverse effect on our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations.][added: cash flows.]

_Any significant interruption in the operations of our [removed: two] 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 [removed: condition] [added: condition, profitability] and [removed: results of operations._][added: cash flows._]

We are a retailer carrying over [removed: 21,000] [added: 20,000] 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.

Any significant interruption in the operation of our supply chain infrastructure, such as disruptions in our information systems, disruptions in operations due to fire or other catastrophic events, 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 [removed: condition] [added: condition, profitability] and [removed: results of operations.][added: cash flows.]

Moreover, security breaches or leaks of proprietary information, including leaks of customers’ private data, could result in liability, decrease customer confidence in our company, and weaken our ability to compete in the marketplace, which could have a material adverse effect on our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations.][added: cash flows.]

Any event causing a sudden disruption of manufacturing or imports from such foreign countries, including the imposition of additional import restrictions, unanticipated political [added: changes, increased customs duties, legal or economic restrictions on overseas suppliers’ ability to produce and deliver products, and natural disasters, could materially harm our operations.]

Our future operations and performance will be subject to these factors, which are beyond our control, and these factors could [removed: materially hurt] [added: have a material adverse effect on] our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations] [added: cash flows] or may require us to modify our current business practices and incur increased costs.

_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 unsold inventory, which could have a material adverse effect on our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations._][added: cash flows._]

As a result of our real estate strategy, most of our stores are located in off-mall shopping areas known as power [removed: centers or lifestyle centers, which also accommodate other well-known destination retailers.][added: centers.]

Power centers typically contain three to five big-box anchor stores along with a variety of smaller specialty [removed: tenants, while lifestyle centers typically contain a variety of high-end destination retailers but no large anchor stores.][added: tenants.]

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 [removed: the lifestyle centers and] power centers where our stores are located.

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 economic downturn, 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 [removed: center or lifestyle] center.

_Diversion of exclusive salon products, or a decision by manufacturers of exclusive salon products to utilize other distribution channels, could negatively impact our revenue from the sale of such products, which could have a material adverse effect on our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations._][added: cash flows._]

If these relationships were to be impaired, or if certain vendors were [added: 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, [removed: our business and] [added: business,] financial [removed: performance._][added: condition, profitability and cash flows._]

During fiscal [removed: 2010,] [added: 2011,] merchandise supplied to Ulta by our top ten vendors accounted for approximately [removed: 48%] [added: 53%] of our net sales.

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 vendors, could have an adverse effect on our [removed: business.][added: business, financial condition, profitability and cash flows.]

_If we are unable to protect our intellectual property rights, our brand and reputation could be harmed, which could have a material adverse effect on our business, financial [removed: condition] [added: condition, profitability] and [removed: results of operations._][added: cash flows._]

_If our manufacturers are unable to produce products manufactured uniquely for Ulta, including Ulta branded products and gift-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 [removed: condition] [added: condition, profitability] and [removed: results of operations._][added: cash flows._]

While global credit and financial markets appear to be recovering from extreme disruptions

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If we were to lose the benefit of the experience, efforts and abilities

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On March 8, 2012 we announced the implementation of a Chief Financial Officer succession plan after our current CFO, Gregg R.

Bodnar, advised us that due to a family health issue he will be required to relocate and as such intends to step down from his current position at such time as a suitable successor CFO can be identified.

In order to facilitate an orderly transition, Mr. Bodnar plans to remain in his present position pending the appointment of his successor and is expected to assist in the transition of his successor.

There can be no assurance, however, that we will be able to timely identify a suitable successor Chief Financial Officer or that Mr. Bodnar’s services will be available to us through a transition period.

Our inability to facilitate an orderly transition could have a material adverse effect on our business, financial condition, profitability and cash flows.

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_Unauthorized disclosure of confidential customer, associate or company information could damage out reputation, expose us to litigation and negatively impact our business._

We collect, process and retain sensitive and confidential customer and associate information as part of our normal course of business.

We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential information.

Despite the security measures we have in place, our systems, and those of our third party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, human errors, or other similar events.

Any security breach of customer, associate or company confidential information could result in damage to our reputation and result in lost sales, litigation, fines, or additional investments to fix or replace the systems that were breached.

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There continues to be vendor consolidation within the beauty products industry.

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| | because significant provisions of the Acts will become effective on various dates over the next several years, future changes could significantly impact any effects on our business that we previously anticipated. |

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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.

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mailings and sorting by zip code and carrier routes.

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.

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Reduced

Our financial condition may be materially affected by conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere around the world.

The stress experienced by global capital markets in 2008 and 2009 persisted into 2010.

Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, and the U.S. mortgage and real estate markets have contributed to volatility and diminished expectations for the economy.

Factors that could affect consumers’ willingness to make such discretionary purchases include general business conditions, levels of employment, interest rates and tax rates, the availability of consumer credit, and consumer confidence in future economic conditions.

A decrease in spending due to lower consumer discretionary income or consumer confidence could adversely impact our net sales and operating results, and could force us to delay or slow our growth strategy and have a material adverse effect on our business, financial condition, profitability, and cash flows.

beauty products and salon services.

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Chuck Rubin was appointed President, Chief Operating Officer and a member of the Board of Directors effective May 10, 2010 and assumed the role of Chief Executive Officer on September 2, 2010.

Any significant leadership or executive management transition involves inherent risks.

changes, increased customs duties, legal or economic restrictions on overseas suppliers’ ability to produce and deliver products, and natural disasters, could materially harm our operations.

These events could interrupt the marketing and sale of our Ulta products, severely damage our brand reputation and

royalties or both.

Future additional increases in postal rates or in paper or printing costs would reduce our profitability to the extent that we are unable to offset those increases by raising selling prices or by reducing the number and size of certain catalog editions.

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This discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of [removed: 1934] [added: 1934, as amended,] and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance.

Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales; and other risk factors detailed in our public filings with the Securities and Exchange Commission (the “SEC”), including risk factors contained in Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the year ended January [removed: 29, 2011.][added: 28, 2012.]

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Key aspects of our beauty superstore strategy include our ability to offer our customers a broad selection of over [removed: 21,000] [added: 20,000] beauty products across the categories of cosmetics, fragrance, haircare, skincare, bath and body products and salon styling tools, as well as salon [removed: haircare products.]

The continued growth of our business and any future increases in net sales, net income and cash flows is dependent on our ability to execute our growth strategy, including growing our store base, expanding our product, brand and service offerings, enhancing our loyalty program, broadening our marketing channels, expanding our e-commerce business and improving our profitability by [removed: leveraging our fixed costs.][added: expanding operating margin.]

We do not expect our [removed: 11.0%] [added: 10.9%] fiscal [removed: 2010] [added: 2011] comparable store sales increase to continue into the future.

We recognize merchandise revenue at the point of sale [removed: (POS)] in our retail stores and the time of shipment in the case of Internet sales.

| | [removed: •] [added: Ÿ] | [added: |] the general national, regional and local economic conditions and corresponding impact on customer spending levels; |

| | [removed: •] [added: Ÿ] | [added: |] the introduction of new products or brands; |

| | [removed: •] [added: Ÿ] | [added: |] the location of new stores in existing store markets; |

| | [removed: •] [added: Ÿ] | [added: |] competition; |

| | [removed: •] [added: Ÿ] | [added: |] our ability to respond on a timely basis to changes in consumer preferences; |

| | [removed: •] [added: Ÿ] | [added: |] the effectiveness of our various marketing activities; and |

| | [removed: •] [added: Ÿ] | [added: |] the number of new stores opened and the impact on the average age of all of our comparable stores. |

| | [removed: •] [added: Ÿ] | [added: |] the cost of merchandise sold, including all vendor allowances, which are treated as a reduction of merchandise costs; |

| | [removed: •] [added: Ÿ] | [added: |] warehousing and distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities, and insurance; |

| | [removed: •] [added: Ÿ] | [added: |] store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, licenses, and cleaning expenses; |

| | [removed: •] [added: Ÿ] | [added: |] salon payroll and benefits; |

| | [removed: •] [added: Ÿ] | [added: |] customer loyalty program expense; and |

| | [removed: •] [added: Ÿ] | [added: |] shrink and inventory valuation reserves. |

| | [removed: •] [added: Ÿ] | [added: |] payroll, bonus and benefit costs for retail and corporate employees; |

| | [removed: •] [added: Ÿ] | [added: |] advertising and marketing costs; |

| | [removed: •] [added: Ÿ] | [added: |] occupancy costs related to our corporate office facilities; |

| | [removed: •] [added: Ÿ] | [added: |] stock-based compensation expense; |

| | [removed: •] [added: Ÿ] | [added: |] depreciation and amortization for all assets except those related to our retail and warehouse operations, which is included in cost of sales; and |

| | [removed: •] [added: Ÿ] | [added: |] legal, finance, information systems and other corporate overhead costs. |

Our credit facility is used to fund seasonal inventory needs and new and remodel store capital requirements in excess of our cash [added: on hand and cash] flow from operations.

The Company’s fiscal years ended January [added: 28, 2012, January] 29, [removed: 2011,] [added: 2011 and] January 30, 2010 [removed: and January 31, 2009] were 52 week years and are hereafter referred to as fiscal [removed: 2010,] [added: 2011,] fiscal [removed: 2009] [added: 2010] and fiscal [removed: 2008.][added: 2009.]

As of January [removed: 29, 2011,] [added: 28, 2012,] we operated [removed: 389] [added: 449] stores across [removed: 40] [added: 43] states.

| | | [removed: 2011] [added: January 28, 2012] | | | | [removed: 2010] [added: January 29, 2011] | | | | [removed: 2009] [added: January 30, 2010] | | |

| Net sales | | $ | [removed: 1,454,838] [added: 1,776,151] | | | $ | [removed: 1,222,771] [added: 1,454,838] | | | $ | [removed: 1,084,646] [added: 1,222,771] | |

| Cost of [removed: sales(1)] [added: sales] | | | [removed: 970,753] [added: 1,159,311] | | | | [removed: 846,202] [added: 970,753] | | | | [removed: 752,939] [added: 846,202] | |

| Gross profit | | | [removed: 484,085] [added: 616,840] | | | | [removed: 376,569] [added: 484,085] | | | | [removed: 331,707] [added: 376,569] | |

| Selling, general and administrative [removed: expenses(1)] [added: expenses] | | | [removed: 358,106] [added: 410,658] | | | | [removed: 302,413] [added: 358,106] | | | | [removed: 271,095] [added: 302,413] | |

| Pre-opening expenses | | | [removed: 7,095] [added: 9,987] | | | | [removed: 6,003] [added: 7,095] | | | | [removed: 14,311] [added: 6,003] | |

| Operating income | | | [removed: 118,884] [added: 196,195] | | | | [removed: 68,153] [added: 118,884] | | | | [removed: 46,301] [added: 68,153] | |

| Interest expense | | | [removed: 755] [added: 587] | | | | [removed: 2,202] [added: 755] | | | | [removed: 3,943] [added: 2,202] | |

| Income before income taxes | | | [removed: 118,129] [added: 195,608] | | | | [removed: 65,951] [added: 118,129] | | | | [removed: 42,358] [added: 65,951] | |

| Income tax expense | | | [removed: 47,099] [added: 75,344] | | | | [removed: 26,595] [added: 47,099] | | | | [removed: 17,090] [added: 26,595] | |

| Net income | | $ | [removed: 71,030] [added: 120,264] | | | $ | [removed: 39,356] [added: 71,030] | | | $ | [removed: 25,268] [added: 39,356] | |

haircare products.

Our stores are predominately located in convenient, high-traffic locations such as power centers.

Economic conditions in the U.S. continue to be uncertain.

Fiscal stress in the U.S. and Europe has resulted in significant fluctuations in the U.S. stock markets and has negatively impacted consumer sentiment.

While the U.S. credit markets have stabilized and credit availability has improved compared to the recent recessionary period, economic growth is expected to continue to be weak.

Consumer spending habits are affected by levels of unemployment, unsettled financial markets, weakness in housing and real estate, higher interest rates, fuel and energy costs, and consumer perception of economic conditions, among others.

Sudden negative changes in one or more of the factors that affect consumer spending could adversely affect consumer spending levels which could lead to reduced consumer demand for our merchandise and adversely affect our sales levels and financial performance.

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Net sales increased $321.4 million, or 22.1%, to $1,776.2 million in fiscal 2011 compared to $1,454.8 million in fiscal 2010.

We attribute the increase in comparable store sales to our successful marketing and merchandise strategies.

Gross profit increased $132.7 million, or 27.4%, to $616.8 million in fiscal 2011, compared to $484.1 million, in fiscal 2010.

The increase in gross profit margin in fiscal 2011 was primarily driven by:

| | Ÿ | | 80 basis points of leverage in fixed store costs attributed to the impact of significantly higher sales levels in fiscal 2011; and |

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| | Ÿ | | 70 basis points improvement in merchandise margin due primarily to improved promotional pricing and a shift in category mix towards higher margin product compared with fiscal 2010. |

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Selling, general and administrative (SG&A) expenses increased $52.6 million, or 14.7%, to $410.7 million in fiscal 2011 compared to $358.1 million in fiscal 2010.

The leverage in SG&A expense was primarily driven by:

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Our stores are conveniently located in high-traffic, primarily off-mall locations such as power centers and lifestyle centers with other destination retailers.

The global economic crisis and resulting volatility and disruption to the capital and credit markets have had a significant, adverse impact on global economic conditions, resulting in recessionary pressures and declines in consumer confidence and economic growth.

While economic conditions have begun to show signs of improvement, the recovery has proceeded at a sluggish rate and the retail environment has remained weak.

As a result of market conditions, the cost and availability of credit has been and may continue to be adversely affected by decreased liquidity in credit markets and wider credit spreads.

Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers.

While global credit and financial markets appear to be recovering from the extreme disruptions experienced over the past few years, uncertainty about continuing economic stability remains.

These factors have led to a decrease in spending by businesses and consumers alike, and a corresponding decrease in global infrastructure spending.

Continued turbulence in the United States and international markets and economies and declines in business and consumer spending may adversely affect our liquidity and financial condition, and the liquidity and

financial condition of our customers, including our ability to refinance maturing liabilities and access the capital markets to meet liquidity needs.

Current business trends

Our comparable store sales for first, second, third and fourth quarters of fiscal 2009 were -2.3%, -1.7%, 1.5% and 6.2%, respectively.

Comparable store sales for the first, second, third and fourth quarters of fiscal 2010 were 10.8%, 10.8%, 12.2% and 10.4%, respectively.

Fiscal 2010 two year comparable store sales for the respective quarters were 8.5%, 9.1%, 13.7%, and 16.6%, respectively.

We believe the improvement in our comparable store sales trends is due to a combination of factors including effective marketing and merchandising programs as well as improved consumer sentiment and shopping patterns due to a general improvement in U.S. economic conditions compared to fiscal 2009 and 2008.

We do not expect the low double digit comparable store increases of fiscal 2010 to continue into the future.

Our long-term annual net income growth target of 25% to 30% is based on comparable store sales increases of 3% to 5%.

As a result, data herein regarding our comparable store sales may not be comparable to similar data made available by our competitors or other retailers.

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| | | January 29, | | | | January 30, | | | | January 31, | | |

| (1) | | The Company made reclassifications in the consolidated income statements for the fiscal years ended January 30, 2010 (fiscal 2009) and January 31, 2009 (fiscal 2008) to decrease cost of sales and increase selling, general and administrative expenses by $3,520 and $3,773, respectively, to conform to the fiscal 2010 presentation. |

SG&A expense as a percentage of sales was primarily impacted by:

Net sales increased $138.2 million, or 12.7%, to $1,222.8 million in fiscal 2009 compared to $1,084.6 million in fiscal 2008.

Non-comparable stores, which include stores opened in fiscal 2009 as well as stores opened in fiscal 2008 which have not yet turned comparable, contributed $123.3 million of the net sales increase while comparable stores contributed $14.9 million of the total net sales increase.

Fiscal 2009 comparable store sales were positively affected by the 6.2% increase in comparable store sales in the fourth quarter.

We believe the improvement in our comparable store sales trends is due to a combination of factors including our ability to better plan our marketing and merchandise programs for the challenging environment and the relatively lower comparable in the prior year fourth quarter period.

We also believe that overall consumer sentiment and shopping patterns improved somewhat in the second half of 2009 which may have contributed to our improving trends when compared to 2008.

Gross profit increased $44.9 million, or 13.5%, to $376.6 million in fiscal 2009, compared to $331.7 million, in fiscal 2008.

Gross profit in fiscal 2009 was impacted by:

| | • | 70 basis points improvement due to supply chain efficiencies including labor and freight; offset by |

| | • | 40 basis points of deleverage of fixed store costs due to the impacts of our new store program; the level of fixed store costs deleverage improved during the course of fiscal 2009 as the rate of square footage growth slowed consistent with the decrease in our fiscal 2009 new store program as compared to fiscal 2008 and 2007. |

SG&A expenses increased $31.3 million, or 11.6%, to $302.4 million in fiscal 2009 compared to $271.1 million in fiscal 2008.

| | • | 20 basis points improvement in marketing expense leverage attributed to improved cost efficiencies while total number of marketing impressions were maintained at historical levels; offset by |

| | • | 40 basis points deleverage of general corporate overhead which is attributed to a 90 basis point, or $11.6 million, increase in incentive compensation compared to the prior year. |

Pre-opening expenses decreased $8.3 million, or 58.1%, to $6.0 million in fiscal 2009 compared to $14.3 million in fiscal 2008.

Interest expense decreased $1.7 million, or 44.2%, to $2.2 million in fiscal 2009 compared to $3.9 million in fiscal 2008 primarily due to a $45 million decrease in the weighted-average debt outstanding on our variable rate credit facility during fiscal 2009.

Income tax expense of $26.6 million in fiscal 2009 represents an effective tax rate of 40.3%, compared to fiscal 2008 tax expense of $17.1 million which represents an effective tax rate of 40.3%.

Net income increased $14.1 million, or 55.8%, to $39.4 million in fiscal 2009 compared to $25.3 million in fiscal 2008.

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We did not utilize the credit facility during fiscal [removed: 2010.][added: 2011.]

The interest rate swap was recorded at fair value in fiscal 2009 and [removed: 2008 and] changes in market value related to the effective portion of the cash flow hedge was recorded as unrecognized gain or loss in accumulated other comprehensive income (loss) section of the stockholders’ equity in the balance sheets.

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| | |

_One-Stop [removed: Shopping._] [added: Shopping__._] Our customers can satisfy all of their beauty needs at Ulta.

We offer a unique combination of over [removed: 21,000] [added: 20,000] prestige and mass beauty products organized by category in [added: a] bright, [removed: open, self-service displays to encourage our customers to play, touch, test, learn and explore.][added: open store environment.]

For example, we run frequent promotions and [removed: gift] coupons for our mass brands, gift-with-purchase offers and multi-product gift sets for our prestige brands, and a comprehensive customer loyalty program.

_An Off-Mall Location._ [removed: We] [added: Our stores] are [removed: conveniently] [added: predominately] located in [removed: high-traffic, primarily off-mall] [added: convenient, high-traffic] locations such as power [removed: centers and lifestyle centers with other destination retailers.][added: centers.]

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

[removed: This] led to what we believe to be a unique retail approach that focuses on all aspects of how women prefer to shop for beauty products by combining the fundamental elements of a beauty superstore, including one-stop shopping, a compelling value proposition and convenient locations, together with an uplifting specialty retail experience.

Our distribution infrastructure consistently delivers [removed: a] [added: an in-stock rate of] greater than [removed: 95% in-stock rate,] [added: 95%,] so our customers know they will find the products they are looking for.

Our well-trained beauty consultants are not commission-based [removed: or brand-dedicated] and therefore can provide unbiased and customized advice tailored to our customers’ needs.

_Retail format poised to benefit from shifting channel [removed: dynamics._] [added: dynamics__._] Over the past several years, the approximately [removed: $96] [added: $93] billion beauty products and salon services industry has experienced significant changes, including a shift in how manufacturers distribute and customers purchase beauty products.

_Loyal and active customer [removed: base._] [added: base__._] We have [removed: almost 8] [added: over nine] million customer loyalty program members.

We [removed: regularly distribute] [added: employ a broad range of media, including digital,] catalogs and newspaper [removed: inserts] [added: inserts,] to entertain and educate our customers and, most importantly, to drive traffic to our stores.

_Experienced management [removed: team._] [added: team_.] We have an experienced senior management team with extensive retail experience that brings a creative merchandising approach and a disciplined operating philosophy to our [added: business.]

[removed: Over the past several years, we have significantly expanded] [added: We continue to expand] the depth of our management team at all levels and in all functional areas to support our growth strategy.

[removed: _Growing our store base to over 1,000 stores in the United States._] We continue to believe that over the long-term, we have the potential to grow our store base to over 1,000 Ulta stores in the [removed: United States.]

As the economy [removed: recovers,] [added: continues to recover,] we [removed: believe our] [added: have been] successful [removed: track record of] [added: in] opening new stores in diverse markets across the United States [removed: will allow] [added: allowing] us to increase our new store growth rates back to historical levels consistent with our long-term target of 15% to 20%.

We opened [removed: 47] [added: 61] new stores during fiscal [removed: 2010,] [added: 2011,] representing a [removed: 13%] [added: 16%] increase in square footage growth and a [removed: 27%] [added: 30%] increase in the number of new stores opened compared to [removed: 37] [added: 47] in fiscal [removed: 2009.][added: 2010.]

We also remodeled [removed: 13] [added: 17] stores and relocated [removed: 5] [added: 2] stores in fiscal [removed: 2010.][added: 2011.]

Our fiscal [added: 2011 and] 2010 new store program represents primarily new stores opened in existing centers compared to prior years when the new store openings were more balanced between new and existing centers.

| | | [removed: 2006 | | | |] 2007 | | | | 2008 | | | | 2009 | | | | 2010 | | | [added: | 2011 | | |]

| Total stores beginning of period | | | [removed: 167 | | | |] 196 | | | | 249 | | | | 311 | | | | 346 | | [added: | | 389 | |]

| Stores opened | | | [removed: 31 | | | |] 53 | | | | 63 | | | | 37 | | | | 47 | | [added: | | 61 | |]

| Stores closed | | | [removed: (2 | ) | | |] — | | | | (1 | ) | | | (2 | ) | | | (4 | ) | [added: | | (1 | ) |]

| Total stores end of period | | | [removed: 196 | | | |] 249 | | | | 311 | | | | 346 | | | | 389 | | [added: | | 449 | |]

| Stores remodeled | | | [removed: 7 | | | |] 17 | | | | 8 | | | | 6 | | | | 13 | | [added: | | 17 | |]

| Total square footage | | | [removed: 2,023,305 | | | |] 2,589,244 | | | | 3,240,579 | | | | 3,613,840 | | | | 4,094,808 | | [added: | | 4,747,148 | |]

| Average square footage per store | | | [removed: 10,323 | | | |] 10,399 | | | | 10,420 | | | | 10,445 | | | | 10,526 | | [added: | | 10,573 | |]

[removed: _Increasing our sales and profitability by] [added: _Continue] expanding our [removed: product, brand] [added: offering by adding new products, brands] and service offerings._ Our strategy is to continue to expand our portfolio of products, brands and services both by capitalizing on the success of our existing vendor relationships and by identifying and developing new [removed: supply sources.][added: vendor relationships.]

Brand additions include [removed: Juicy Couture,] [added: Mark Jacobs, Givenchy, Taylor Swift,] Dolce and [removed: Gabanna,] [added: Gabanna] and Coach [removed: Poppy] in [removed: fragrance, Dermalogica, Murad] [added: fragrance; Bliss, Clarisonic, Mario Badescu, Jack Black, The Art of Shaving, Dermalogica] and Philosophy in skin [removed: care,] [added: care; Laura Geller, Butter London,] Benefit, Cargo and Tarte in [removed: cosmetics] [added: cosmetics;] and [added: Living Proof, Phyto, Ouidad and] Pureology in hair care.

_Enhancing our successful loyalty program._ We have [removed: almost 8] [added: over nine] million active customer loyalty members who are enrolled in our loyalty programs.

[added: Loyalty member transactions represent more than fifty percent of our annual] total net sales, and the transaction data demonstrates that loyalty members shop with higher frequency and spend more per visit as compared to non-members.

Currently slightly more than 20% of our stores are on the points-based [removed: program.][added: program and we will be rolling additional markets onto this program in fiscal 2012.]

_Broaden our marketing [removed: channels._] [added: reach._] We believe a key component of our success is the brand exposure we get from our marketing initiatives, which provide an effective means to introduce new products, brands and services to our existing and potential new customers.

[removed: We plan to continue to leverage our] print marketing while expanding our reach into other marketing channels including [removed: television,] [added: various broadcast formats,] digital, social media and e-mail marketing.

We [removed: also believe we have an opportunity] [added: plan] to [removed: increase] [added: continue to focus on] our in-store marketing [removed: efforts] [added: and eventing] as an additional means of educating our customers and increasing the frequency of their visits to our stores.

_Enhancing and expanding our [removed: e-commerce] [added: digital] business._ Our website serves two roles: to generate direct channel sales and profits and as a vehicle to communicate with our customers in an interactive, enjoyable way to reinforce the Ulta brand and drive traffic to our stores.

We intend to establish ourselves over time as a leading online beauty resource [removed: for women] by providing our customers with a rich online experience for information on key trends and products, editorial content, expanded assortments, leading website features and functionality, and social media content.

_Improving our [removed: profitability by leveraging our fixed costs._] [added: operating margin._] We plan to continue to improve our operating results by leveraging our [removed: existing] infrastructure and continually optimizing [added: the efficiency of] our operations.

This market represents approximately [removed: $96] [added: $93] billion in retail sales, according to Euromonitor International and IBIS World Inc. The approximately [removed: $52] [added: $53] billion beauty products industry includes color cosmetics, haircare, fragrance, bath and body, skincare, salon styling tools and other toiletries.

The approximately [removed: $44] [added: $40] billion salon services industry consists of hair, face and nail services.

We believe the principal bases upon which we compete are the quality and assortment of merchandise, our value proposition, the quality of our [added: customers’ shopping experience and the convenience of our stores as one-stop destinations for beauty products and salon services.]

| --- | --- |

The beauty products are arranged in self-service displays and full-service boutiques in a way that encourages our customers to play, touch, test, learn and explore.

This

_Accelerate pace of new store expansion and grow to over 1,000 stores in the United States_.

##### [Table of Contents](#toc)

United States.

We plan to continue to leverage our

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

64.

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Our stores are predominately located in convenient, high-traffic locations such as power centers.

##### [Table of Contents](#toc)

expenses, and initial inventory, net of payables.

We also consider remodeling all relevant stores in a particular geography when appropriate, which allows us to present a consistent brand identity across an entire market.

##### [Table of Contents](#toc)

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##### [Table of Contents](#toc)

There continues to be vendor consolidation within the beauty products industry.

We believe we have strong relationships with our vendors.

We additionally engage our customers through an active growing social media dialog, targeted digital communications and broadcast compaigns.

Each general manager reports to a district manager, who in turn reports to a Regional Vice President of Operations who in turn

##### [Table of Contents](#toc)

We use a combination of existing managers, internal promotes and outside hires to support our new stores.

The Chambersburg warehouse contains approximately 373,000 square feet.

##### [Table of Contents](#toc)

operations of our growing store base.

We have registered over 30 trademarks in the United States and other countries.

We maintain our marks on a docket system to monitor filing deadlines for renewal and continued validity.

Both OTC drugs and dietary supplements have specific ingredients, labeling and manufacturing requirements.

##### [Table of Contents](#toc)

We also maintain a strategic value relationship with others in the category through competitive pricing and promotion.

business.

Chuck Rubin was appointed President, Chief Operating Officer and a member of the Board of Directors effective May 10, 2010 and assumed the role of Chief Executive Officer on September 2, 2010.

Mr. Rubin has over 30 years of experience in the retail industry including senior executive level operating, merchandising and marketing management roles as well as partner level consulting roles across retail formats and e-commerce businesses.

Mr. Rubin along with Gregg Bodnar, our Chief Financial Officer, lead our senior management team.

The 2009 new store program was reduced primarily due to the uncertainty in the economy and the decline in high-quality commercial real estate projects that we typically target for our new store locations.

| | | | | | | | | | | | | | | | | | | | | |

Loyalty member transactions represent more than 50% of our annual

customers’ shopping experience and the convenience of our stores as one-stop destinations for beauty products and salon services.

| | | |

| --- | --- | --- |

| | | merchandisers, Generation X has grown up shopping in specialty stores and we believe seeks a retail environment that combines a compelling experience, functionality, variety and location. |

We are conveniently located in high-traffic, primarily off-mall locations such as power centers and lifestyle centers with other destination retailers.

In recent years, our strategic focus has been on refining our new store model, improving our real estate selection process and executing on our new store opening program.

As a result, we decided to limit the investments made in our existing store base from fiscal 2000 to fiscal 2005.

_The Five E’s_

In addition to offering one of the most extensive product and brand selections in our industry, we strive to offer an uplifting shopping experience through what we refer to as “The Five E’s”: Escape, Education, Entertainment, Esthetics and Empowerment.

| | • | _Escape._ We strive to offer our customers a timely escape from the stresses of daily life in a welcoming and approachable environment. Our customer can immerse herself in our extensive product selection, indulge herself in our hair or skin treatments, or discover new and exciting products in an interactive setting. We provide a shopping experience without the intimidating, commission-oriented and brand-dedicated sales approach that we believe is found in most department stores and with a level of service that we believe is typically unavailable in drug stores and mass merchandisers. |

| | • | _Education._ We staff our stores with a team of well-trained beauty consultants and professionally licensed estheticians and stylists whose mission is to educate, inform and advise our customers regarding their beauty needs. We also provide product education through demonstrations, in-store videos and informational displays. Our focus on educating our customer reinforces our authority as her primary resource for beauty products and our credibility as a provider of consistent, high-quality salon services. Our beauty consultants are trained to service customers across all prestige lines and within our prestige “boutiques” where customers can receive a makeover or skin analysis. |

| | • | _Entertainment._ The entertainment experience for our customer begins at home when she receives our catalogs or visits our website. They are designed to introduce our customers to our newest products and promotions and to be invitations to come to Ulta to play, touch, test, learn and explore. A significant percentage of our sales throughout the year is derived from new products, making every visit to Ulta an opportunity to discover something new and exciting. In addition to providing over 4,500 testers in categories such as fragrance, cosmetics, skincare, and salon styling tools, we further enhance the shopping experience and store atmosphere through live demonstrations from our licensed salon professionals and beauty consultants, and through customer makeovers and in-store videos. |

| | • | _Esthetics._ We strive to create a visually pleasing and inviting store and salon environment that exemplifies and reinforces the quality of our products and services. Our stores are brightly lit, spacious and attractive on the inside and outside of the store. Our store and salon design features sleek, modern lines that reinforce our status as a fashion authority, together with wide aisles that make the store easy to navigate and pleasant lighting to create a luxurious and welcoming environment. This strategy enables us to provide an extensive product selection in a well-organized store and to offer a salon experience that is both fashionable and contemporary. |

| | • | _Empowerment._ We are committed to creating an environment in which women feel empowered by both their inner and outer beauty; we take honor in providing our guests with opportunities to showcase how they have empowered themselves and others. Ulta is committed to positively impacting the lives of women through our work on empowerment initiatives such as the Ulta Enrich, Empower and Enlighten Scholarship Fund which grants deserving high school senior girls scholarships to the educational institution of their choice. |

Our merchandising team reports directly to our CEO and consists of a Senior Vice President of Merchandising who oversees; Senior Vice President of Prestige Cosmetics; Vice President of Mass Cosmetics, Skincare and Haircare; Vice President of Merchandise Operations; Vice President of Fragrance, Prestige Skin, Bath and Gift with Purchase; Divisional Merchandise Manager of Salon Products; Divisional Merchandise Manager of Styling Tools, and Director of Inventory.

standards, in all of our stores.

We primarily use existing managers or promote from within to support our new stores, although many outlying stores have all-new teams.

During fiscal 2008, we began operating a second

The renewal dates for the identified marks are January 22, 2012 (Ulta Salon Cosmetics Fragrance (and design)), October 8, 2012 (Ulta.com), July 10, 2017 (Ulta Beauty) and October 16, 2017 (the two Ulta Beauty related designs).

We have applications pending for certain of these marks in Canada.

_General litigation —_ In [removed: July 2009] [added: May 2010,] a putative employment class action lawsuit was filed against us and certain unnamed defendants in state court in California.

The suit seeks to recover damages and penalties as a result of [removed: this] [added: these] alleged [removed: misclassification.][added: practices.]

The settlement amount [removed: is] [added: was] not material.

[removed: In May 2010,] [added: On March 2, 2012,] a putative employment class action lawsuit was filed against us and certain unnamed defendants in state court in [added: Los Angeles County,] California.

The proposed settlement was approved and became final in January 2012.

The plaintiff and members of the proposed class are alleged to be (or to have been) non-exempt hourly employees.

The suit alleges that Ulta violated various provisions of the California labor laws and failed to provide plaintiff and members of the proposed class with full meal periods, paid rest breaks, certain wages, overtime compensation and premium pay.

The Company denies plaintiff’s allegations and intends to vigorously defend the matter.

The suit alleges that Ulta misclassified its store General Managers and Salon Managers as exempt from the Fair Labor Standards Act and California Labor Code.

On August 27, 2009, we filed our answer to the lawsuit, and on August 31, 2009 we moved the action to the United States District Court for the Northern District of California.

On November 2, 2009, the plaintiffs filed an amended complaint adding another named plaintiff.

On May 26, 2010, the Company and plaintiffs engaged in a voluntary mediation.

Although we continue to deny plaintiffs’ allegations, in the interest of putting the Salon Manager claims behind us, we agreed in principle to settle all claims of the putative Salon Manager class.

The settlement, which is not an admission of liability, received Court approval on December 17, 2010 and payments were disbursed to individual class members in February 2011.

Counsel for the plaintiffs has agreed to dismiss without prejudice the claims of the General Managers.

The proposed settlement amount is not material.

| | |

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##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

| [removed: þ] | [added: þ] | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |

| | | For the fiscal year ended January [removed: 29, 2011] [added: 28, 2012] |

| [removed: o] | [added: ¨] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |

| [removed: Delaware _(State] [added: Delaware _(State] or other jurisdiction [removed: of incorporation] [added: of_ _incorporation] or organization)_ | | [removed: 36-3685240 _(I.R.S. Employer Identification] [added: 36-3685240 _(I.R.S. Employer_ _Identification] No.)_ |

| 1000 Remington Blvd., Suite [removed: 120 Bolingbrook, Illinois _(Address] [added: 120 Bolingbrook, Illinois _(Address] of principal executive offices)_ | | [removed: 60440 _(Zip] [added: 60440 _(Zip] code)_ |

þ Yes [removed: o] [added: ¨] No

[removed: o] [added: ¨] Yes þ No

[removed: o] [added: þ] Yes [removed: o] [added: ¨] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K [removed: (§ 229.405] [added: (§229.405] of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [removed: o]

See [removed: the] definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

| Large accelerated filer þ | [added: |] Accelerated filer [removed: o] [added: ¨] | [added: |] Non- accelerated filer [removed: o] [added: ¨] | [added: |] Smaller reporting company [removed: o] [added: ¨] |

[added: | | |] (Do not check if a smaller reporting company) [added: | | | | |]

The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on July [removed: 31, 2010,] [added: 30, 2011,] as reported on the NASDAQ Global Select Market, was approximately [removed: $1,120,326,000.][added: $3,034,284,000.]

Shares of the registrant’s common stock held by each executive officer and director and by each entity or person that, to the registrant’s knowledge, owned 5% or more of the registrant’s outstanding common stock as of July [removed: 31, 2010] [added: 30, 2011] have been excluded in that such persons may be deemed to be affiliates of the registrant.

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of March [removed: 24, 2011] [added: 22, 2012] was [removed: 60,654,795] [added: 62,474,444] shares.

ULTA SALON, COSMETICS & FRAGRANCE, [removed: INC.][added: INC.]

| [removed: | [Item 1.](#C63694102) |] [added: Item 1.] | | [removed: Business] [added: [Business](#tx265737_2)] | | | 3 | |

| [removed: | [Item 1A.](#C63694103) |] [added: Item 1A.] | | [removed: Risk Factors] [added: [Risk Factors](#tx265737_3)] | | | [removed: 14] [added: 13] | |

| [removed: | [Item 1B.](#C63694104) |] [added: Item 1B.] | | [removed: Unresolved] [added: [Unresolved] Staff [removed: Comments] [added: Comments](#tx265737_4)] | | | [removed: 25] [added: 23] | |

| [removed: | [Item 2.](#C63694105) |] [added: Item 2.] | | [removed: Properties] [added: [Properties](#tx265737_5)] | | | [removed: 26] [added: 24] | |

| [removed: | [Item 3.](#C63694106) |] [added: Item 3.] | | [removed: Legal Proceedings] [added: [Legal Proceedings](#tx265737_6)] | | | [removed: 27] [added: 25] | |

| [removed: | [Item 5.](#C63694109) |] [added: Item 5.] | | [removed: Market] [added: [Market] for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities] [added: Securities](#tx265737_9)] | | | [removed: 28] [added: 26] | |

| [removed: | [Item 6.](#C63694110) |] [added: Item 6.] | | [removed: Selected] [added: [Selected] Financial [removed: Data] [added: Data](#tx265737_10)] | | | [removed: 31] [added: 29] | |

| [removed: | [Item 7.](#C63694111) |] [added: Item 7.] | | [removed: Management’s] [added: [Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations] [added: Operations](#tx265737_11)] | | | [removed: 32] [added: 30] | |

| [removed: | [Item 7A.](#C63694112) |] [added: Item 7A.] | | [removed: Quantitative] [added: [Quantitative] and Qualitative Disclosures about Market [removed: Risk] [added: Risk](#tx265737_12)] | | | [removed: 42] [added: 40] | |

| [removed: | [Item 8.](#C63694113) |] [added: Item 8.] | | [removed: Financial] [added: [Financial] Statements and Supplementary [removed: Data] [added: Data](#tx265737_13)] | | | [removed: 43] [added: 40] | |

| [removed: | [Item 9.](#C63694114) |] [added: Item 9.] | | [removed: Changes] [added: [Changes] in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure] [added: Disclosure](#tx265737_14)] | | | [removed: 43] [added: 40] | |

| [removed: | [Item 9A.](#C63694115) |] [added: Item 9A.] | | [removed: Controls] [added: [Controls] and [removed: Procedures] [added: Procedures](#tx265737_15)] | | | [removed: 43] [added: 41] | |

| [removed: | [Item 9B.](#C63694116) |] [added: Item 9B.] | | [removed: Other Information] [added: [Other Information](#tx265737_16)] | | | [removed: 43] [added: 41] | |

| [Part [removed: III](#C63694117) | |] [added: III](#tx265737_17)] | | | | | | [added: [](#tx265737_17)] |

| [removed: | [Item 10.](#C63694118) |] [added: Item 10.] | | [removed: Directors,] [added: [Directors,] Executive Officers and Corporate [removed: Governance] [added: Governance](#tx265737_18)] | | | [removed: 44] [added: 42] | |

| [removed: | [Item 11.](#C63694119) |] [added: Item 11.] | | [removed: Executive Compensation] [added: [Executive Compensation](#tx265737_19)] | | | [removed: 44] [added: 42] | |

| [removed: | [Item 12.](#C63694120) |] [added: Item 12.] | | [removed: Security] [added: [Security] Ownership and Certain Beneficial Owners and Management and Related Stockholder [removed: Matters] [added: Matters](#tx265737_20)] | | | [removed: 44] [added: 42] | |

| [removed: | [Item 13.](#C63694121) |] [added: Item 13.] | | [removed: Certain] [added: [Certain] Relationships and Related Transactions, and Director [removed: Independence] [added: Independence](#tx265737_21)] | | | [removed: 44] [added: 42] | |

| [removed: | [Item 14.](#C63694122) |] [added: Item 14.] | | [removed: Principal] [added: [Principal] Accountant Fees and [removed: Services] [added: Services](#tx265737_22)] | | | [removed: 44] [added: 42] | |

| [removed: | [Item 15.](#C63694124) |] [added: Item 15.] | | [removed: Exhibits] [added: [Exhibits] and Financial Statement [removed: Schedules] [added: Schedules](#tx265737_24)] | | | [removed: 45] [added: 43] | |

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of [removed: 1934] [added: 1934, as amended,] and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to, among other things, future events and financial performance.

Such forward-looking statements are subject to various risks and uncertainties, which include, without limitation: the impact of weakness in the economy; changes in the overall level of consumer spending; changes in the wholesale cost of our products; the possibility that we may be unable to compete effectively in our highly competitive markets; the possibility that our continued opening of new stores could strain our resources and have a material adverse effect on our business and financial performance; the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues; the possibility that the capacity of our distribution and order fulfillment infrastructure may not be adequate to support our recent growth and expected future growth plans; the possibility of material disruptions to our information systems; weather conditions that could negatively impact sales; and other risk factors detailed in our public filings with the Securities and Exchange Commission (the “SEC”), including risk factors contained in Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the year ended January [removed: 29, 2011.][added: 28, 2012.]

10-K 1 d265737d10k.htm FORM 10-K

or

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þ Yes ¨ No

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¨ Yes þ No

##### [Table of Contents](#toc)

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| [Part I](#tx265737_1) | | | | | | [](#tx265737_1) |

| Item 4. | | [Mine Safety Disclosures](#tx265737_7) | | | 25 | |

| | | | | | | |

| [Part II](#tx265737_8) | | | | | | [](#tx265737_8) |

| | | | | | | |

| | | | | | | |

| [Part IV](#tx265737_23) | | | | | | [](#tx265737_23) |

##### [Table of Contents](#toc)

10-K 1 c63694e10vk.htm FORM 10-K

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| or | | |

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| [PART I](#C63694101) | | | | | | | | |

| | [Item 4.](#C63694107) | | | \[Removed and Reserved\] | | | 27 | |

| [Part II](#C63694108) | | | | | | | | |

| [PART IV](#C63694123) | | | | | | | | |

| [EX-10.5.D](https://www.sec.gov/Archives/edgar/data/1403568/000095012311030900/c63694exv10w5wd.htm) | | | | | | | | |

| [EX-10.6.C](https://www.sec.gov/Archives/edgar/data/1403568/000095012311030900/c63694exv10w6wc.htm) | | | | | | | | |

| [EX-23.1](https://www.sec.gov/Archives/edgar/data/1403568/000095012311030900/c63694exv23w1.htm) | | | | | | | | |

| [EX-31.1](https://www.sec.gov/Archives/edgar/data/1403568/000095012311030900/c63694exv31w1.htm) | | | | | | | | |

| [EX-31.2](https://www.sec.gov/Archives/edgar/data/1403568/000095012311030900/c63694exv31w2.htm) | | | | | | | | |

| [EX-32.1](https://www.sec.gov/Archives/edgar/data/1403568/000095012311030900/c63694exv32w1.htm) | | | | | | | | |

| | |

| --- | --- |

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

| | |

Our retail stores are [removed: conveniently] [added: predominately] located in [added: convenient,] high-traffic, [removed: primarily off-mall] locations such as power [removed: centers and lifestyle centers with other destination retailers.][added: centers.]

Most of our retail store leases provide for a fixed minimum annual rent and [added: generally] have a fixed [added: 10-year initial] term with options for two or three extension periods of five years each, exercisable at our option.

As of January [removed: 29, 2011,] [added: 28, 2012,] we operated [removed: 389] [added: 449] retail stores in [removed: 40] [added: 43] states, as shown in the table below:

| State | | [removed: of Stores] [added: Number of stores] | | |

| Alabama | | | [removed: 7] [added: 9] | |

| California | | | [removed: 33] [added: 39] | |

| Florida | | | [removed: 29] [added: 31] | |

| Georgia | | | [removed: 18] [added: 19] | |

| Illinois | | | [removed: 34] [added: 37] | |

| Iowa | | | [removed: 3] [added: 4] | |

| Kansas | | | [removed: 1] [added: 3] | |

| Kentucky | | | [removed: 3] [added: 6] | |

| Louisiana | | | [removed: 3] [added: 4] | |

| Maryland | | | [removed: 6] [added: 8] | |

| Massachusetts | | | [removed: 4] [added: 6] | |

| Michigan | | | [removed: 11] [added: 15] | |

| Minnesota | | | [removed: 9] [added: 11] | |

| Missouri | | | [removed: 3] [added: 4] | |

| New Jersey | | | [removed: 12] [added: 13] | |

| New York | | | [removed: 12] [added: 15] | |

| North Carolina | | | [removed: 13] [added: 17] | |

| Ohio | | | [removed: 11] [added: 14] | |

| Oregon | | | [removed: 3] [added: 5] | |

| Pennsylvania | | | [removed: 17] [added: 18] | |

| Tennessee | | | [removed: 5] [added: 7] | |

| Texas | | | [removed: 52] [added: 57] | |

| Utah | | | [removed: 2] [added: 4] | |

| Washington | | | [removed: 6] [added: 7] | |

| Wisconsin | | | [removed: 4] [added: 5] | |

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

As of January [removed: 29, 2011,] [added: 28, 2012,] we operated two distribution facilitates located in Romeoville, Illinois and Phoenix, Arizona.

| Idaho | | | 1 | |

| New Hampshire | | | 1 | |

| North Dakota | | | 1 | |

| Total | | | 449 | |

The lease for the Romeoville warehouse expires on April 30, 2015.

In August 2011, we entered into a lease for a distribution center located in Chambersburg, Pennsylvania.

The Chambersburg warehouse contains approximately 373,000 square feet and is expected to open in fiscal 2012.

The lease expires on March 31, 2027 and has three renewal options with terms of five years each.

| | | | | |

| | | Number | | |

| Total | | | 389 | |

The lease for the Romeoville warehouse expires on April 30, 2015 and has one renewal option with a term of five years.

| | |

| Name | | Age | | [removed: | |] Position |

| Carl S. Rubin | | [removed: | 51 |] [added: 52] | | President, Chief Executive Officer and Director |

| Gregg R. Bodnar | | [removed: | 46 |] [added: 47] | | Chief Financial Officer and Assistant Secretary |

| Robert S. Guttman | | [removed: | 58 |] [added: 59] | | Senior Vice President, General Counsel & Secretary |

Prior to joining Ulta, Mr. Rubin was President of the North American Retail [added: division of Office Depot Inc. from January 2006 to April 2010.]

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

None.

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

division of Office Depot Inc. from January 2006 to April 2010.

| | |

| --- | --- |

The following table sets forth the high and low sales prices for our common stock on the NASDAQ Global Select Market during fiscal years [removed: 2010] [added: 2011] and [removed: 2009:][added: 2010:]

| Fiscal Year [removed: 2009] [added: 2011] | | High | | | | Low | | |

The last reported sale price of our common stock on the NASDAQ Global Select Market on March [removed: 24, 2011] [added: 22, 2012] was [removed: $47.84] [added: $93.59] per share.

As of March [removed: 24, 2011,] [added: 22, 2012,] we had [removed: 141] [added: 94] holders of record of our common stock.

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

[removed: Sales] [added: _Sales] of Unregistered [removed: Securities][added: Securities_]

The following table provides information about Ulta common stock that may be issued under our equity compensation plans as of January [removed: 29, 2011.][added: 28, 2012.]

Set forth below is a graph comparing the cumulative total stockholder return on Ulta’s common stock with the NASDAQ Global Select Market Composite Index (NQGS) and the S&P Retail Index (RLX) for the period covering Ulta’s first trading day on October 25, 2007 through the end of Ulta’s fiscal year ended January [removed: 29, 2011.][added: 28, 2012.]

[removed: ][added: ]

| First quarter | | $ | 53.19 | | | $ | 36.73 | |

| Second quarter | | | 68.70 | | | | 49.61 | |

| Third quarter | | | 72.86 | | | | 48.89 | |

| Fourth quarter | | | 78.80 | | | | 64.09 | |

On March 8, 2012, we announced that our Board of Directors had declared a $1.00 per share special cash dividend to shareholders of record as of the close of business on March 20, 2012.

The special cash dividend, which totals approximately $62 million, will be payable on May 15, 2012.

Our Board of Directors may determine future dividends after giving consideration to our levels of profit and cash flow, capital requirements, current and future liquidity, restrictions as part of our credit facility as well as financial and other conditions existing at the time.

The following table sets forth repurchases of our common stock during the fourth quarter of 2011:

| | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Period | | Total number of shares purchased (1) | | | | Average price paid per share | | | | Total number of shares purchased as part of publicly announced plans or programs (2) | | | | Number of maximum shares that may yet to be purchased under plans or programs (2) | | |

| November 27, 2011 to December 24, 2011 | | | 672 | | | | 68.37 | | | | — | | | | — | |

| December 25, 2011 to January 28, 2012 | | | 49,325 | | | | 64.67 | | | | — | | | | — | |

| | | | | | | | | | | | | | | | | |

| | | | 49,997 | | | | 64.72 | | | | — | | | | — | |

| | | | | | | | | | | | | | | | | |

| (1) | Represents shares of the Company’s common stock transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the period. |

| --- | --- |

| (2) | During the fourth quarter of 2011, the Company did not have a formal plan or program for the repurchase of the Company’s common stock. |

| --- | --- |

| Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | | Weighted-average exercise price of outstanding options, warrants and rights | | | | Number of securities remaining available for future issuance under equity compensation plans | | |

| Equity compensation plans approved by security holders | | | 3,559,395 | | | $ | 26.46 | | | | 5,030,937 | |

| Total | | | 3,559,395 | | | $ | 26.46 | | | | 5,030,937 | |

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

| | | | | | | | | |

| First quarter | | $ | 8.75 | | | $ | 4.29 | |

| Second quarter | | | 11.56 | | | | 8.36 | |

| Third quarter | | | 17.44 | | | | 10.25 | |

| Fourth quarter | | | 21.61 | | | | 15.14 | |

No cash dividends have been declared on our common stock to date nor have any decisions been made to pay a dividend in the foreseeable future.

We evaluate our dividend policy on a periodic basis.

Any dividend we might declare in the future would be subject to the applicable provisions of our credit agreement, which currently limits our ability to pay cash dividends.

None.

| | | | | | | | | | | | | |

| | | Number of Securities | | | | | | | | Number of Securities | | |

| | | to be Issued Upon | | | | Weighted-Average | | | | Remaining Available | | |

| | | Exercise of | | | | Exercise Price of | | | | for Future Issuance | | |

| | | Outstanding Options, | | | | Outstanding Options, | | | | Under Equity | | |

| Plan Category | | Warrants and Rights | | | | Warrants and Rights | | | | Compensation Plans | | |

| Equity compensation plans approved by security holders | | | 5,035,871 | | | $ | 16.55 | | | | 712,730 | |

| Total | | | 5,035,871 | | | $ | 16.55 | | | | 712,730 | |

| | |

| | | [removed: 2011] [added: January 28, 2012] | | | | [removed: 2010] [added: January 29, 2011] | | | | [removed: 2009] [added: January 30, 2010] | | | | [removed: 2008] [added: January 31, 2009] | | | | [removed: 2007] [added: February 2, 2008] | | |

| Net [removed: sales(2)] [added: sales] | | $ | [removed: 1,454,838] [added: 1,776,151] | | | $ | [removed: 1,222,771] [added: 1,454,838] | | | $ | [removed: 1,084,646] [added: 1,222,771] | | | $ | [removed: 912,141] [added: 1,084,646] | | | $ | [removed: 755,113] [added: 912,141] | |

| Cost of [removed: sales(3)] [added: sales] | | | [removed: 970,753] [added: 1,159,311] | | | | [removed: 846,202] [added: 970,753] | | | | [removed: 752,939] [added: 846,202] | | | | [removed: 628,495] [added: 752,939] | | | | [removed: 519,929] [added: 628,495] | |

| Gross profit | | | [removed: 484,085] [added: 616,840] | | | | [removed: 376,569] [added: 484,085] | | | | [removed: 331,707] [added: 376,569] | | | | [removed: 283,646] [added: 331,707] | | | | [removed: 235,184] [added: 283,646] | |

| Selling, general and administrative [removed: expenses(3)] [added: expenses] | | | [removed: 358,106] [added: 410,658] | | | | [removed: 302,413] [added: 358,106] | | | | [removed: 271,095] [added: 302,413] | | | | [removed: 225,167] [added: 271,095] | | | | [removed: 188,000] [added: 225,167] | |

| Pre-opening expenses | | | [removed: 7,095] [added: 9,987] | | | | [removed: 6,003] [added: 7,095] | | | | [removed: 14,311] [added: 6,003] | | | | [removed: 11,758] [added: 14,311] | | | | [removed: 7,096] [added: 11,758] | |

| Operating income | | | [removed: 118,884] [added: 196,195] | | | | [removed: 68,153] [added: 118,884] | | | | [removed: 46,301] [added: 68,153] | | | | [removed: 46,721] [added: 46,301] | | | | [removed: 40,088] [added: 46,721] | |

| Interest expense | | | [removed: 755] [added: 587] | | | | [removed: 2,202] [added: 755] | | | | [removed: 3,943] [added: 2,202] | | | | [removed: 4,542] [added: 3,943] | | | | [removed: 3,314] [added: 4,542] | |

| Income before income taxes | | | [removed: 118,129] [added: 195,608] | | | | [removed: 65,951] [added: 118,129] | | | | [removed: 42,358] [added: 65,951] | | | | [removed: 42,179] [added: 42,358] | | | | [removed: 36,774] [added: 42,179] | |

| Income tax expense | | | [removed: 47,099] [added: 75,344] | | | | [removed: 26,595] [added: 47,099] | | | | [removed: 17,090] [added: 26,595] | | | | [removed: 16,844] [added: 17,090] | | | | [removed: 14,231] [added: 16,844] | |

| Net income | | $ | [removed: 71,030] [added: 120,264] | | | $ | [removed: 39,356] [added: 71,030] | | | $ | [removed: 25,268] [added: 39,356] | | | $ | [removed: 25,335] [added: 25,268] | | | $ | [removed: 22,543] [added: 25,335] | |

| Basic | | $ | [removed: 1.20] [added: 1.96] | | | $ | [removed: 0.68] [added: 1.20] | | | $ | [removed: 0.44] [added: 0.68] | | | $ | [removed: 0.69] [added: 0.44] | | | $ | [removed: 1.38] [added: 0.69] | |

| Diluted | | $ | [removed: 1.16] [added: 1.90] | | | $ | [removed: 0.66] [added: 1.16] | | | $ | [removed: 0.43] [added: 0.66] | | | $ | [removed: 0.48] [added: 0.43] | | | $ | [removed: 0.45] [added: 0.48] | |

| Basic | | | [removed: 58,959] [added: 61,259] | | | | [removed: 57,915] [added: 58,959] | | | | [removed: 57,425] [added: 57,915] | | | | [removed: 20,383] [added: 57,425] | | | | [removed: 5,771] [added: 20,383] | |

| Diluted | | | [removed: 61,288] [added: 63,334] | | | | [removed: 59,237] [added: 61,288] | | | | [removed: 58,967] [added: 59,237] | | | | [removed: 53,293] [added: 58,967] | | | | [removed: 49,921] [added: 53,293] | |

| Comparable store sales [removed: increase(4)] [added: increase(2)] | | | [removed: 11.0] [added: 10.9] | % | | | [removed: 1.4] [added: 11.0] | % | | | [removed: 0.2] [added: 1.4] | % | | | [removed: 6.4] [added: 0.2] | % | | | [removed: 14.5] [added: 6.4] | % |

| Number of stores end of year | | | [removed: 389] [added: 449] | | | | [removed: 346] [added: 389] | | | | [removed: 311] [added: 346] | | | | [removed: 249] [added: 311] | | | | [removed: 196] [added: 249] | |

| Total square footage end of year | | | [removed: 4,094,808] [added: 4,747,148] | | | | [removed: 3,613,840] [added: 4,094,808] | | | | [removed: 3,240,579] [added: 3,613,840] | | | | [removed: 2,589,244] [added: 3,240,579] | | | | [removed: 2,023,305] [added: 2,589,244] | |

| Total square footage per [removed: store(5)] [added: store(3)] | | | [removed: 10,526] [added: 10,573] | | | | [removed: 10,445] [added: 10,526] | | | | [removed: 10,420] [added: 10,445] | | | | [removed: 10,399] [added: 10,420] | | | | [removed: 10,323] [added: 10,399] | |

| Average total square [removed: footage(6)] [added: footage(4)] | | | [removed: 3,811,597] [added: 4,413,236] | | | | [removed: 3,459,628] [added: 3,811,597] | | | | [removed: 2,960,355] [added: 3,459,628] | | | | [removed: 2,283,935] [added: 2,960,355] | | | | [removed: 1,857,885] [added: 2,283,935] | |

| Net sales per average total square [removed: foot(7)] [added: foot(5)] | | $ | [removed: 382] [added: 402] | | | $ | [removed: 353] [added: 382] | | | $ | [removed: 366] [added: 353] | | | $ | [removed: 399] [added: 366] | | | $ | [removed: 398] [added: 399] | |

| Capital expenditures | | | [removed: 97,115] [added: 128,636] | | | | [removed: 68,105] [added: 97,115] | | | | [removed: 110,863] [added: 68,105] | | | | [removed: 101,866] [added: 110,863] | | | | [removed: 62,331] [added: 101,866] | |

| Depreciation and amortization | | | [removed: 64,936] [added: 75,931] | | | | [removed: 62,166] [added: 64,936] | | | | [removed: 51,445] [added: 62,166] | | | | [removed: 39,503] [added: 51,445] | | | | [removed: 29,736] [added: 39,503] | |

| Cash and cash equivalents | | $ | [removed: 111,185] [added: 253,738] | | | $ | [removed: 4,017] [added: 111,185] | | | $ | [removed: 3,638] [added: 4,017] | | | $ | [removed: 3,789] [added: 3,638] | | | $ | [removed: 3,645] [added: 3,789] | |

| Working capital | | | [removed: 241,032] [added: 415,377] | | | | [removed: 136,417] [added: 241,032] | | | | [removed: 159,695] [added: 136,417] | | | | [removed: 117,039] [added: 159,695] | | | | [removed: 88,105] [added: 117,039] | |

| Property and equipment, net | | | [removed: 326,099] [added: 376,985] | | | | [removed: 290,861] [added: 326,099] | | | | [removed: 292,224] [added: 290,861] | | | | [removed: 236,389] [added: 292,224] | | | | [removed: 162,080] [added: 236,389] | |

| Total assets | | | [removed: 730,488] [added: 957,217] | | | | [removed: 553,635] [added: 730,488] | | | | [removed: 568,932] [added: 553,635] | | | | [removed: 469,413] [added: 568,932] | | | | [removed: 338,597] [added: 469,413] | |

| Total [removed: debt(8)] [added: debt] | | | — | | | | — | | | | [removed: 106,047] [added: —] | | | | [removed: 74,770] [added: 106,047] | | | | [removed: 55,529] [added: 74,770] | |

| Total stockholders’ equity | | | [removed: 402,533] [added: 584,704] | | | | [removed: 292,608] [added: 402,533] | | | | [removed: 244,968] [added: 292,608] | | | | [removed: 211,503] [added: 244,968] | | | | [removed: 148,760] [added: 211,503] | |

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

| (1) | [removed: |] Our fiscal year-end is the Saturday closest to January 31 based on a 52/53-week year. Each fiscal year consists of four 13-week quarters, with an extra week added onto the fourth quarter every five or six years. |

| [removed: (4) |] [added: (2)] | Comparable store sales increase reflects sales for stores beginning on the first day of the 14th month of operation. Remodeled stores are included in comparable store sales unless the store was closed for a portion of the current or comparable prior year. |

| [removed: (5) |] [added: (3)] | Total square footage per store is calculated by dividing total square footage at end of year by number of stores at end of year. |

| [removed: (6) |] [added: (4)] | Average total square footage represents a weighted average which reflects the effect of opening stores in different months throughout the year. |

| [removed: (7) |] [added: (5)] | Net sales per average total square foot was calculated by dividing net sales for the year by the average square footage for those stores open during each year. [removed: Fiscal 2006 net sales per average total square foot were adjusted to exclude the net sales effect of the 53rd week.] |

| --- | --- |

| --- | --- |

| --- | --- |

| --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

| | | January 29, | | | | January 30, | | | | January 31, | | | | February 2, | | | | February 3, | | |

| | | |

| --- | --- | --- |

| (2) | | Fiscal 2006 was a 53-week operating year and the 53rd week represented approximately $16.4 million in net sales. |

| (3) | | The Company made reclassifications in the consolidated income statements for the fiscal years ended January 30, 2010 (fiscal 2009) and January 31, 2009 (fiscal 2008) to decrease cost of sales and increase selling, general and administrative expenses by $3,520 and $3,773, respectively, to conform to the fiscal 2010 presentation. Amounts were insignificant for fiscal 2007 and 2006. |

| (8) | | Total debt includes approximately $4.8 million related to the Series III preferred stock, which is presented between the liabilities section and the equity section of our balance sheet for all years prior to February 2, 2008. |

| | |

| | |

| --- | --- |

##### [Table of Contents](#toc)

| | |

| --- | --- |

Based on management’s evaluation as of January [removed: 29, 2011,] [added: 28, 2012,] our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our principal executive officer and our principal financial officer, management evaluated the effectiveness of our internal control over financial reporting as of January [removed: 29, 2011,] [added: 28, 2012,] based on the criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this evaluation, our principal executive officer and principal financial officer concluded that our internal controls over financial reporting were effective as of January [removed: 29, 2011.][added: 28, 2012.]

Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, has audited the effectiveness of our internal control over financial reporting as of January [removed: 29, 2011] [added: 28, 2012] and has issued the attestation report included in Item 15 of this Annual Report on Form 10-K.

There were no changes to our internal controls over financial reporting during the three months ended January [removed: 29, 2011] [added: 28, 2012] that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

| | |

| --- | --- |

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

| | |

The information required by this item with respect to our executive officers is set forth after Part I, Item 4 of this report under the caption “Executive Officers of the Registrant.” The additional information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 29, 2011] [added: 28, 2012] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2011] [added: 2012] annual meeting of stockholders.

| | |

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 29, 2011] [added: 28, 2012] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2011] [added: 2012] annual meeting of stockholders.

| | |

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 29, 2011] [added: 28, 2012] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2011] [added: 2012] annual meeting of stockholders.

| | |

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 29, 2011] [added: 28, 2012] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2011] [added: 2012] annual meeting of stockholders.

| | |

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January [removed: 29, 2011] [added: 28, 2012] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2011] [added: 2012] annual meeting of stockholders.

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

| | |

[added: |] (a) [added: |] The following documents are filed as a part of this Form 10-K: [added: |]

| [Report of Independent Registered Public Accounting [removed: Firm](#C63694300)] [added: Firm](#tx265737_30)] | | | [removed: 46] [added: 44] | |

[removed: | [Balance Sheets](#C63694301) | | | 48 | |][added: Balance Sheets]

[removed: | [Statements] [added: Statements] of [removed: Income](#C63694302) | | | 49 | |][added: Income]

[removed: | [Statements] [added: Statements] of Cash [removed: Flows](#C63694303) | | | 50 | |][added: Flows]

[removed: | [Statements] [added: Statements] of Stockholders’ [removed: Equity](#C63694304) | | | 51 | |][added: Equity]

[removed: | [Notes] [added: Notes] to Financial [removed: Statements](#C63694305) | | | 52 | |][added: Statements]

##### [Table of [removed: Contents](#C63694tocpage)][added: Contents](#toc)]

[removed: Ulta] [added: Ulta] Salon, Cosmetics & Fragrance, [removed: Inc.][added: Inc.]

We have audited the accompanying balance sheets of Ulta Salon, Cosmetics & Fragrance, Inc. (the Company) as of January [removed: 29, 2011] [added: 28, 2012] and January [removed: 30, 2010,] [added: 29, 2011,] and the related statements of income, cash flows, and stockholders’ equity for each of the three years in the period ended January [removed: 29, 2011.][added: 28, 2012.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ulta Salon, Cosmetics & Fragrance, Inc. at January [removed: 29, 2011] [added: 28, 2012] and January [removed: 30, 2010,] [added: 29, 2011,] and the results of its operations and its cash flows for each of the three years in the period ended January [removed: 29, 2011,] [added: 28, 2012,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ulta Salon, Cosmetics & Fragrance, Inc.’s internal control over financial reporting as of January [removed: 29, 2011,] [added: 28, 2012,] based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March [removed: 30, 2011,] [added: 28, 2012,] expressed an unqualified opinion thereon.

We have audited Ulta Salon, Cosmetics & Fragrance, Inc.’s internal control over financial reporting as of January [removed: 29, 2011,] [added: 28, 2012,] based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).

In our opinion, Ulta Salon, Cosmetics & Fragrance, Inc. maintained, in all material respects, effective internal control over financial reporting as of January [removed: 29, 2011,] [added: 28, 2012,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Ulta Salon, Cosmetics & Fragrance, Inc. as of January [removed: 29, 2011] [added: 28, 2012] and January [removed: 30, 2010,] [added: 29, 2011,] and the related statements of income, cash flows and stockholders’ equity for each of the three years in the period ended January [removed: 29, 2011] [added: 28, 2012] and our report dated March [removed: 30, 2011] [added: 28, 2012] expressed an unqualified opinion thereon.

Ulta Salon, Cosmetics & Fragrance, [removed: Inc.][added: Inc.]

[removed: Balance Sheets][added: | [Balance Sheets](#tx265737_31) | | | 46 | |]

[removed: (In] [added: (In] thousands, except per share data)

| | | January [removed: 29,] [added: 28,] | | | | January [removed: 30,] [added: 29,] | | |

| | | 2011 | | | | [added: | | | | | | | | | | | |] 2010 | | | [added: | | | | | | | | | | | |]

| Cash and cash equivalents [added: at beginning of year] | | [removed: $] | 111,185 | | | [removed: $] | 4,017 | | [added: | | 3,638 | |]