Ulta Beauty (ULTA) 10-K risk factor changes: FY2015 vs FY2014

In these circumstances, the market price of our common stock could decline, and you may lose [removed: all or] part [added: or all] of your investment._

In addition, the recent global economic crisis and volatility in global economic conditions and the financial markets may adversely affect our business, financial condition, [removed: profitability,] [added: profitability] and cash flows._

[added: A bankruptcy or financial failure of a significant vendor or a] number of significant real estate developers or shopping center landlords could have a material adverse effect on our business, financial condition, [removed: profitability,] [added: profitability] and cash flows.

The markets for beauty products and salon services are highly competitive with few barriers to [removed: entry even when economic conditions are favorable.][added: entry.]

We compete against a diverse group of retailers, both small and large, including regional and national department stores, specialty retailers, drug stores, mass merchandisers, high-end and discount salon chains, locally owned beauty retailers and salons, [removed: Internet] [added: e-commerce] businesses, catalog retailers and direct response television, including television home shopping retailers and infomercials.

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

_Our comparable [removed: store] sales and quarterly financial performance may fluctuate for a variety of reasons, which could result in a decline in the price of our common stock._

Our comparable [removed: store] sales and quarterly results of operations have fluctuated in the past, and we expect them to continue to fluctuate in the future.

A variety of factors affect our comparable [removed: store] sales and quarterly financial performance, including:

| | Ÿ | | timing and effectiveness of our marketing [removed: activities, such as catalogs and newspaper inserts;] [added: activities;] |

Accordingly, our results for any one fiscal quarter are not necessarily indicative of the results to be expected for any other quarter, and comparable [removed: store] sales for any particular future period may decrease.

In that event, the price of our common stock [removed: would likely] [added: may] decline.

_We may not be able to sustain our growth plans and successfully [removed: develop and] implement our long-range strategic and financial [removed: plan,] [added: plans,] which could have a material adverse effect on our business, financial condition, profitability and cash flows.

Our continued and future growth largely depends on our ability to implement our long-range strategic and financial [removed: plan] [added: plans] and successfully open and operate new stores on a profitable basis.

[removed: There can be no assurance that] we will be successful in implementing our growth [removed: plan] [added: plans] or long-range strategic [removed: initiatives,] [added: imperatives,] and our failure to do so could have a material adverse impact on our business, financial condition, profitability and 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 [added: excess] costs to expand this infrastructure, which could have a material adverse effect on our business, financial condition, profitability and cash flows._

[added: In order to support our recent and expected future] growth and to maintain the efficient operation of our business, additional distribution centers [removed: may need to] [added: will] be added in the future.

[removed: We are embarking on] [added: In 2014, we began] a multi-year supply chain [removed: project beginning in 2014] [added: project,] which [removed: will include] [added: includes] adding additional capacity, including [removed: a fourth] [added: two additional] distribution [removed: center] [added: centers] expected to open in [removed: 2015,] [added: 2015] and [added: 2016, and] system improvements to support expanded omni-channel capabilities.

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 [removed: disagreements,] [added: 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 condition, profitability and cash flows.

Any material disruption of our systems could disrupt our ability to track, record and analyze the merchandise that we sell and could negatively impact our operations, shipment of goods, ability to process financial information and credit card [removed: transactions,] [added: transactions] and our ability to receive and process e-commerce orders or engage in normal business activities.

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

The Ulta.com website serves as an effective extension of Ulta’s marketing and prospecting strategies (beyond catalogs, newspaper inserts and national advertising) by exposing potential new customers to the Ulta brand, product [removed: offerings,] [added: offerings] and enhanced content.

[removed: Despite our security measures, our information] technology [added: systems] and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, damage our [removed: reputation,] [added: reputation] and cause a loss of confidence in our business, products and services, which could adversely affect our business, financial condition, profitability and cash flows.

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 [removed: errors,] [added: errors] or other similar events.

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

As we continue to grow our e-commerce business, the impact of attracting existing rather than new customers, of conflicts between product offerings online and through our [removed: stores,] [added: stores] and of opening up our channels to increased internet competition could have a material adverse impact on our business, financial condition, profitability and cash flows, including future growth.

We directly source the majority of our [removed: gift-with-purchase] [added: gifts with purchase] and other promotional products through third-party vendors using foreign factories.

[added: Any event causing a sudden disruption of manufacturing or imports] from such foreign countries, including the imposition of additional import restrictions, unanticipated political 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.

We have no long-term supply contracts with respect to such foreign-sourced items, many of which are subject to existing or potential duties, [removed: tariffs or quotas that may limit the quantity of certain types of goods that may be imported into the United States from such countries.]

Our future operations and performance will be subject to these factors, [removed: which are beyond our control,] and these factors could have a material adverse effect on our business, financial condition, profitability and 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 [removed: unsold] [added: excess] inventory, which could have a material adverse effect on our business, financial condition, profitability and cash flows._

We may respond by increasing [removed: markdowns or] [added: markdowns,] initiating marketing [removed: promotions] [added: promotions, or transferring product] to [added: other stores to] reduce excess inventory, which would further decrease our gross profits and net income.

We have no long-term supply agreements [removed: or exclusive arrangements] with vendors and, therefore, our success depends on maintaining good relationships with our vendors.

[added: Our business depends to a significant extent on the] willingness and ability of our vendors to supply us with a sufficient selection and volume of products to stock our stores.

We also have strategic partnerships with certain core brands, which have allowed us to benefit from the growing [removed: popularity of such brands.]

During fiscal [removed: 2013,] [added: 2014,] merchandise supplied to Ulta by our top ten vendors accounted for approximately [removed: 51%] [added: 50%] of our net sales.

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

We do not own or operate any manufacturing facilities and therefore depend upon independent third-party vendors for the manufacture of all products manufactured uniquely for Ulta, including Ulta branded products and [removed: gift-with-purchase] [added: gifts with purchase] and other promotional products.

Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate [added: cost of compliance with these requirements or their effect on our operations.]

Despite our security measures, our information

There can be no assurance that

We intend to continue to grow our number of stores for the foreseeable future.

tariffs or quotas that may limit the quantity of certain types of goods that may be imported into the United States from such countries.

popularity of such brands.

our stores or a prohibition on the sale of our Ulta branded products.

Our store leases generally require us to provide a certificate of occupancy with respect to the interior build-out of our stores (landlords

European Patent Office, regarding intellectual property rights with respect to products purchased from third-party vendors or our Ulta branded products and technology.

Negative commentary regarding us or the products we sell may be

We may still incur legal costs

We may have in place from time to time, a stock repurchase program.

A bankruptcy or financial failure of a significant vendor or a

Our senior management is currently evaluating our long-range strategic and financial plan to align and prioritize our growth strategies, as well as additional investments that will be needed to support continued and future growth.

During fiscal 2013, we opened 127 new stores.

We intend to continue to grow our number of stores for the foreseeable future, and believe we have the long-term potential to grow our store base to approximately 1,200 stores in the United States.

During fiscal 2013, the average investment required to open a typical new store was approximately $1.0 million.

In order to support our recent and expected future

Any event causing a sudden disruption of manufacturing or imports

Our business depends to a significant extent on the

cost of compliance with these requirements or their effect on our operations.

Ultimately, we could be

We expect the net investment to open a new store in 2014 to increase due to increases in material and labor costs resulting from a stronger commercial and residential building environment compared to the last several years.

On March 18, 2013, we announced that our Board of Directors had approved a stock repurchase program.

Under the program, we are authorized to repurchase shares of our common stock from time to time in the open market, in privately negotiated transactions, or otherwise, at prices that the Company deems appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company’s sole discretion, up to an aggregate purchase price of $150 million.

You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” [added: “targets,” “strategies,”] or other comparable words.

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; [added: customer acceptance of our rewards programs and technological and marketing initiatives;] 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; our ability to attract and retain key executive personnel; our ability to successfully execute [removed: and implement] our common stock repurchase [removed: program;] [added: program or implement future common stock repurchase programs;] our ability to sustain our growth plans and successfully [removed: develop and] implement our long-range strategic and financial plan; 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 [removed: February 1, 2014.][added: January 31, 2015.]

References in the following discussion to “we”, “us”, “our”, “the Company”, [removed: “Ulta”] [added: “Ulta”, “Ulta Beauty”] and similar references mean Ulta Salon, Cosmetics & Fragrance, Inc. and its consolidated subsidiary, Ulta Inc. unless otherwise expressly stated or the context otherwise requires._

We were founded in 1990 as a beauty retailer at a time when prestige, mass and salon products were sold through distinct channels [removed: –] [added: —] department stores for prestige products, drug stores and mass merchandisers for mass [removed: products, and salons and authorized retail outlets for professional hair care products.]

We developed a unique specialty retail concept by combining one-stop shopping, a compelling value proposition, convenient locations [added: and a welcoming shopping environment.]

We focus on providing affordable indulgence to our [removed: customers] [added: guests] by combining unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer.

Key aspects of our business include our ability to offer our [removed: customers] [added: guests] a [removed: broad selection] [added: unique combination] of more than 20,000 beauty products across the categories of [added: prestige and mass] cosmetics, fragrance, haircare, skincare, bath and body products and salon styling [removed: tools, as well as salon haircare products.][added: tools.]

We focus on delivering a compelling value proposition to our [removed: customers] [added: guests] across all of our product categories.

We believe that the expanding U.S. beauty products and salon services industry, the shift in distribution [added: channel] of prestige beauty products from department stores to specialty retail stores, coupled with Ulta’s competitive strengths, positions us to capture additional market share in the [removed: industry through successful execution of our growth strategy.][added: industry.]

Comparable [removed: store] sales is a key metric that is monitored closely within the retail industry.

Our comparable [removed: store] sales have fluctuated in the past and we expect them to continue to fluctuate in the future.

A variety of factors affect our comparable [removed: store] sales, including general U.S. economic conditions, changes in merchandise strategy or [removed: mix,] [added: mix] and timing and effectiveness of our marketing activities, among others.

Over the long-term, our growth strategy is to increase total net sales through increases in our comparable [removed: store sales and] [added: sales,] by opening new [removed: stores.][added: stores and by increasing sales in our e-commerce channel.]

Operating profit is expected to increase as a result of our ability to expand merchandise margin and leverage our fixed store costs with comparable [removed: store] sales increases and operating efficiencies offset by incremental investments in people, systems and supply chain required to support a 1,200 store chain with a successful e-commerce business and competitive omni-channel capabilities.

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

Comparable [removed: store] sales reflect sales for stores beginning on the first day of the 14th month of operation.

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

[removed: Beginning with the first quarter of 2013, comparable store] [added: Comparable] sales include the Company’s e-commerce business.

Measuring comparable [removed: store] sales allows us to evaluate the performance of our store base as well as several other aspects of our overall strategy.

Several factors could positively or negatively impact our comparable [removed: store] sales results:

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

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

Pre-opening expense includes non-capital expenditures during the period prior to store opening for new, remodeled and relocated stores including rent during the construction period for new and relocated stores, store set-up labor, management and employee [removed: training,] [added: training] and grand opening advertising.

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

The Company’s fiscal years ended [added: January 31, 2015,] February 1, [removed: 2014,] [added: 2014 and] February 2, 2013 [removed: and January 28, 2012] were 52, [removed: 53 and] 52 [added: and 53] week years, respectively, and are hereafter referred to as fiscal [removed: 2013,] [added: 2014,] fiscal [removed: 2012] [added: 2013] and fiscal [removed: 2011.][added: 2012.]

As of [removed: February 1, 2014,] [added: January 31, 2015,] we operated [removed: 675] [added: 774] stores across [removed: 46] [added: 47] states.

| (Dollars in thousands) | | [added: January 31, 2015 | | | |] February 1, 2014 | | | | February 2, 2013 | | | [removed: | January 28, 2012 | | |]

| Net sales | | $ | [removed: 2,670,573] [added: 3,241,369] | | | $ | [removed: 2,220,256] [added: 2,670,573] | | | $ | [removed: 1,776,151] [added: 2,220,256] | |

| Cost of sales | | | [removed: 1,729,325] [added: 2,104,582] | | | | [removed: 1,436,582] [added: 1,729,325] | | | | [removed: 1,159,311] [added: 1,436,582] | |

| Gross profit | | | [removed: 941,248] [added: 1,136,787] | | | | [removed: 783,674] [added: 941,248] | | | | [removed: 616,840] [added: 783,674] | |

| Selling, general and administrative expenses | | | [removed: 596,390] [added: 712,006] | | | | [removed: 488,880] [added: 596,390] | | | | [removed: 410,658] [added: 488,880] | |

| Pre-opening expenses | | | [removed: 17,270] [added: 14,366] | | | | [removed: 14,816] [added: 17,270] | | | | [removed: 9,987] [added: 14,816] | |

| Operating income | | | [removed: 327,588] [added: 410,415] | | | | [removed: 279,978] [added: 327,588] | | | | [removed: 196,195] [added: 279,978] | |

| Interest (income) [removed: expense] [added: expense, net] | | | [removed: (118] [added: (894] | ) | | | [removed: 185] [added: (118] | [added: )] | | | [removed: 587] [added: 185] | |

| Income before income taxes | | | [removed: 327,706] [added: 411,309] | | | | [removed: 279,793] [added: 327,706] | | | | [removed: 195,608] [added: 279,793] | |

| Income tax expense | | | [removed: 124,857] [added: 154,174] | | | | [removed: 107,244] [added: 124,857] | | | | [removed: 75,344] [added: 107,244] | |

| Net income | | $ | [removed: 202,849] [added: 257,135] | | | $ | [removed: 172,549] [added: 202,849] | | | $ | [removed: 120,264] [added: 172,549] | |

| Number of stores end of period | | | [removed: 675] [added: 774] | | | | [removed: 550] [added: 675] | | | | [removed: 449] [added: 550] | |

| Comparable [removed: store] sales [removed: increase] [added: increase:] | | | | | | | | | | | | |

| Retail and salon comparable [removed: store] sales | | | [removed: 6.1] [added: 8.1] | % | | | [removed: 8.8] [added: 6.1] | % | | | [removed: 10.9] [added: 8.8] | % |

products and salons and authorized retail outlets for professional hair care products.

We also offer a full-service salon and a wide range of salon haircare products in all of our stores.

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 six strategic imperatives: 1) acquire new guests and deepen loyalty with existing guests, 2) differentiate by delivering a distinctive and personalized guest experience across all channels, 3) offer relevant, innovative and often exclusive products that excite our guests, 4) deliver exceptional services in three core areas: hair, skin health and brows, 5) grow stores and e-commerce to reach and serve more guests and 6) invest in infrastructure to support our guest experience and growth, and capture scale efficiencies.

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

Net sales increased $570.8 million, or 21.4%, to $3,241.4 million in fiscal 2014 compared to $2,670.6 million in fiscal 2013.

E-commerce sales increased $54.1 million, or 56.4%, to $149.9 million compared to $95.8 million in fiscal 2013.

The 9.9% comparable sales increase consisted of a 8.1% increase at the Company’s retail and salon stores and a 56.4% increase in the Company’s e-commerce business.

The salon business contributed 10 basis points to the retail and salon comp of 8.1%.

The inclusion of the e-commerce business resulted in an increase of approximately 180 basis points to the Company’s consolidated same store sales calculation for fiscal 2014 and 2013.

The total comparable sales increase included a 4.3% increase in average ticket and a 5.6% increase in transaction.

Gross profit increased $195.6 million, or 20.8%, to $1,136.8 million in fiscal 2014, compared to $941.2 million, in fiscal 2013.

The decrease in gross profit margin in fiscal 2014 was primarily due to 10 basis points of deleverage in merchandise margins driven primarily by product and channel mix shifts and converting the remaining 50% of our loyalty program members to the ULTAmate rewards loyalty program.

The leverage in SG&A expenses is primarily attributed to:

| | Ÿ | | 30 basis points deleverage in corporate overhead expense primarily driven by higher variable compensation, consulting and depreciation expense. |

Pre-opening expenses decreased $2.9 million, or 16.8%, to $14.4 million in fiscal 2014 compared to $17.3 million in fiscal 2013.

Net interest income was $0.9 million in fiscal 2014, compared to $0.1 million in fiscal 2013.

Interest income results from short-term investments with maturities of twelve months or less from the date of purchase.

Net income increased $54.3 million, or 26.8%, to $257.1 million in fiscal 2014 compared to $202.8 million in fiscal 2013.

The salon business contributed 10 basis points to the retail and salon comp of 6.1%.

| Purchases of short-term investments | | | (200,209 | ) | | | — | | | | — | |

| Proceeds from short-term investments | | | 50,000 | | | | — | | | | — | |

| Purchases of property and equipment | | | (249,067 | ) | | | (226,024 | ) | | | (188,578 | ) |

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

| | Ÿ | | approximately $56 million related to new brand additions, boutiques and investments to improve store in-stock levels. |

Capital expenditures increased in fiscal 2014 compared to fiscal 2013 due to investments in supply chain initiatives, partially offset by the decrease in the number of new store openings during 2014.

Purchases of short-term investments were $150.2 million during fiscal 2014 and consist of certificates of deposit with maturities of twelve months or less from the date of purchase.

| | | 2015 | | | | Fiscal | | | | Fiscal | | | | Fiscal | | |

| | | $ | 297 | | | $ | 249 | | | $ | 226 | | | $ | 189 | |

The 2015 merchandising capital increase reflects expansion of prestige boutiques and related in-store merchandising upgrades.

The 2013 Share Repurchase Program did not have an expiration date, but provided for suspension or discontinuation at any time.

On September 11, 2014, we announced that our Board of Directors authorized a new share repurchase program (the 2014 Share Repurchase Program) pursuant to which the Company may repurchase up to $300 million of the

Company’s common stock.

The 2014 Share Repurchase Program authorization revokes the previously authorized but unused amounts of $112.7 million from the 2013 Share Repurchase Program.

On March 12, 2015, we announced that our Board of Directors authorized an increase of $100 million to the 2014 Share Repurchase Program effective March 17, 2015.

During fiscal 2014, we purchased 321,113 shares of common stock for $39.9 million at an average price of $124.31 from the 2014 Share Repurchase Program.

As of January 31, 2015, we have not entered into any “off-balance sheet” arrangements, as that term is described by the SEC.

We do however, have off-balance sheet operating leases and purchases obligations incurred in the ordinary course of business as indicated within the contractual obligations table below.

| Operating lease obligations(1) | | $ | 1,602,917 | | | $ | 214,479 | | | $ | 426,102 | | | $ | 362,794 | | | $ | 599,542 | |

| Purchase obligations | | | 34,521 | | | | 29,552 | | | | 4,969 | | | | — | | | | — | |

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

and a welcoming shopping environment.

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 five point growth strategy, including growing stores to approximately 1,200 locations, expanding our offering by adding new products, brands and services, enhancing our loyalty program, broadening our marketing reach and expanding our digital business.

We are currently evaluating our long range strategic and financial plan and expect to share our long-term growth plan and financial targets in the fall of 2014.

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

The sales for the 53rd week of fiscal 2012 were approximately $55 million.

Net sales increased $444.1 million, or 25.0%, to $2,220.3 million in fiscal 2012 compared to $1,776.2 million in fiscal 2011.

Gross profit increased $166.9 million, or 27.0%, to $783.7 million in fiscal 2012, compared to $616.8 million, in fiscal 2011.

The increase in gross profit margin in fiscal 2012 was primarily driven by:

| | Ÿ | | 50 basis points of leverage in fixed store costs attributed to the impact of higher sales levels in fiscal 2012; and |

| | Ÿ | | 30 basis points improvement in merchandise margins driven by our marketing and merchandising strategies. |

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

| | Ÿ | | 40 basis points improvement in variable store and marketing expense leverage attributed to cost efficiencies and higher sales volume. |

Pre-opening expenses increased $4.8 million, or 48.4%, to $14.8 million in fiscal 2012 compared to $10.0 million in fiscal 2011.

Interest expense was $0.2 million in fiscal 2012 and $0.6 million in fiscal 2011.

Net income increased $52.2 million, or 43.5%, to $172.5 million in fiscal 2012 compared to $120.3 million in fiscal 2011.

| | Ÿ | | approximately $10 million related to new brand additions and existing brand extensions primarily in the prestige color and skin category; and |

| | Ÿ | | approximately $5 million related to the addition of in-store prestige boutiques. |

The $18.7 million cash flow benefit from income taxes is attributed to Federal income tax deductions due to accelerated depreciation on fixed assets and tax deductible stock option exercises.

Capital expenditures increased in fiscal 2013 compared to fiscal 2012 due to the increase in our 2013 new store program.

| | | 2014 | | | | Fiscal | | | | Fiscal | | | | Fiscal | | |

| | | $ | 265 | | | $ | 226 | | | $ | 189 | | | $ | 129 | |

We expect to spend less on new, remodeled and relocated stores with our plan to open approximately 100 new stores and remodel approximately 12 stores in fiscal 2014 compared to 127 new stores and 17 remodels in fiscal 2013.

This decrease

will be offset by expected increases in supply chain expenditures.

borrowings under the facility.

Our off-balance sheet arrangements consist of operating lease obligations.

We do not have any non-cancelable purchase commitments as of February 1, 2014.

| Operating lease obligations(1) | | $ | 1,407,664 | | | $ | 184,771 | | | $ | 370,162 | | | $ | 320,278 | | | $ | 532,453 | |

The majority of cash consideration received by the Company is considered to be a reduction of the cost of the related products and is reflected in cost of sales in our consolidated statements of income as the related products are sold.

Any portion of such cash consideration received that is attributable to inventory on hand is reflected as a reduction of inventory.

We consider the facts and circumstances of the various contractual agreements with vendors in order to determine the appropriate classification of amounts received in the consolidated statements of income.

We did not utilize the credit facility during fiscal [removed: 2013, 2012] [added: 2014, 2013] or [removed: 2011.][added: 2012.]

The interest expense recognized in our statement of income represents unused fees associated with the credit facility.

Interest expense is offset by interest income from short-term investments with maturities of twelve months or less from the date of purchase.

We focus on providing affordable indulgence to our [removed: customers] [added: guests] by combining unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer.

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

We offer a unique combination of more than 20,000 prestige and mass beauty products organized by category in a bright, [removed: open store] [added: open-store] environment.

The beauty products are arranged in self-service displays and full-service boutiques in a way that encourages our [removed: customers] [added: guests] to enjoy discovering new products and services.

[added: Our Value Proposition.] We believe our focus on delivering a compelling value proposition to our [removed: customers] [added: guests] across all of our product categories drives customer loyalty.

We offer [removed: frequent promotions and coupons, in store events, gift-with-purchase offers,] a comprehensive customer loyalty [removed: program] [added: program, ULTAmate Rewards] and targeted promotions through our Customer Relationship Management platform (CRM).

[added: An Off-Mall Location.] Our stores are predominantly located in convenient, high-traffic locations such as power centers.

[added: _Differentiated merchandising strategy with broad appeal._] We believe our broad selection of merchandise across categories, price points and brands offers a unique shopping experience for our [removed: customers.][added: guests.]

While the products we sell can be found in department stores, specialty stores, salons, drug stores and mass merchandisers, we offer all of these products in one retail format so that our [removed: customers] [added: guests] can find everything they need in one shopping trip.

We offer more than 500 brands, such as Bare Minerals and Urban Decay prestige cosmetics, [removed: Nyx] [added: NYX] and Maybelline mass cosmetics, Coty and Estée Lauder fragrances, Redken and Matrix haircare, as well as Dermalogica and Philosophy skincare and Clarisonic and [removed: Ultra Chi] [added: CHI] personal care appliances.

Because we offer a broad array of products in prestige, mass and salon, we appeal to a wide range of customers including women of all ages, [removed: demographics,] [added: demographics] and lifestyles.

[added: _Our unique guest experience._] We combine unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer.

Our well-trained, non-commissioned beauty advisors provide unbiased and customized advice tailored to our [removed: customers’] [added: guests’] needs.

[added: _Loyal and active customer base._] Approximately [removed: thirteen] [added: fifteen] million Ulta [removed: customers] [added: guests] are members of our loyalty program.

We use this valuable proprietary database to drive traffic, better understand our [removed: customers’] [added: guests’] purchasing patterns and support new store site selection.

[added: _Strong vendor relationships across product categories._] We have strong, active relationships with over 300 vendors, including Bare Minerals, Coty, Estée Lauder, L’Oréal and Procter & Gamble.

We believe [added: that] the scope of these relationships, which span the three beauty categories of prestige, mass and [removed: salon and] [added: salon,] which have taken years to develop, creates a significant impediment for other retailers to replicate our model.

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

[added: _Grow stores and e-commerce to reach and serve more guests._] We believe that over the long-term, we have the potential to grow our store base to [removed: approximately] [added: more than] 1,200 Ulta stores in the United States.

We opened [removed: 127] [added: 100] new stores during fiscal [removed: 2013,] [added: 2014,] representing a [removed: 22%] [added: 14%] increase in square footage growth [removed: and a 25% increase in the number of new stores opened] compared to [removed: 102] [added: 127] new stores in fiscal [removed: 2012.][added: 2013.]

We also remodeled [removed: 7] [added: 9] stores and relocated [removed: 4] [added: 2] stores in fiscal [removed: 2013.][added: 2014.]

Our fiscal [removed: 2013] [added: 2014] new store program was comprised of approximately 70% new stores opened in existing shopping centers and 30% in new shopping centers.

In fiscal [removed: 2013] [added: 2014,] approximately one third of new stores were in new markets and two thirds were filling in existing markets.

| | | [removed: 2009 | | | |] 2010 | | | | 2011 | | | | 2012 | | | | 2013 | | | [added: | 2014 | | |]

| Total stores beginning of period | | | [removed: 311 | | | |] 346 | | | | 389 | | | | 449 | | | | 550 | | [added: | | 675 | |]

| Stores opened | | | [removed: 37 | | | |] 47 | | | | 61 | | | | 102 | | | | 127 | | [added: | | 100 | |]

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

| Total stores end of period | | | [removed: 346 | | | |] 389 | | | | 449 | | | | 550 | | | | 675 | | [added: | | 774 | |]

| Stores remodeled | | | [removed: 6 | | | |] 13 | | | | 17 | | | | 21 | | | | 7 | | [added: | | 9 | |]

| Total square footage | | | [removed: 3,613,840 | | | |] 4,094,808 | | | | 4,747,148 | | | | 5,847,393 | | | | 7,158,286 | | [added: | | 8,182,404 | |]

| Average square footage per store | | | [removed: 10,445 | | | |] 10,526 | | | | 10,573 | | | | 10,632 | | | | 10,605 | | [added: | | 10,572 | |]

Over the last several [removed: years] [added: years,] we have added new products from existing vendors across product categories.

We have also added [removed: a number of] new [removed: brands in recent years,] [added: brands,] most notably in [removed: our] prestige [removed: category] [added: cosmetics,] which is currently the beauty industry’s highest growth category.

We [removed: also] offer haircare services in our full service salons as well as skin and brow services in most of our stores.

We plan to establish Ulta as a leading salon authority by providing high quality and consistent services from our licensed [removed: stylists and by expanding our portfolio] [added: stylists, with a focus on the key pillars] of [removed: services.][added: hair, skin health and brows.]

We have approximately [removed: thirteen] [added: fifteen] million active Ulta [removed: customers who are] [added: members] enrolled in our [added: ULTAmate Rewards] loyalty program.

Loyalty member transactions represent [removed: approximately] [added: more than] 80% 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.

The customer data captured by our loyalty program, together with our CRM platform, also enables customer segmentation and one-on-one marketing communications tailored to our [removed: customers’] [added: guests’] unique beauty needs.

We believe our loyalty [removed: program] [added: program,] combined with our growing CRM [removed: capabilities] [added: capabilities,] provide [added: a] significant long-term opportunity for Ulta.

We [removed: have historically utilized primarily] [added: continue to leverage our] direct mail advertising, catalogs and newspaper inserts to communicate with our [removed: customers.][added: guests.]

We also offer frequent promotions and coupons, in-store events and gifts with purchase.

Six strategic imperatives

We are committed to the following six strategic imperatives to drive sustainable long-term growth:

_Acquire new guests and deepen loyalty with existing guests._ We believe there is an opportunity to use consumer insights and effective marketing tactics to acquire new guests and increase our “share of wallet” of existing guests.

We have sharpened our brand positioning, and plan to increase awareness of the Ulta brand by

communicating our brand differentiation through broad scale advertising.

We also plan to deploy other marketing tactics, such as digital, in-store events and public relations to drive brand engagement, deepen the consumer connection to Ulta and strengthen our authority in the beauty category.

In addition, we plan to grow and further leverage our loyalty program and CRM platform.

In early fiscal 2014, we completed the conversion of all of our loyalty customers to ULTAmate Rewards.

_Differentiate by delivering a distinctive and personalized guest experience across all channels._ The Ulta guest experience today is differentiated by our broad array of categories, brands and price points, high quality services and friendly and helpful associates.

Our opportunity is to sharpen that experience, by making it more relevant, differentiated and personalized in-store and online.

Our store associates are the key to delivering a distinctive guest experience that is personal, informative and fun.

We plan to invest in labor and technology to enable this experience.

For example, we are testing in-store technology solutions like clienteling and mobile POS.

At the same time, we are improving our e-commerce guest experience to ensure it is easy and informative with content that inspires, educates and enables sharing and social engagement.

Through our loyalty and CRM capabilities, we are gaining efficiencies in our marketing by targeting communications and promotions to be more personalized and relevant to our guests.

_Offer relevant, innovative and often exclusive products that excite our guests._ Our strategy is to continue to partner with key vendors to bring new and exclusive products to delight our guests and to introduce new brands.

We expect to increase the presence of prestige brands and boutiques in our stores.

We also plan to refine and grow our private label business, which in the future could include partnerships or acquisitions to create more exclusive brands for Ulta.

Finally, we plan to increase the brands and categories we offer on Ulta.com.

_Deliver exceptional services in three core areas: hair, skin health and brows._ The salon represents a small percent of our total revenues, but salon guests are our best guests.

Salon guests shop more frequently and spend more than twice as much as non-salon guests based on loyalty guest data.

Our strategy is to drive awareness and trial of our salon services with new guests as well as accelerate the frequency of existing guests’ visits.

We plan to grow the expertise and tenure of our salon professionals through more frequent training and programs to reduce turnover.

We have a solid track record of executing an aggressive store growth program and a rigorous analytical approach to site selection that has translated into a high performing real estate portfolio.

We expect to open approximately 100 new stores per year for the next several years.

Our omni-channel guests are extremely valuable, spending two to four times as much as single channel guests.

For example, in 2014 we launched new technology to enable shoppable videos, live interactive chats with key vendors and developed a new iOS application to provide a unique guest experience with new ways for guests to share and engage.

Our long-term goal is to grow our e-commerce business from approximately 5% of sales today to approximately 10% of total sales over the next several years.

_Invest in infrastructure to support our guest experience and growth, and capture scale efficiencies._ We expect to continue to grow enterprise inventory capabilities to better anticipate and respond to our guests’ demand across all channels.

This includes optimizing our distribution network, improving inventory turns by moving product faster and more frequently through all channels and improving inventory visibility, forecast accuracy, and product life cycle through investments in people, process and technology.

We also plan to invest in guest-facing labor hours, training and tools to deliver a differentiated and personalized guest experience.

We also expect to capture operational efficiencies in new enterprise inventory capabilities to help fund those investments in-store labor and tools.

We will also pursue opportunities to optimize our marketing spend to maximize effectiveness and efficiency.

Finally, we plan to drive scale and cost efficiencies across the enterprise.

businesses.

As of January 31, 2015, we operated 774 stores in 47 states.

We are focusing our efforts on the three key pillars of hair, skin health and brow services.

We continue to enhance the site with a collection of tips, tutorials and social content.

We expect Ulta.com to maintain rapid growth with the long-term goal of 10% of total sales.

_One-Stop Shopping_.

_Our Value Proposition_.

_An Off-Mall Location_.

_D__ifferentiated merchandising strategy with broad appeal_.

_Our unique customer experience_.

_L__oyal and active customer base_.

_Strong vendor relationships across product categories_.

_Experienced management team_.

Five point growth strategy

We intend to expand our presence as a leading retailer of beauty products and salon services by pursuing the following growth strategies:

_Growing stores to approximately 1,200 locations_.

Our internal real estate model takes into account a number of variables, including demographic and sociographic data as well as population density relative to maximum drive times, economic and competitive factors.

_Expanding our offering by adding new products, brands and services_.

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 vendor relationships.

Fiscal 2013 brand additions included IT Cosmetics, Lipstick Queen, Mally, Meaningful Beauty and Perricone.

We continue to roll out Clinique and Lancôme boutiques, ending the year with 100 stores with Clinique boutiques and 105 stores with Lancôme boutiques.

_Enhancing our successful loyalty program_.

_Broadening our marketing reach_.

We believe our marketing initiatives are a key component of our success, providing an effective means to introduce new products, brands and services to our existing and potential new customers.

We plan to continue to leverage our print marketing while expanding our reach into other marketing channels, including digital marketing, social media and e-mail marketing.

In addition, we continue to enhance in-store marketing and special events to educate customers and drive traffic.

We plan to continue to focus on our in-store marketing and in-store special events as an additional means of educating our customers and increasing the frequency of their visits to our stores.

We believe Ulta has a significant opportunity to attract new customers to our stores and website and we expect to increase our marketing efforts to drive greater awareness of our brand.

_Expanding our digital business_.

experience for information on key trends and products, editorial content, expanded assortments, best in class features and functionality and social media content.

In 2013 we re-launched ulta.com with enhanced content and capabilities and believe we are well positioned to capitalize on the growth of e-commerce sales of beauty products.

We expect the net investment to open a new store in 2014 to increase due to increases in material and labor costs resulting from a stronger commercial and residential building environment compared to the last several years.

As of February 1, 2014, we operated 675 stores in 46 states.

most salons also providing facials and waxing.

We continue to expand our service offering, adding services, such as gel manicures, microdermabrasion and hair extensions, to select locations.

We are confident our e-commerce business will continue to deliver rapid growth in in the future, but will likely begin to moderate off a larger base.

During 2013 we expanded our e-commerce distribution capabilities by adding fulfillment to the Chambersburg, Pennsylvania distribution center.

In early fiscal 2014, we converted all of our

loyalty customers to ULTAmate Rewards, a points-based program.

not commissioned.

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

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

| | | For the fiscal year ended [removed: February 1, 2014] [added: January 31, 2015] |

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

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 August [removed: 3, 2013,] [added: 2, 2014,] as reported on the NASDAQ Global Select Market, was approximately [removed: $4,815,407,000.][added: $4,117,508,000.]

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 August [removed: 3, 2013] [added: 2, 2014] 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: 27, 2014] [added: 26, 2015] was [removed: 64,295,291] [added: 64,230,316] shares.

| [removed: Item 1.] [added: Item 1.] | | [removed: [Business](#tx661459_2)] [added: [Business](#tx842591_2)] | | | [removed: 3] [added: 3] | |

| [removed: Item 1A.] [added: Item 1A.] | | [removed: [Risk Factors](#tx661459_3)] [added: [Risk Factors](#tx842591_3)] | | | [removed: 12] [added: 13] | |

| [removed: Item 1B.] [added: Item 1B.] | | [removed: [Unresolved] [added: [Unresolved] Staff [removed: Comments](#tx661459_4)] [added: Comments](#tx842591_4)] | | | [removed: 24] [added: 25] | |

| [removed: Item 2.] [added: Item 2.] | | [removed: [Properties](#tx661459_5)] [added: [Properties](#tx842591_5)] | | | [removed: 25] [added: 26] | |

| [removed: Item 3.] [added: Item 3.] | | [removed: [Legal Proceedings](#tx661459_6)] [added: [Legal Proceedings](#tx842591_6)] | | | [removed: 26] [added: 27] | |

| [removed: Item 4.] [added: Item 4.] | | [removed: [Mine] [added: [Mine] Safety [removed: Disclosures](#tx661459_7)] [added: Disclosures](#tx842591_7)] | | | [removed: 26] [added: 28] | |

| [removed: Item 5.] [added: Item 5.] | | [removed: [Market] [added: [Market] for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#tx661459_9)] [added: Securities](#tx842591_9)] | | | [removed: 28] [added: 29] | |

| [removed: Item 6.] [added: Item 6.] | | [removed: [Selected] [added: [Selected] Financial [removed: Data](#tx661459_10)] [added: Data](#tx842591_10)] | | | [removed: 31] [added: 32] | |

| [removed: Item 7.] [added: Item 7.] | | [removed: [Management’s] [added: [Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx661459_11)] [added: Operations](#tx842591_11)] | | | [removed: 32] [added: 33] | |

| [removed: Item 7A.] [added: Item 7A.] | | [removed: [Quantitative] [added: [Quantitative] and Qualitative Disclosures about Market [removed: Risk](#tx661459_12)] [added: Risk](#tx842591_12)] | | | [removed: 43] [added: 45] | |

| [removed: Item 8.] [added: Item 8.] | | [removed: [Financial] [added: [Financial] Statements and Supplementary [removed: Data](#tx661459_13)] [added: Data](#tx842591_13)] | | | [removed: 43] [added: 45] | |

| [removed: Item 9.] [added: Item 9.] | | [removed: [Changes] [added: [Changes] in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx661459_14)] [added: Disclosure](#tx842591_14)] | | | [removed: 43] [added: 45] | |

| [removed: Item 9A.] [added: Item 9A.] | | [removed: [Controls] [added: [Controls] and [removed: Procedures](#tx661459_15)] [added: Procedures](#tx842591_15)] | | | [removed: 43] [added: 46] | |

| [removed: Item 9B.] [added: Item 9B.] | | [removed: [Other Information](#tx661459_16)] [added: [Other Information](#tx842591_16)] | | | [removed: 44] [added: 46] | |

| [Part [removed: III](#tx661459_17)] [added: III](#tx842591_17)] | | | | | | [removed: [](#tx661459_17)] [added: [](#tx842591_17)] |

| [removed: Item 10.] [added: Item 10.] | | [removed: [Directors,] [added: [Directors,] Executive Officers and Corporate [removed: Governance](#tx661459_18)] [added: Governance](#tx842591_18)] | | | [removed: 44] [added: 46] | |

| [removed: Item 11.] [added: Item 11.] | | [removed: [Executive Compensation](#tx661459_19)] [added: [Executive Compensation](#tx842591_19)] | | | [removed: 44] [added: 47] | |

| [removed: Item 12.] [added: Item 12.] | | [removed: [Security] [added: [Security] Ownership and Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#tx661459_20)] [added: Matters](#tx842591_20)] | | | [removed: 44] [added: 47] | |

| [removed: Item 13.] [added: Item 13.] | | [removed: [Certain] [added: [Certain] Relationships and Related Transactions, and Director [removed: Independence](#tx661459_21)] [added: Independence](#tx842591_21)] | | | [removed: 44] [added: 47] | |

| [removed: Item 14.] [added: Item 14.] | | [removed: [Principal] [added: [Principal] Accountant Fees and [removed: Services](#tx661459_22)] [added: Services](#tx842591_22)] | | | [removed: 45] [added: 47] | |

| [removed: Item 15.] [added: Item 15.] | | [removed: [Exhibits] [added: [Exhibits] and Financial Statement [removed: Schedules](#tx661459_24)] [added: Schedules](#tx842591_24)] | | | [removed: 46] [added: 48] | |

You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “plans,” “estimates,” [added: “targets,” “strategies”] or other comparable words.

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; [added: customer acceptance of our rewards programs and technological and marketing initiatives;] 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; our ability to attract and retain key executive personnel; our ability to successfully execute [removed: and implement] our common stock repurchase [removed: program;] [added: program or implement future common stock repurchase programs;] our ability to sustain our growth plans and successfully [removed: develop and] implement our long-range strategic and financial plan; 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 [removed: February 1, 2014.][added: January 31, 2015.]

10-K 1 d842591d10k.htm FORM 10-K

| [Part I](#tx842591_1) | | | | | | [](#tx842591_1) |

| [Part II](#tx842591_8) | | | | | | [](#tx842591_8) |

| [Part IV](#tx842591_23) | | | | | | [](#tx842591_23) |

10-K 1 d661459d10k.htm 10-K

| [Part I](#tx661459_1) | | | | | | [](#tx661459_1) |

| [Part II](#tx661459_8) | | | | | | [](#tx661459_8) |

| [Part IV](#tx661459_23) | | | | | | [](#tx661459_23) |

As of [removed: February 1, 2014,] [added: January 31, 2015,] we operated [removed: 675] [added: 774] retail stores in [removed: 46] [added: 47] states, as shown in the table below:

| Alabama | | | [removed: 11] [added: 12] | |

| Arizona | | | [removed: 23] [added: 24] | |

| Arkansas | | | [removed: 5] [added: 6] | |

| California | | | [removed: 73] [added: 89] | |

| Colorado | | | [removed: 13] [added: 16] | |

| Connecticut | | | [removed: 7] [added: 8] | |

| Florida | | | [removed: 45] [added: 54] | |

| Georgia | | | [removed: 24] [added: 26] | |

| Illinois | | | [removed: 44] [added: 45] | |

| Indiana | | | [removed: 13] [added: 15] | |

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

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

| Kentucky | | | [removed: 8] [added: 9] | |

| Louisiana | | | [removed: 11] [added: 13] | |

| Massachusetts | | | [removed: 8] [added: 12] | |

| Michigan | | | [removed: 34] [added: 36] | |

| Missouri | | | [removed: 15] [added: 16] | |

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

| Nevada | | | [removed: 7] [added: 8] | |

| New Hampshire | | | [removed: 4] [added: 6] | |

| New Jersey | | | [removed: 16] [added: 20] | |

| New Mexico | | | [removed: 2] [added: 3] | |

| New York | | | [removed: 22] [added: 28] | |

| North Carolina | | | [removed: 21] [added: 25] | |

| Ohio | | | [removed: 26] [added: 29] | |

| Oklahoma | | | [removed: 8] [added: 9] | |

| Oregon | | | [removed: 8] [added: 9] | |

| Pennsylvania | | | [removed: 23] [added: 28] | |

| South Carolina | | | [removed: 12] [added: 13] | |

| Texas | | | [removed: 72] [added: 77] | |

| Utah | | | [removed: 7] [added: 11] | |

| Virginia | | | [removed: 19] [added: 21] | |

| Washington | | | [removed: 13] [added: 16] | |

| West Virginia | | | [removed: 2] [added: 4] | |

| Wisconsin | | | [removed: 11] [added: 13] | |

As of [removed: February 1, 2014,] [added: January 31, 2015,] we operated three distribution [removed: facilitates] [added: facilities] located in Romeoville, Illinois, Phoenix, Arizona and Chambersburg, Pennsylvania.

We [removed: are embarking] [added: have embarked] on a multi-year supply chain project beginning in [removed: 2014] [added: 2014,] which will include adding additional capacity, including [removed: a fourth] [added: two additional] distribution [removed: center] [added: centers] expected to open in [removed: 2015,] [added: 2015] and [added: 2016, and] system improvements to support expanded omni-channel capabilities.

In [removed: 2013] [added: 2013,] the Company expanded its office space with an additional 42,000 square feet located at its current headquarters.

| Wyoming | | | 1 | |

| | | | | |

| Total | | | 774 | |

In April 2014, we entered into a lease for a distribution center located in Greenwood, Indiana.

The Greenwood warehouse contains approximately 671,000 square feet and is expected to open in fiscal 2015.

The lease expires on July 31, 2025 and has four renewal options with terms of five years each.

In December 2014, we entered into a lease for a distribution center located in Dallas, Texas.

The Dallas warehouse contains approximately 671,000 square feet and is expected to open in fiscal 2016.

The lease expires on July 31, 2026 and has four renewal options with terms of five years each.

| Total | | | 675 | |

[removed: Eck as Interim] [added: | Mary N. Dillon | | | 53 | | |] Chief Executive Officer [removed: of Ulta] and [added: member of] the [removed: appointment] [added: Board] of [removed: Mary N.][added: Directors |]

| Name | | Age | | [added: | |] Position |

| Scott M. Settersten | | [removed: 53] | [added: 54] | [added: | |] Chief Financial Officer and Assistant Secretary |

| Jeffrey J. Childs | | [removed: 56] | [added: 57] | [added: | |] Chief Human Resources Officer |

| Robert S. Guttman | | [removed: 61] | [added: 62] | [added: | |] Senior Vice President, General Counsel & Secretary |

| David Kimbell | | [removed: 47] | [added: 48] | [added: | |] Chief [added: Merchandising and] Marketing Officer |

| Janet Taake | | [removed: 56] | [added: 57] | [added: | |] Chief Merchandising Officer |

Prior to joining Ulta Beauty, Mr. Settersten spent 15 years with [removed: Pricewaterhouse Coopers] [added: PricewaterhouseCoopers] LLP as a certified public accountant serving in various senior manager roles in the assurance and risk management practices.

Previously, he served from 1979 to 2001 in a variety of human resources, marketing, [removed: sales,] [added: sales] and operations roles at AT&T, [added: Ameritech and SBC] including Vice President, Human Resources and Corporate Services.

Prior to joining [removed: Ulta,] [added: Ulta Beauty,] Mr. Guttman was Vice President, General Counsel and Secretary of The Reynolds and Reynolds Company from August 2005 to October 2006.

_David Kimbell._ Mr. Kimbell was named Chief [added: Merchandising and] Marketing Officer in [added: March 2015 after having previously served as Chief Marketing Officer since] February 2014.

Prior to joining Ulta Beauty, Ms. Taake was Senior Vice President [removed: and Chief] [added: of] Merchandising [removed: Officer] for Babies [removed: R] [added: “R”] Us from 2006 to 2008.

On March 12, 2015, we announced the retirement of Janet Taake as Chief Merchandising Officer effective May 1, 2015 and the appointment of David Kimbell as the Chief Merchandising and Marketing Officer effective March 27, 2015.

| | | | | | | |

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

On June 24, 2013 we announced the resignation of Dennis K.

Dillon as our Chief Executive Officer and member of the Board of Directors.

Mr. Eck remained a member of the Company’s Board of Directors.

| | | | | |

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

| Mary N. Dillon | | 52 | | Chief Executive Officer and member of the Board of Directors |

| Jeffrey T. Severts | | 43 | | Senior Vice President, Marketing |

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

_Jeffrey T.

Severts._ Mr. Severts has served as Senior Vice President, Marketing since November 2012.

Prior to joining Ulta Beauty, he was the Chief Marketing & Services Officer for Best Buy Europe since June 2010.

Prior to his role with Best Buy Europe, he held numerous other senior marketing and management roles with Best Buy USA since 2001.

Before that time, Mr. Severts served as Vice President of Marketing and Management for Techies.Com, Inc. from 1999 to 2001.

Mr. Severts held a number of marketing roles for several brands at General Mills, Inc. from 1992 to 1999.

[removed: Market Information][added: _Market information_]

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: 2013] [added: 2014] and [removed: 2012:][added: 2013:]

| Fiscal Year [removed: 2012] [added: 2014] | | High | | | | Low | | |

The last reported sale price of our common stock on the NASDAQ Global Select Market on March [removed: 27, 2014] [added: 26, 2015] was [removed: $98.75] [added: $150.01] per share.

As of March [removed: 27, 2014,] [added: 26, 2015,] we had [removed: 56] [added: 49] holders of record of our common stock.

[removed: No] [added: The following table sets forth] repurchases of our common stock [removed: were completed] during the fourth quarter of [removed: 2013.][added: 2014:]

The following table provides information about Ulta common stock that may be issued under our equity compensation plans as of [removed: February 1, 2014.][added: January 31, 2015.]

| Plan category | | Number of [removed: securities to] [added: securities to] be issued upon exercise of outstanding options, warrants and [removed: rights] [added: rights(2)] | | | | Weighted-average exercise price of outstanding options, warrants and [removed: rights] [added: rights(3)] | | | | Number of securities remaining available for future issuance under equity compensation [removed: plans] [added: plans(4)] | | |

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 January [removed: 30, 2009] [added: 29, 2010] through the end of Ulta’s fiscal year ended [removed: February 1, 2014.][added: January 31, 2015.]

The graph assumes an investment of $100 made at the closing of trading on January [removed: 30, 2009,] [added: 29, 2010,] in (i) Ulta’s common stock, (ii) the stocks comprising the NQGS and (iii) stocks comprising the RLX.

[removed: ][added: ]

| First quarter | | $ | 104.30 | | | $ | 83.50 | |

| Second quarter | | | 97.11 | | | | 84.79 | |

| Third quarter | | | 121.56 | | | | 92.45 | |

| Fourth quarter | | | 136.08 | | | | 118.66 | |

No cash dividends were declared on our common stock in 2014 or 2013 nor have any decisions been made to pay a dividend in the foreseeable future.

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

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

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

| November 2, 2014 to November 29, 2014 | | | 70,802 | | | $ | 123.66 | | | | 70,802 | | | $ | 281,271 | |

| November 30, 2014 to December 27, 2014 | | | 72,161 | | | | 127.32 | | | | 72,161 | | | | 272,082 | |

| December 28, 2014 to January 31, 2015 | | | 92,260 | | | | 130.11 | | | | 92,260 | | | | 260,076 | |

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

| 13 weeks ended January 31, 2015 | | | 235,223 | | | | 127.31 | | | | 235,223 | | | | 260,076 | |

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

| (1) | There were 235,223 shares repurchased as part of our publicly announced share repurchase program during the three months ended January 31, 2015 and there were no shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the period. |

| --- | --- |

| (2) | On September 11, 2014, we announced that our Board of Directors authorized a new share repurchase program (the 2014 Share Repurchase Program) pursuant to which the Company may repurchase up to $300 million of the Company’s common stock. The 2014 Share Repurchase Program authorization revokes the previously authorized but unused amounts of $112.7 million from the 2013 Share Repurchase Program. The 2014 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time. As of January 31, 2015, $260.1 million remained available under the $300 million 2014 Share Repurchase Program. On March 12, 2015, we announced that our Board of Directors authorized an increase of $100 million to the 2014 Share Repurchase Program effective March 17, 2015. |

| --- | --- |

| Equity compensation plans approved by security holders(1) | | | 1,223,314 | | | $ | 72.12 | | | | 4,408,748 | |

| Total | | | 1,223,314 | | | $ | 72.12 | | | | 4,408,748 | |

| (1) | Includes options issued and available for exercise and shares available for issuance in connection with past awards under the 2011 Incentive Award Plan and predecessor equity incentive plans. We currently grant awards only under the 2011 Incentive Award Plan. |

| --- | --- |

| (2) | Includes 1,072,717 shares issuable pursuant to the exercise of outstanding stock options and 150,597 shares issuable pursuant to restricted stock units. |

| --- | --- |

| (3) | Calculation of weighted-average exercise price of outstanding awards includes stock options, but does not include shares of restricted stock units that convert to shares of common stock for no consideration. |

| --- | --- |

| (4) | Represents shares that are available for issuance pursuant to the 2011 Incentive Award Plan. The shares available under the plan are reduced by 1.0 for each stock option awarded and by 1.5 for each restricted stock unit awarded. |

| --- | --- |

| First quarter | | $ | 95.56 | | | $ | 76.15 | |

| Second quarter | | | 97.70 | | | | 83.78 | |

| Third quarter | | | 101.54 | | | | 83.74 | |

| Fourth quarter | | | 101.99 | | | | 86.93 | |

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, totaling $62.5 million, was paid on May 15, 2012.

On March 18, 2013, we announced the approval of a stock repurchase program pursuant to which the Company is authorized to repurchase up to $150 million of the Company’s common stock in the open market, in privately negotiated transactions, or otherwise, at prices that the Company deems appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company’s sole discretion.

The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time.

As of February 1, 2014, $112.7 million remained available under the $150 million program.

| Equity compensation plans approved by security holders | | | 1,089,705 | | | $ | 56.94 | | | | 4,691,043 | |

| Total | | | 1,089,705 | | | $ | 56.94 | | | | 4,691,043 | |

| | | [added: January 31, 2015 | | | |] February 1, 2014 | | | | February 2, 2013 | | | | January 28, 2012 | | | | January 29, 2011 | | | [removed: | January 30, 2010 | | |]

| Net sales(2) | | $ | [removed: 2,670,573] [added: 3,241,369] | | | $ | [removed: 2,220,256] [added: 2,670,573] | | | $ | [removed: 1,776,151] [added: 2,220,256] | | | $ | [removed: 1,454,838] [added: 1,776,151] | | | $ | [removed: 1,222,771] [added: 1,454,838] | |

| Cost of sales | | | [removed: 1,729,325] [added: 2,104,582] | | | | [removed: 1,436,582] [added: 1,729,325] | | | | [removed: 1,159,311] [added: 1,436,582] | | | | [removed: 970,753] [added: 1,159,311] | | | | [removed: 846,202] [added: 970,753] | |

| Gross profit | | | [removed: 941,248] [added: 1,136,787] | | | | [removed: 783,674] [added: 941,248] | | | | [removed: 616,840] [added: 783,674] | | | | [removed: 484,085] [added: 616,840] | | | | [removed: 376,569] [added: 484,085] | |

| Selling, general and administrative expenses | | | [removed: 596,390] [added: 712,006] | | | | [removed: 488,880] [added: 596,390] | | | | [removed: 410,658] [added: 488,880] | | | | [removed: 358,106] [added: 410,658] | | | | [removed: 302,413] [added: 358,106] | |

| Pre-opening expenses | | | [removed: 17,270] [added: 14,366] | | | | [removed: 14,816] [added: 17,270] | | | | [removed: 9,987] [added: 14,816] | | | | [removed: 7,095] [added: 9,987] | | | | [removed: 6,003] [added: 7,095] | |

| Operating income | | | [removed: 327,588] [added: 410,415] | | | | [removed: 279,978] [added: 327,588] | | | | [removed: 196,195] [added: 279,978] | | | | [removed: 118,884] [added: 196,195] | | | | [removed: 68,153] [added: 118,884] | |

| Interest (income) [removed: expense] [added: expense, net] | | | [removed: (118] [added: (894] | ) | | | [removed: 185] [added: (118] | [added: )] | | | [removed: 587] [added: 185] | | | | [removed: 755] [added: 587] | | | | [removed: 2,202] [added: 755] | |

| Income before income taxes | | | [removed: 327,706] [added: 411,309] | | | | [removed: 279,793] [added: 327,706] | | | | [removed: 195,608] [added: 279,793] | | | | [removed: 118,129] [added: 195,608] | | | | [removed: 65,951] [added: 118,129] | |

| Income tax expense | | | [removed: 124,857] [added: 154,174] | | | | [removed: 107,244] [added: 124,857] | | | | [removed: 75,344] [added: 107,244] | | | | [removed: 47,099] [added: 75,344] | | | | [removed: 26,595] [added: 47,099] | |

| Net income | | $ | [removed: 202,849] [added: 257,135] | | | $ | [removed: 172,549] [added: 202,849] | | | $ | [removed: 120,264] [added: 172,549] | | | $ | [removed: 71,030] [added: 120,264] | | | $ | [removed: 39,356] [added: 71,030] | |

| Basic | | $ | [removed: 3.17] [added: 4.00] | | | $ | [removed: 2.73] [added: 3.17] | | | $ | [removed: 1.96] [added: 2.73] | | | $ | [removed: 1.20] [added: 1.96] | | | $ | [removed: 0.68] [added: 1.20] | |

| Diluted | | $ | [removed: 3.15] [added: 3.98] | | | $ | [removed: 2.68] [added: 3.15] | | | $ | [removed: 1.90] [added: 2.68] | | | $ | [removed: 1.16] [added: 1.90] | | | $ | [removed: 0.66] [added: 1.16] | |

| Basic | | | [removed: 63,992] [added: 64,335] | | | | [removed: 63,250] [added: 63,992] | | | | [removed: 61,259] [added: 63,250] | | | | [removed: 58,959] [added: 61,259] | | | | [removed: 57,915] [added: 58,959] | |

| Diluted | | | [removed: 64,461] [added: 64,651] | | | | [removed: 64,396] [added: 64,461] | | | | [removed: 63,334] [added: 64,396] | | | | [removed: 61,288] [added: 63,334] | | | | [removed: 59,237] [added: 61,288] | |

| Dividends declared per common share | | $ | — | | | $ | [removed: 1.00] [added: —] | | | $ | [removed: —] [added: 1.00] | | | $ | — | | | $ | — | |

| Comparable [removed: store] sales increase:(3) | | | | | | | | | | | | | | | | | | | | |

| Retail and salon comparable [removed: store] sales | | | [removed: 6.1] [added: 8.1] | % | | | [removed: 8.8] [added: 6.1] | % | | | [removed: 10.9] [added: 8.8] | % | | | [removed: 11.0] [added: 10.9] | % | | | [removed: 1.4] [added: 11.0] | % |

| E-commerce comparable [removed: store] sales | | | [removed: 76.6] [added: 56.4] | % | | | [removed: 30.7] [added: 76.6] | % | | | [removed: 37.8] [added: 30.7] | % | | | [removed: 76.8] [added: 37.8] | % | | | [removed: 45.4] [added: 76.8] | % |

| Total comparable [removed: store] sales increase | | | [removed: 7.9] [added: 9.9] | % | | | [removed: 9.3] [added: 7.9] | % | | | [removed: 11.5] [added: 9.3] | % | | | [removed: 11.9] [added: 11.5] | % | | | [removed: 1.9] [added: 11.9] | % |

| Number of stores end of year | | | [removed: 675] [added: 774] | | | | [removed: 550] [added: 675] | | | | [removed: 449] [added: 550] | | | | [removed: 389] [added: 449] | | | | [removed: 346] [added: 389] | |

| Total square footage end of year | | | [removed: 7,158,286] [added: 8,182,404] | | | | [removed: 5,847,393] [added: 7,158,286] | | | | [removed: 4,747,148] [added: 5,847,393] | | | | [removed: 4,094,808] [added: 4,747,148] | | | | [removed: 3,613,840] [added: 4,094,808] | |

| Total square footage per store(4) | | | [removed: 10,605] [added: 10,572] | | | | [removed: 10,632] [added: 10,605] | | | | [removed: 10,573] [added: 10,632] | | | | [removed: 10,526] [added: 10,573] | | | | [removed: 10,445] [added: 10,526] | |

| Average total square footage(5) | | | [removed: 6,555,960] [added: 7,690,742] | | | | [removed: 5,315,653] [added: 6,555,960] | | | | [removed: 4,413,236] [added: 5,315,653] | | | | [removed: 3,811,597] [added: 4,413,236] | | | | [removed: 3,459,628] [added: 3,811,597] | |

| Net sales per average total square foot(6) | | $ | [removed: 407] [added: 421] | | | $ | [removed: 418] [added: 407] | | | $ | [removed: 402] [added: 418] | | | $ | [removed: 382] [added: 402] | | | $ | [removed: 353] [added: 382] | |

| Capital expenditures | | | [removed: 226,024] [added: 249,067] | | | | [removed: 188,578] [added: 226,024] | | | | [removed: 128,636] [added: 188,578] | | | | [removed: 97,115] [added: 128,636] | | | | [removed: 68,105] [added: 97,115] | |

| Depreciation and amortization | | | [removed: 106,283] [added: 131,764] | | | | [removed: 88,233] [added: 106,283] | | | | [removed: 75,931] [added: 88,233] | | | | [removed: 64,936] [added: 75,931] | | | | [removed: 62,166] [added: 64,936] | |

| Cash and cash equivalents | | $ | [removed: 419,476] [added: 389,149] | | | $ | [removed: 320,475] [added: 419,476] | | | $ | [removed: 253,738] [added: 320,475] | | | $ | [removed: 111,185] [added: 253,738] | | | $ | [removed: 4,017] [added: 111,185] | |

| Working capital | | | [removed: 735,886] [added: 900,761] | | | | [removed: 568,257] [added: 735,886] | | | | [removed: 415,377] [added: 568,257] | | | | [removed: 241,032] [added: 415,377] | | | | [removed: 136,417] [added: 241,032] | |

| Property and equipment, net | | | [removed: 595,736] [added: 717,159] | | | | [removed: 483,059] [added: 595,736] | | | | [removed: 376,985] [added: 483,059] | | | | [removed: 326,099] [added: 376,985] | | | | [removed: 290,861] [added: 326,099] | |

| Total assets | | | [removed: 1,602,727] [added: 1,983,170] | | | | [removed: 1,275,249] [added: 1,602,727] | | | | [removed: 957,217] [added: 1,275,249] | | | | [removed: 730,488] [added: 957,217] | | | | [removed: 553,635] [added: 730,488] | |

| Total stockholders’ equity | | | [removed: 1,003,094] [added: 1,247,509] | | | | [removed: 786,942] [added: 1,003,094] | | | | [removed: 584,704] [added: 786,942] | | | | [removed: 402,533] [added: 584,704] | | | | [removed: 292,608] [added: 402,533] | |

| (3) | Comparable [removed: store] sales increase reflects sales for stores beginning on the first day of the 14th month of operation. Remodeled stores are included in comparable [removed: store] sales unless the store was closed for a portion of the current or comparable prior year. |

| (5) | Average total square footage represents a weighted [removed: average] [added: average,] which reflects the effect of opening stores in different months throughout the year. |

| Short-term investments | | | 150,209 | | | | — | | | | — | | | | — | | | | — | |

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

Based on management’s evaluation as of [removed: February 1, 2014,] [added: January 31, 2015,] 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.

Internal control over financial reporting is a process designed by, or under the supervision [removed: of] [added: of,] the principal executive officer and principal financial officer and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

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 [removed: February 1, 2014,] [added: January 31, 2015,] based on the criteria established in “Internal Control [removed: –] [added: —] Integrated [removed: Framework” (1992 Framework)] [added: Framework] issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (COSO).][added: (2013 framework) (the 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 [removed: February 1, 2014.][added: January 31, 2015.]

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 [removed: February 1, 2014] [added: January 31, 2015] 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 [removed: February 1, 2014] [added: January 31, 2015] that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

##### [Table of 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 [removed: February 1, 2014] [added: January 31, 2015] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2014] [added: 2015] annual meeting of stockholders.

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

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 [removed: February 1, 2014] [added: January 31, 2015] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2014] [added: 2015] 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 [removed: February 1, 2014] [added: January 31, 2015] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2014] [added: 2015] 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 [removed: February 1, 2014] [added: January 31, 2015] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2014] [added: 2015] annual meeting of stockholders.

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

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 [removed: February 1, 2014] [added: January 31, 2015] pursuant to Regulation 14A under the Exchange Act in connection with our [removed: 2014] [added: 2015] annual meeting of stockholders.

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

| [removed: [Report] [added: [Report] of Independent Registered Public Accounting [removed: Firm](#tx661459_30)] [added: Firm](#tx842591_123)] | | | [removed: 47] [added: 49] | |

| [removed: [Consolidated] [added: [Consolidated] Balance [removed: Sheets](#tx661459_31)] [added: Sheets](#tx842591_124)] | | | [removed: 49] [added: 51] | |

| [removed: [Consolidated] [added: [Consolidated] Statements of [removed: Income](#tx661459_32)] [added: Income](#tx842591_125)] | | | [removed: 50] [added: 52] | |

| [removed: [Consolidated] [added: [Consolidated] Statements of Cash [removed: Flows](#tx661459_33)] [added: Flows](#tx842591_126)] | | | [removed: 51] [added: 53] | |

| [removed: [Consolidated] [added: [Consolidated] Statements of Stockholders’ [removed: Equity](#tx661459_34)] [added: Equity](#tx842591_127)] | | | [removed: 52] [added: 54] | |

| [removed: [Notes] [added: [Notes] to Consolidated Financial [removed: Statements](#tx661459_35)] [added: Statements](#tx842591_128)] | | | [removed: 53] [added: 55] | |

We have audited the accompanying consolidated balance sheets of Ulta Salon, Cosmetics & Fragrance, Inc. [removed: (the Company)] as of [removed: February 1, 2014] [added: January 31, 2015] and February [removed: 2, 2013,] [added: 1, 2014,] and the related consolidated statements of income, cash flows, and stockholders’ equity for each of the three years in the period ended [removed: February 1, 2014.][added: January 31, 2015.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ulta Salon, Cosmetics & Fragrance, Inc. at [removed: February 1, 2014] [added: January 31, 2015] and February [removed: 2, 2013,] [added: 1, 2014,] and the consolidated results of its operations and its cash flows for each of the three years in the period ended [removed: February 1, 2014,] [added: January 31, 2015,] 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 [removed: February 1, 2014,] [added: January 31, 2015,] based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (1992 Framework)] [added: (2013 framework)] and our report dated April [removed: 2, 2014,] [added: 1, 2015,] expressed an unqualified opinion thereon.

[added: |] /s/ Ernst & Young LLP [added: |]

[added: |] Chicago, Illinois [added: |]

We have audited Ulta Salon, Cosmetics & Fragrance, Inc.’s internal control over financial reporting as of [removed: February 1, 2014,] [added: January 31, 2015,] based on criteria established in Internal Control — Integrated Framework [removed: (1992 Framework)] issued by the Committee of Sponsoring Organizations of the Treadway Commission [added: (2013 framework)] (the COSO criteria).

Ulta Salon, Cosmetics & Fragrance, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s [removed: Annual] Report on Internal Control over Financial Reporting.

In our opinion, Ulta Salon, Cosmetics & Fragrance, Inc. maintained, in all material respects, effective internal control over financial reporting as of [removed: February 1, 2014,] [added: January 31, 2015,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ulta Salon, Cosmetics & Fragrance, Inc. as of [removed: February 1, 2014] [added: January 31, 2015] and February [removed: 2, 2013,] [added: 1, 2014,] and the related consolidated statements of income, cash flows and stockholders’ equity for each of the three years in the period ended [removed: February 1, 2014] [added: January 31, 2015] and our report dated April [removed: 2, 2014] [added: 1, 2015] expressed an unqualified opinion thereon.

| | | [added: January 31, | | | |] February 1, | | | | February 2, | | |

| (In thousands, except per share data) | | [removed: 2014] [added: January 31, 2015] | | | | [removed: 2013] [added: February 1, 2014] | | | [added: | February 2, 2013 | | |]

| Cash and cash equivalents [added: at beginning of year] | | [removed: $] | 419,476 | | | [removed: $] | 320,475 | | [added: | | 253,738 | |]

| Receivables, net | | | [removed: 47,049] [added: 52,440] | | | | [removed: 41,515] [added: 47,049] | |

| Merchandise inventories, net | | | [removed: 457,933] [added: 581,229] | | | | [removed: 361,125] [added: 457,933] | |

| Prepaid expenses and other current assets | | | [removed: 55,993] [added: 66,548] | | | | [removed: 50,452] [added: 55,993] | |

| Deferred income taxes | | | [removed: 22,246] [added: 20,780] | | | | [removed: 15,757] [added: 22,246] | |

| Total current assets | | | [removed: 1,002,697] [added: 1,260,355] | | | | [removed: 789,324] [added: 1,002,697] | |

| Property and equipment, net | | | [removed: 595,736] [added: 717,159] | | | | [removed: 483,059] [added: 595,736] | |

| Deferred compensation plan assets | | | [removed: 4,294] [added: 5,656] | | | | [removed: 2,866] [added: 4,294] | |

| Total assets | | $ | [removed: 1,602,727] [added: 1,983,170] | | | $ | [removed: 1,275,249] [added: 1,602,727] | |

| Accounts payable | | $ | [removed: 148,282] [added: 190,778] | | | $ | [removed: 118,886] [added: 148,282] | |

| Accrued liabilities | | | [removed: 103,180] [added: 149,412] | | | | [removed: 92,127] [added: 103,180] | |

| Accrued income taxes | | | [removed: 15,349] [added: 19,404] | | | | [removed: 10,054] [added: 15,349] | |

| Total current liabilities | | | [removed: 266,811] [added: 359,594] | | | | [removed: 221,067] [added: 266,811] | |

| Deferred rent | | | [removed: 261,630] [added: 294,127] | | | | [removed: 208,003] [added: 261,630] | |

| Deferred income taxes | | | [removed: 66,718] [added: 74,498] | | | | [removed: 56,361] [added: 66,718] | |

| Other long-term liabilities | | | [removed: 4,474] [added: 7,442] | | | | [removed: 2,876] [added: 4,474] | |

| Total liabilities | | | [removed: 599,633] [added: 735,661] | | | | [removed: 488,307] [added: 599,633] | |

| Common stock, $.01 par value, 400,000 shares authorized; [removed: 64,793] [added: 64,762] and [removed: 64,565] [added: 64,793] shares issued; [removed: 64,231] [added: 64,184] and [removed: 64,009] [added: 64,231] shares outstanding; at [added: January 31, 2015, and] February 1, 2014, [removed: and February 2, 2013,] respectively | | | 647 | | | | [removed: 645] [added: 647] | |

| Treasury stock-common, at cost | | | [removed: (8,125] [added: (9,713] | ) | | | [removed: (7,494] [added: (8,125] | ) |

| Additional paid-in capital | | | [removed: 548,194] [added: 576,982] | | | | [removed: 496,930] [added: 548,194] | |

| Retained earnings | | | [removed: 462,378] [added: 679,593] | | | | [removed: 296,861] [added: 462,378] | |

| Total stockholders’ equity | | | [removed: 1,003,094] [added: 1,247,509] | | | | [removed: 786,942] [added: 1,003,094] | |

| [Exhibits](#tx842591_129) | | | 68 | |

| |

| --- |

| April 1, 2015 |

| |

| --- |

| /s/ Ernst & Young LLP |

| Chicago, Illinois |

| April 1, 2015 |

| (In thousands, except per share data) | | January 31, 2015 | | | | February 1, 2014 | | |

| Cash and cash equivalents | | $ | 389,149 | | | $ | 419,476 | |

| Short-term investments | | | 150,209 | | | | — | |

| Net income | | $ | 257,135 | | | $ | 202,849 | | | $ | 172,549 | |

| Purchases of short-term investments | | | (200,209 | ) | | | — | | | | — | |

| Proceeds from short-term investments | | | 50,000 | | | | — | | | | — | |

| Stock options exercised and other awards | | | 290 | | | | 3 | | | | — | | | | — | | | | 10,636 | | | | — | | | | 10,639 | |

| Net income | | | — | | | | — | | | | — | | | | — | | | | — | | | | 257,135 | | | | 257,135 | |

| Repurchase of common shares | | | (321 | ) | | | (3 | ) | | | — | | | | — | | | | — | | | | (39,920 | ) | | | (39,923 | ) |

| Balance — January 31, 2015 | | | 64,762 | | | $ | 647 | | | | (578 | ) | | $ | (9,713 | ) | | $ | 576,982 | | | $ | 679,593 | | | $ | 1,247,509 | |

_Short-term investments_

The Company determines the balance sheet classification of its investments at the time of purchase and evaluates the classification at each balance sheet date.

Money market funds, certificates of deposit and time deposits with maturities of greater than three months but no more than twelve months are carried at cost, which approximates fair value and are recorded in the Consolidated Balance Sheets in Short-term investments (see Note 9, “Investments”).

vendors and landlords comprising the Company’s vendor base.

No significant impairments charges have been recognized in fiscal 2014, 2013 or 2012.

Prior to this conversion, we ran both ULTAmate Rewards and our prior program, The Club at Ulta.

For these leases, the Company recognizes the related rental expense on a straight-line basis over

the expected lease term and records the difference between the amounts charged to expense and the rent paid as deferred rent.

Advertising expense as a percentage of sales was 4.9%, 5.3% and 5.3% for fiscal 2014, 2013 and 2012, respectively.

Cost of sales includes the cost of merchandise sold including a majority of vendor allowances, which are treated as a reduction of merchandise costs; warehousing and distribution costs including labor and related benefits,

_Recent accounting pronouncements_

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, issued as a new Topic, Accounting Standards Codification Topic 606.

The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized.

The core principle is that the Company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

This standard is effective beginning in fiscal year 2017 and