Ulta Beauty (ULTA) 10-K risk factor changes: FY2016 vs FY2015

You should carefully consider the following risks and all of the other information contained in this [added: Annual Report on] Form 10-K before making an investment decision.

_The health of the economy in the channels we serve may affect consumer purchases of discretionary items such as beauty products and salon services, which could have a material adverse effect on our business, financial condition, profitability and cash [removed: flows.][added: flows._]

Our results of operations may be materially affected by conditions in the [removed: global] capital markets and the economy generally, both in the U.S. and internationally.

[removed: Continued uncertainty] [added: Uncertainty] in the economy could adversely impact consumer purchases of discretionary items across all of our product categories, including prestige beauty products and premium salon services.

In addition, the [removed: recent global economic crisis and] [added: continued] volatility and disruption to the capital and credit markets have had a significant, adverse impact on global economic conditions, resulting in recessionary pressures and declines in consumer confidence and economic growth.

Additionally, the general deterioration in economic conditions could adversely affect our commercial partners including our [removed: product vendors] [added: vendor partners] as well as the real estate developers and landlords who we rely on to construct and operate centers in which our stores are located.

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

Many of our competitors are, and many of our potential competitors may be, larger and have greater financial, marketing and other resources and [removed: therefore] [added: therefore,] may be able to adapt to changes in customer requirements more quickly, devote greater resources to the marketing and sale of their products, generate greater national brand recognition or adopt more aggressive pricing policies than we can.

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

We [added: currently] operate [removed: three] [added: four] distribution facilities, which house the distribution operations for Ulta [added: Beauty] retail stores together with the order fulfillment operations of our e-commerce business.

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

In 2014, we began a multi-year supply chain project, which [removed: includes] [added: focuses on, among other things,] adding [removed: additional capacity, including two additional distribution centers expected to open in 2015 and 2016,] [added: capacity] and system improvements to support expanded omni-channel capabilities.

Our failure to effectively upgrade and expand our distribution capacity on a timely basis to keep pace with our anticipated growth in stores [added: and the performance of our newly opened distribution center and our distribution center to be opened in 2016] could have a material adverse effect on our business, financial condition, profitability and cash flows.

_Cybersecurity breaches and other disruptions could compromise our [removed: information] [added: information, result in the unauthorized disclosure of confidential guest, employee, Company and/or business partners’ information, damage our reputation] and expose us to liability, which [removed: would cause] [added: could negatively impact] our [removed: business and reputation to suffer._][added: business._]

In the ordinary course of our business, we [removed: collect] [added: collect, process] and store sensitive [added: and confidential] data, including our proprietary business information and that of our [removed: customers,] [added: guests,] suppliers and business partners, and personally identifiable information of our [removed: customers] [added: guests] and employees, in our data centers and on our networks.

Despite the security measures we have in [removed: place,] [added: place and continual vigilance in regard to the protection of sensitive information,] our systems and those of our third party service [removed: providers,] [added: providers] may be vulnerable to security breaches, [added: attacks by hackers,] acts of vandalism, computer viruses, misplaced or lost data, human errors or other similar events.

[removed: Any] [added: The loss] of [added: or a reduction in the amount of merchandise made available to us by any one of] these [removed: events] [added: key vendor partners, or by any of our other vendors,] could have a material adverse effect on our business, financial condition, profitability and cash flows.

_If we are unable to gauge beauty trends and react to changing consumer preferences in a timely manner, our sales [removed: will] [added: may] decrease._

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

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

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

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

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

| | [removed: Ÿ] [added: •] | | general U.S. economic conditions and, in particular, the retail sales environment; |

| | [removed: Ÿ] [added: •] | | changes in our merchandising strategy or mix; |

| | [removed: Ÿ] [added: •] | | performance of our new and remodeled stores; |

| | [removed: Ÿ] [added: •] | | the effectiveness of our inventory management; |

| | [removed: Ÿ] [added: •] | | timing and concentration of new store openings, including additional human resource requirements and related pre-opening and other start-up costs; |

| | [removed: Ÿ] [added: •] | | cannibalization of existing store sales by new store openings; |

| | [removed: Ÿ] [added: •] | | levels of pre-opening expenses associated with new stores; |

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

| | [removed: Ÿ] [added: •] | | seasonal fluctuations due to weather conditions; and |

| | [removed: Ÿ] [added: •] | | actions by our existing or new competitors. |

We offer [removed: many] [added: most] of our beauty products for sale through our website.

[removed: Although we believe that our participation in both e-commerce and physical store sales is a distinct advantage for us due to synergies and the potential for new] customers, supporting product offerings through both of these channels could create issues that have the potential to adversely affect our results of operations.

For example, if our e-commerce business successfully grows, it may do so in part by attracting existing [removed: customers,] [added: guests,] rather than new [removed: customers,] [added: guests,] who choose to purchase products from us online rather than from our physical stores, thereby reducing the financial performance of our stores.

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

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

For example, our planned expansion will require us to increase the number of people we [removed: employ] [added: employ,] as well as to monitor and upgrade our management information and other systems and our distribution infrastructure.

[removed: _Any] [added: _We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems or any] material disruption of our information systems could negatively impact financial results and materially adversely affect our business operations, particularly during the holiday season._

We opened our fourth distribution center in August 2015 and expect to open our fifth in 2016.

Although we believe that our participation in both e-commerce and physical store sales is a distinct advantage for us due to synergies and the potential for new

In addition, many of our vendors use

Our business depends to a significant extent on the

inspectors’ interpretations of such building codes.

As the number of local building codes and local building and fire inspectors to which we and our landlords are subject to increases, we may be increasingly vulnerable to increased construction costs and delays in store openings caused by our or our landlords’ compliance with local building codes and local building and fire inspectors’ interpretations of such building codes.

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

We may effect repurchases under any stock repurchase program from time to time in the open market, in privately negotiated transactions or otherwise, including accelerated stock repurchase arrangements.

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

Concerns over inflation, employment, tax laws, energy costs, healthcare costs, geopolitical issues, terrorism, the availability and cost of credit, the mortgage market, sovereign and private banking systems, sovereign deficits and increasing debt burdens and the real estate and other financial markets in the U.S. and Europe have contributed to increased volatility and diminished expectations for the U.S. and certain foreign economies.

Recent economic conditions have also resulted in a tightening of the credit markets, including lending by financial institutions, which is a source of capital for our borrowing and liquidity.

This tightening of the credit markets has increased the cost of capital and reduced the availability of credit.

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

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

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

It is difficult to predict how long the current economic and capital and credit market conditions will continue, the extent to which they will continue to recover, if at all, and which aspects of our products or business may be adversely affected.

Current market and credit conditions could continue to make it more difficult for developers and landlords to obtain the necessary credit to build new retail centers.

A significant decrease in new retail center development could limit our future growth opportunities as long as the aforementioned conditions exist.

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

Despite our security measures, our information

technology systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.

We employ IT security and security-related products and services as well as a full-time staff to proactively monitor our systems and networks.

We maintain continual vigilance in regard to the protection of sensitive information and are in compliance with all applicable data protection laws and regulations.

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

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

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

Mary Dillon was appointed Chief Executive Officer and a member of the Board of Directors effective July 1, 2013 and Scott Settersten was appointed Chief Financial Officer and Assistant Secretary effective March 12, 2013.

There can be no assurance that

We are increasingly dependent on a variety of information systems to effectively manage the operations of our growing store base and fulfill customer orders from our e-commerce business.

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

_We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems could have a material adverse effect on our operations._

Our ability to effectively manage our business depends on the security, reliability and capacity of these systems.

Information technology system failures, network disruptions or breaches of security could disrupt our operations, causing delays or cancellation of customer orders or impeding the manufacture or shipment of products, processing of transactions or reporting of financial results.

An attack or other problem with our systems could also result in the disclosure of proprietary information about our business or confidential information concerning our customers or employees, which could result in significant damage to our business and our reputation.

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

This risk is more pronounced during the recent economic downturn which has resulted in a number of national retailers filing for bankruptcy or closing stores due to depressed consumer spending levels.

popularity of such brands.

The loss of or a reduction in the amount of merchandise made available to us by any one of these key vendors, or by any of our other vendors, could have an adverse effect on our business, financial condition, profitability and cash flows.

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

This healthcare reform legislation significantly expands healthcare coverage to many uninsured individuals and to those already insured.

Due to the breadth and complexity of the healthcare reform legislation and the staggered implementation and uncertain timing of the regulations and lack of interpretive guidance, it is difficult to predict the overall impact of the healthcare reform legislation on our business over the coming years.

Possible adverse effects include increased costs, exposure to expanded liability and requirements for us to revise the ways in which we conduct business.

For example, the Patient Protection and Affordable Care Act has imposed new mandates on employers, including a requirement effective January 1, 2014 (which has been extended to January 1, 2015 due to a recent executive order) that employers with 50 or more full-time employees provide “credible” health insurance to employees or pay a financial penalty.

Given our current health plan design, and assuming the law is implemented without significant changes, these mandates could materially increase our costs.

Moreover, if we choose to opt out of offering health insurance to our employees, we may become less attractive as an employer and it may be harder for us to compete for qualified employees.

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

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

Further, we may not have sufficient capital resources to pay a judgment, in which case our creditors could levy against our assets.

_The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form [removed: 10-K.][added: 10-K._]

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 [added: products and salons and authorized retail outlets for professional hair care products.]

We developed a unique specialty retail concept [removed: by combining one-stop shopping,] [added: that offers All Things Beauty, All in One PlaceTM,] a compelling value [removed: proposition, convenient locations] [added: proposition] and a [added: convenient and] welcoming shopping environment.

We believe our strategy provides us with the competitive advantages that have contributed to our [removed: strong] financial performance.

Key aspects of our business [removed: include] [added: include:] our ability to offer our guests a unique combination of more than 20,000 beauty products across the categories of prestige and mass cosmetics, fragrance, haircare, skincare, bath and body products and salon styling [removed: tools.][added: tools, as well as a full-service salon in every store featuring hair, skin and brow services; our focus on delivering a compelling value proposition to our guests across all of our product categories; and convenience, as our stores are predominantly located in convenient, high-traffic locations such as power centers.]

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

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

We have combined our three operating segments: retail stores, salon services and e-commerce, into one reportable segment because they have a similar class of [removed: consumer,] [added: consumers,] economic characteristics, nature of products and distribution methods.

We recognize merchandise revenue at the point of sale in our retail stores and e-commerce sales are recorded based on delivery of merchandise to the [removed: customer.][added: guest.]

Gift card sales revenue is deferred until the [removed: customer] [added: guest] redeems the gift card.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pre-opening [removed: expense includes] [added: expenses include] 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 training and grand opening advertising.

The Company’s fiscal years ended January [added: 30, 2016, January] 31, [removed: 2015,] [added: 2015 and] February 1, 2014 [removed: and February 2, 2013] were [removed: 52,] 52 [removed: and 53] week [removed: years, respectively,] [added: years] and are hereafter referred to as fiscal [removed: 2014,] [added: 2015,] fiscal [removed: 2013] [added: 2014] and fiscal [removed: 2012.][added: 2013.]

As of January [removed: 31, 2015,] [added: 30, 2016,] we operated [removed: 774] [added: 874] stores across [removed: 47] [added: 48] states.

| (Dollars in thousands) | | January [removed: 31, 2015] [added: 30, 2016] | | | | [removed: February 1, 2014] [added: January 31, 2015] | | | | February [removed: 2, 2013] [added: 1, 2014] | | |

| Net sales | | $ | [removed: 3,241,369] [added: 3,924,116] | | | $ | [removed: 2,670,573] [added: 3,241,369] | | | $ | [removed: 2,220,256] [added: 2,670,573] | |

| Cost of sales | | | [removed: 2,104,582] [added: 2,539,783] | | | | [removed: 1,729,325] [added: 2,104,582] | | | | [removed: 1,436,582] [added: 1,729,325] | |

| Gross profit | | | [removed: 1,136,787] [added: 1,384,333] | | | | [removed: 941,248] [added: 1,136,787] | | | | [removed: 783,674] [added: 941,248] | |

| Selling, general and administrative expenses | | | [removed: 712,006] [added: 863,354] | | | | [removed: 596,390] [added: 712,006] | | | | [removed: 488,880] [added: 596,390] | |

| Pre-opening expenses | | | [removed: 14,366] [added: 14,682] | | | | [removed: 17,270] [added: 14,366] | | | | [removed: 14,816] [added: 17,270] | |

| Operating income | | | [removed: 410,415] [added: 506,297] | | | | [removed: 327,588] [added: 410,415] | | | | [removed: 279,978] [added: 327,588] | |

| Interest [removed: (income) expense,] [added: income,] net | | | [removed: (894] [added: (1,143] | ) | | | [removed: (118] [added: (894] | ) | | | [removed: 185] [added: (118] | [added: )] |

We are currently the largest beauty retailer in the United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products and salon services.

Interest income, net includes both interest income and expense.

Net sales increased $682.7 million, or 21.1%, to $3,924.1 million in fiscal 2015 compared to $3,241.4 million in fiscal 2014.

E-commerce sales increased $71.2 million, or 47.5%, to $221.1 million compared to $149.9 million in fiscal 2014.

Gross profit increased $247.5 million, or 21.8%, to $1,384.3 million in fiscal 2015, compared to $1,136.8 million, in fiscal 2014.

| | • | | 30 basis points of supply chain deleverage related to the addition of our new Greenwood, Indiana distribution center. |

As a percentage of net sales, SG&A expense was 22.0% in fiscal 2015 and fiscal 2014.

Compared to fiscal 2014’s SG&A expense, fiscal 2015 had 10 basis points of leverage in marketing expense attributed to strong sales growth, offset by 10 basis points of deleverage in corporate overhead expense primarily driven by higher consulting expense.

Pre-opening expenses increased $0.3 million, or 2.2%, to $14.7 million in fiscal 2015 compared to $14.4 million in fiscal 2014.

Interest income, net was $1.1 million in fiscal 2015, compared to $0.9 million in fiscal 2014.

Net income increased $62.9 million, or 24.5%, to $320.0 million in fiscal 2015 compared to $257.1 million in fiscal 2014.

in fiscal 2013.

_Interest income, net_

| | • | | approximately $62 million due to increased sales, new brand additions and incremental inventory for in-store prestige brand boutiques; and |

| | • | | approximately $43 million due to the opening of the Company’s fourth distribution center in Greenwood, Indiana. |

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

The decrease in taxes payable is primarily due to an increase in tax deductible stock option exercises and a decrease in state taxes.

Investment activities for capital expenditures

| | | $ | 391 | | | $ | 299 | | | $ | 249 | | | $ | 226 | |

The 2014 Share Repurchase Program did not have an expiration date and could be suspended or discontinued at any time.

During fiscal 2015, we purchased 1,034,418 shares of common stock for $167.4 million at an average price of $161.81 from the 2014 Share Repurchase Program.

On March 10, 2016, we announced that the Board of Directors authorized the 2016 Share Repurchase Program pursuant to which the Company may repurchase up to $425 million of the Company’s common stock.

The 2016 Share Repurchase Program authorization revokes the previously authorized but unused amounts from the 2014 Share Repurchase Program.

As part of the 2016 Share Repurchase Program, we entered into an Accelerated Share Repurchase (ASR) agreement with Goldman, Sachs & Co. to repurchase $200 million of the Company’s common stock.

Under the ASR agreement, we paid $200 million to Goldman, Sachs & Co. and received an initial delivery of 851,653 shares in the first quarter of 2016, which represents 80% of the total shares we expect to receive based on the market price at the time of the initial delivery.

The final number of shares delivered upon settlement of the agreement will be determined with reference to the average price of the Company’s common stock over the term of the ASR agreement.

To a lesser extent, our business is also

| Operating lease obligations(1) | | $ | 1,759,133 | | | $ | 238,837 | | | $ | 465,841 | | | $ | 406,819 | | | $ | 647,636 | |

| Purchase obligations | | | 26,913 | | | | 26,913 | | | | — | | | | — | | | | — | |

Excluded from our purchase obligations are normal purchases and contracts entered into in the ordinary course of business.

estimates or assumptions we use to calculate our impairment charges.

Adjustments to earnings resulting from revisions to management’s estimates of the redemption rates have been insignificant during fiscal 2015, 2014 and 2013.

The expected volatility is based on the historical volatility of the Company’s common stock.

In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU 2014-09 by one year.

With the deferral, the revenue recognition standard is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods with early adoption permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods.

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation, Accounting Standards Codification Topic 718.

This update clarifies the accounting for share-based awards with performance targets.

The standard will take effect for public companies for annual reporting periods beginning after December 15, 2015, including interim reporting periods.

We will not be affected by this guidance as we currently account for these awards in a manner consistent with the new guidance.

In April 2015, the FASB issued ASU No. 2015-05, Customers’ Accounting for Fees Paid in a Cloud Computing Arrangement.

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

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

Any forward-looking statements contained in this Form 10-K are based upon our historical performance and on current plans, estimates and expectations.

The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.

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; 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 our common stock repurchase program or implement future common stock repurchase programs; our ability to sustain our growth plans and successfully 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 January 31, 2015.

We assume no obligation to update any forward-looking statements as a result of new information, future events or developments.

References in the following discussion to “we”, “us”, “our”, “the Company”, “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._

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

We are currently the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States.

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

We focus on delivering a compelling value proposition to our guests across all of our product categories.

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

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

Net sales increased $450.3 million, or 20.3%, to $2,670.6 million in fiscal 2013 compared to $2,220.3 million in fiscal 2012.

E-commerce sales increased $40.7 million, or 73.9%, to $95.8 million compared to $55.1 million in fiscal 2012.

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

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

Gross profit increased $157.5 million, or 20.1%, to $941.2 million in fiscal 2013, compared to $783.7 million, in fiscal 2012.

| | Ÿ | | 20 basis point leverage in supply chain due to operating efficiencies; and |

As a percentage of net sales, SG&A expenses increased 30 basis points to 22.3% in fiscal 2013 compared to 22.0% in fiscal 2012.

The 30 basis point deleverage in SG&A expense was primarily driven by the planned investments in supply chain, e-commerce and store labor to support rapid growth.

Pre-opening expenses increased $2.5 million, or 16.6%, to $17.3 million in fiscal 2013 compared to $14.8 million in fiscal 2012.

Interest income was $0.1 million in fiscal 2013 and interest expense was $0.2 million in fiscal 2012.

Net income increased $30.3 million, or 17.6%, to $202.8 million in fiscal 2013 compared to $172.5 million in fiscal 2012.

Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or within several days of the related sale, while we typically have up to 30 days to pay our vendors.

| 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. |

The increase in taxes payable is primarily due to an increase in taxable income.

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

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

_Dividend_

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.

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

Company’s common stock.

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

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

vendor allowances including co-op advertising, markdowns and volume discounts.

We did not utilize the credit facility during fiscal [removed: 2014, 2013] [added: 2015, 2014] or [removed: 2012.][added: 2013.]

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

[removed: One-Stop Shopping.] [added: All Things Beauty, All in One Place™.] Our guests can satisfy all of their beauty needs at [removed: Ulta.][added: Ulta Beauty.]

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

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

We offer a comprehensive [removed: customer] loyalty program, [removed: ULTAmate Rewards] [added: Ultamate Rewards,] and targeted promotions through our Customer Relationship Management [removed: platform (CRM).][added: (CRM) platform.]

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

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

We were founded as a Delaware corporation 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 products and salons and authorized retail outlets for professional hair care products.

We developed a unique specialty retail concept [removed: combining one-stop shopping,] [added: that offers All Things Beauty, All in One Place™,] a compelling value proposition, [added: and a] convenient [removed: locations] and a welcoming shopping environment.

The following description of our business should be read in conjunction with the information contained in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 and [removed: the consolidated financial statements] [added: our Financial Statements and Supplementary Data] included in Item 8 of this Annual Report on Form 10-K.

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

We also offer [removed: private label] Ulta [added: Beauty Collection] products in key categories such as cosmetics, skincare and [removed: bath.][added: bath and exclusive products such as IT Brushes for Ulta.]

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

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

Our customer service strategy, convenient [removed: locations and] [added: locations,] attractive store design [added: and compelling e-commerce offerings] combine to create a unique shopping experience.

_Loyal and active customer base._ [removed: Approximately fifteen] [added: Over 18] million Ulta [added: Beauty] guests are [added: active] members of our [added: Ultamate Rewards] loyalty program.

_Strong vendor [removed: relationships] [added: partnerships] across product categories._ We have strong, active relationships with over [removed: 300 vendors,] [added: 350 vendor partners,] including Bare Minerals, Coty, Estée [removed: Lauder,] [added: Lauder Companies,] L’Oréal and Procter & Gamble.

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

We work closely with our [removed: vendors] [added: vendor partners] to market both new and existing brands in a collaborative manner.

We have sharpened our brand positioning, and [removed: plan to increase] [added: are increasing] awareness of the Ulta [added: Beauty] brand by [added: communicating our brand differentiation through broad scale advertising.]

We [added: are] also [removed: plan to deploy other] [added: deploying additional] marketing tactics, such as digital, in-store events and public relations to drive brand engagement, deepen the [removed: consumer] [added: guest] connection to Ulta [added: Beauty] and strengthen our authority in the beauty category.

We have [removed: approximately fifteen] [added: over 18] million active Ulta [removed: members] [added: Beauty guests] enrolled in our [removed: ULTAmate] [added: Ultamate] Rewards loyalty program.

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

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

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

We [removed: plan] [added: continue] to invest in labor and technology to enable this experience.

For example, we are testing in-store technology solutions like clienteling and [removed: mobile POS.][added: have rolled out task management tools.]

_Offer relevant, innovative and often exclusive products that excite our guests._ Our strategy is to continue to partner with [added: existing and new] key [removed: vendors] [added: vendor partners] to bring new and exclusive products to delight our guests and to introduce new [removed: brands.][added: brands both in-store and online.]

We [removed: have also added] [added: regularly add] new [removed: brands, most notably] [added: brands across product categories, especially] in prestige cosmetics, [removed: which is] currently the beauty industry’s highest growth category.

We [removed: expect] [added: continue] to increase the presence of prestige brands and boutiques in our stores.

[removed: We also plan to refine and grow our] [added: Our] private label [removed: business, which in the future] [added: strategy] could include partnerships or acquisitions to create more exclusive brands for [removed: Ulta.][added: Ulta Beauty in the future.]

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

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

_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 more than 1,200 Ulta [added: Beauty] stores in the United [removed: States.][added: States and significantly grow our e-commerce business.]

We opened [removed: 100] [added: 103] new stores during [added: our] fiscal [removed: 2014,] [added: year ended January 30, 2016 (fiscal 2015),] representing a [removed: 14%] [added: 13%] increase in square footage growth compared to [removed: 127] [added: 100] new stores in fiscal [removed: 2013.][added: 2014.]

We also remodeled [removed: 9] [added: four] stores and relocated [removed: 2] [added: five] stores in fiscal [removed: 2014.][added: 2015.]

Our fiscal [removed: 2014] [added: 2015] new store program was comprised of approximately 70% new stores opened in existing shopping centers and 30% in new shopping centers.

In fiscal [removed: 2014,] [added: 2015,] approximately one third of new stores were in new markets and two thirds were [removed: filling in] [added: filling-in] existing markets.

| | | [removed: 2010 | | | |] 2011 | | | | 2012 | | | | 2013 | | | | 2014 | | | [added: | 2015 | | |]

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

Ulta Beauty is the largest beauty retailer in the United States and the premier beauty destination for cosmetics, fragrance, skin care products, hair care products and salon services.

Our stores and website offer more than 20,000 products from over 500 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty’s own private label, the Ulta Beauty Collection.

We also offer a full-service salon in every store featuring hair, skin and brow services.

As of January 30, 2016, we operated 874 retail stores across 48 states and distributed our products through our website, which includes a collection of tips, tutorials and social content.

Our well-trained, non-commissioned beauty

We are also refining and growing the Ulta Beauty Collection, our private label products.

We provide haircare services in our full service salons, using high quality Redken products and offering trend-right hairstyles and color in partnership with Rodney Cutler of Redken.

We also offer skin services in partnership with Dermalogica in all stores and brow services through Benefit Brow Bars in most of our stores.

In addition, our investment and focus in 2015 continued to build out our order fulfillment capabilities resulting in increased capacity, faster order and delivery time, enhanced guest shipping communications and improved order quality.

We

We expect the net investment to open a new store in 2016 will increase due to store enhancements and boutique additions.

We are in the process of significantly improving our e-commerce fulfillment capabilities through new distribution centers and systems.

We offer a comprehensive customer loyalty program, Ultamate Rewards, and targeted promotions through our CRM platform.

_Assortment_

Our merchandising team works to ensure consistent execution across our store base and e-commerce platform.

In 2015, we began to implement a new merchandising planning and forecasting system, which we expect to fully roll out in 2016.

_Vendor partnerships_

Our top ten vendor partners, such as Bare Minerals, Coty, Estée Lauder Companies, L’Oréal and Procter & Gamble, among others, represented approximately 50% of our total net sales in fiscal 2015.

We communicate with our guests and prospective guests through multiple vehicles, including direct mail catalogs, free-standing newspaper inserts, television, radio and digital advertising.

A growing percentage of our marketing expense is being directed toward email marketing, digital marketing, and national TV and radio advertising.

We believe these channels are highly effective in communicating with existing guests, as well as reaching those who have not yet shopped with us.

Our email marketing program has been effective in communicating with our existing online and retail guests in a targeted and relevant way.

Digital marketing, coupled with our national TV and radio advertising, has helped us grow brand awareness among those not familiar with Ulta Beauty, which we believe has resulted in new guests and reactivation of guests who have not shopped at Ulta Beauty within the last year.

As a result, the fourth distribution facility, located in Greenwood, Indiana, opened in August of 2015 and is

approximately 671,000 square feet.

The Dallas warehouse is approximately 671,000 square feet.

Products such as wrinkle reducing lights may be classified as medical devices and, in addition to being subject to labeling and

manufacturing requirements, may also be subject to premarketing review by the FDA.

Finally, products such as styling tools (e.g. blow dryers, curling irons) are regulated by the CPSC, which has strict requirements with respect to reporting possible product defects.

Ulta Beauty (or Ulta, we, the Company) is the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States.

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

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

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

communicating our brand differentiation through broad scale advertising.

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

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

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

We offer haircare services in our full service salons as well as skin and brow services in most of our stores.

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.

businesses.

Our competitive advantages are the quality and assortment of merchandise and services, our value proposition, the quality of our guests’ shopping experience and the convenience of our stores and website as one-stop destinations for beauty products.

Store remodel program

We have a formal store remodel program in place to update our older stores to provide a consistent shopping experience across all of our locations.

We remodeled 9 stores in fiscal 2014.

The average investment to remodel a store in fiscal 2014 was approximately $1.1 million.

Each remodel takes approximately four months to complete, during which time we generally keep the store open.

We operate full-service salons in all of our stores.

Each salon is a full-service salon offering haircuts, hair coloring and texturizing, with most salons also providing facials and waxing.

We plan to significantly expand our e-commerce distribution capabilities with the addition of two new distribution centers which we expect to open in 2015 and 2016.

Our

We believe we offer a compelling value proposition to our customers across all of our product categories.

_Category mix_

merchandise planning group.

_Vendor relationships_

Our top ten vendors represented approximately 50% of our total net sales in fiscal 2014.

These include vendors across all product categories, such as Bare Minerals, Coty, Estée Lauder, L’Oréal and Procter & Gamble, among others.

We communicate with our customers and prospective customers through multiple vehicles.

In 2014, we expanded our marketing to include the integration of TV, radio and digital advertising.

In early fiscal 2014, we converted all of our loyalty customers to ULTAmate Rewards, a points-based program.

Since that time, we have built upon our CRM capabilities to deliver targeted marketing campaigns to our loyalty program members.

A growing percentage of our marketing expense is directed at our digital marketing strategy as a highly effective channel to communicate with existing customers and reach customers who are not familiar with Ulta or who have not yet shopped with us.

Ulta’s email marketing programs are effective in communicating with online and retail customers and driving sales.

management, merchandising, cash management, scheduling, hiring and guest services.

centers in which our stores are located.

See Note 4 to our consolidated financial statements, “Commitments and contingencies – General litigation,” for information on legal proceedings.

_General litigation —_ 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.

On April 12, 2012, the Company removed the case to the United States District Court for the Central District of California.

On August 8, 2013, the plaintiff asked the court to certify the proposed class and the Company opposed the plaintiff’s request and is waiting for the court to issue a decision.

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

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

The suit seeks to recover damages and penalties as a result of these alleged practices.

The Company denies plaintiff’s allegations and is vigorously defending the matter.

We are also involved in various legal proceedings that are incidental to the conduct of our business.

In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not be material.

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

| | | For the fiscal year ended January [removed: 31, 2015] [added: 30, 2016] |

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 [removed: August 2, 2014,] [added: July 31, 2015,] as reported on the NASDAQ Global Select Market, was approximately [removed: $4,117,508,000.][added: $9,282,171,000.]

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 [removed: August 2, 2014] [added: July 31, 2015] 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: 26, 2015] [added: 24, 2016] was [removed: 64,230,316] [added: 62,618,206] shares.

Information required in response to Part III of Form 10-K (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference [removed: to] [added: from portions of] the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held during [removed: the current fiscal year.][added: 2016.]

| [removed: [Part I](#tx842591_1)] [added: Part I] | | | | | | [removed: [](#tx842591_1)] |

| Item 1. | | [removed: [Business](#tx842591_2)] [added: [Business](#toc101485_1)] | | | [removed: 3] [added: 2] | |

| Item 1A. | | [Risk [removed: Factors](#tx842591_3)] [added: Factors](#toc101485_2)] | | | [removed: 13] [added: 11] | |

| Item 1B. | | [Unresolved Staff [removed: Comments](#tx842591_4)] [added: Comments](#toc101485_3)] | | | [removed: 25] [added: 21] | |

| Item 2. | | [removed: [Properties](#tx842591_5)] [added: [Properties](#toc101485_4)] | | | [removed: 26] [added: 21] | |

| Item 3. | | [Legal [removed: Proceedings](#tx842591_6)] [added: Proceedings](#toc101485_5)] | | | [removed: 27] [added: 23] | |

| Item 4. | | [Mine Safety [removed: Disclosures](#tx842591_7)] [added: Disclosures](#toc101485_6)] | | | [removed: 28] [added: 23] | |

| [removed: [Part II](#tx842591_8)] [added: Part II] | | | | | | [removed: [](#tx842591_8)] |

| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#tx842591_9)] [added: Securities](#toc101485_7)] | | | [removed: 29] [added: 24] | |

| Item 6. | | [Selected Financial [removed: Data](#tx842591_10)] [added: Data](#toc101485_8)] | | | [removed: 32] [added: 27] | |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx842591_11)] [added: Operations](#toc101485_9)] | | | [removed: 33] [added: 28] | |

| Item 7A. | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#tx842591_12)] [added: Risk](#toc101485_10)] | | | [removed: 45] [added: 40] | |

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#tx842591_13)] [added: Data](#toc101485_11)] | | | [removed: 45] [added: 40] | |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx842591_14)] [added: Disclosure](#toc101485_12)] | | | [removed: 45] [added: 41] | |

| Item 9A. | | [Controls and [removed: Procedures](#tx842591_15)] [added: Procedures](#toc101485_13)] | | | [removed: 46] [added: 41] | |

| Item 9B. | | [Other [removed: Information](#tx842591_16)] [added: Information](#toc101485_14)] | | | [removed: 46] [added: 41] | |

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

| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#tx842591_18)] [added: Governance](#toc101485_15)] | | | [removed: 46] [added: 41] | |

| Item 11. | | [Executive [removed: Compensation](#tx842591_19)] [added: Compensation](#toc101485_16)] | | | [removed: 47] [added: 42] | |

| Item 12. | | [Security Ownership [removed: and] [added: of] Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#tx842591_20)] [added: Matters](#toc101485_17)] | | | [removed: 47] [added: 42] | |

| Item 13. | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#tx842591_21)] [added: Independence](#toc101485_18)] | | | [removed: 47] [added: 42] | |

| Item 14. | | [Principal Accountant Fees and [removed: Services](#tx842591_22)] [added: Services](#toc101485_19)] | | | [removed: 47] [added: 42] | |

| [removed: [Part IV](#tx842591_23)] [added: Part IV] | | | | | | [removed: [](#tx842591_23)] |

| Item 15. | | [Exhibits and Financial Statement [removed: Schedules](#tx842591_24)] [added: Schedules](#toc101485_20)] | | | [removed: 48] [added: 43] | |

The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, [removed: estimates] [added: estimates, targets, strategies] or expectations contemplated by us will be achieved.

[removed: We assume] [added: Except to the extent required by the federal securities laws, we undertake] no obligation to [added: publicly] update [added: or revise] any forward-looking [removed: statements] [added: statements, whether] as a result of new information, future events or [removed: developments.][added: otherwise.]

References in [removed: the following discussion] [added: this Annual Report on Form 10-K] to [removed: “we”, “us”, “our”, “the Company”, “Ulta”,] [added: “we,” “us,” “our,” “Ulta,”] “Ulta [removed: Beauty”] [added: Beauty,” the “Company”] and similar references mean Ulta Salon, Cosmetics & Fragrance, Inc. and its consolidated subsidiary, Ulta [removed: Inc.] [added: Inc.,] unless otherwise expressly stated or the context otherwise requires.

10-K 1 d101485d10k.htm FORM 10-K

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; |

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

| | • | | the possibility that we may be unable to compete effectively in our highly competitive markets; |

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

| | • | | the possibility that cybersecurity breaches and other disruptions could compromise our information or result in the unauthorized disclosure of confidential information; |

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

| | • | | the possibility that the capacity of our distribution and order fulfillment infrastructure and the performance of our newly opened and to be opened distribution centers may not be adequate to support our recent growth and expected future growth plans; |

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

| | • | | our ability to gauge beauty trends and react to changing consumer preferences in a timely manner; |

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

| | • | | our ability to attract and retain key executive personnel; |

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

| | • | | customer acceptance of our rewards program and technological and marketing initiatives; |

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

| | • | | our ability to sustain our growth plans and successfully implement our long-range strategic and financial plan; |

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

| | • | | 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 of material disruptions to our information systems; |

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

| | • | | changes in the wholesale cost of our products; |

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

| | • | | the possibility that new store openings and existing locations may be impacted by developer or co-tenant issues; |

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

| | • | | weather conditions that could negatively impact sales; |

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

| | • | | our ability to successfully execute our common stock repurchase program or implement future common stock repurchase programs; and |

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

| | • | | other risk factors detailed in our public filings with the Securities and Exchange Commission (the SEC), including risk factors contained in Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the year ended January 30, 2016. |

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

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

10-K 1 d842591d10k.htm FORM 10-K

The Proxy Statement will be filed by the registrant with the SEC no later than 120 days after the close of the fiscal year covered by this Form 10-K.

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; 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 our common stock repurchase program or implement future common stock repurchase programs; our ability to sustain our growth plans and successfully 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 January 31, 2015.

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

All of our retail stores, [removed: corporate offices and] distribution and warehouse facilities [added: and corporate offices] are leased or subleased.

As of January [removed: 31, 2015,] [added: 30, 2016,] we operated [removed: 774] [added: 874] retail stores in [removed: 47] [added: 48] states, as shown in the table below:

| Alabama | | | [removed: 12] [added: 14] | |

| California | | | [removed: 89] [added: 104] | |

| Colorado | | | [removed: 16] [added: 18] | |

| Connecticut | | | [removed: 8] [added: 10] | |

| Delaware | | | [removed: 1] [added: 2] | |

| Florida | | | [removed: 54] [added: 61] | |

| Georgia | | | [removed: 26] [added: 27] | |

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

| Illinois | | | [removed: 45] [added: 46] | |

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

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

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

| Kentucky | | | [removed: 9] [added: 10] | |

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

| Maryland | | | [removed: 12] [added: 14] | |

| Massachusetts | | | [removed: 12] [added: 13] | |

| Michigan | | | [removed: 36] [added: 38] | |

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

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

| Nevada | | | [removed: 8] [added: 11] | |

| New Jersey | | | [removed: 20] [added: 23] | |

| New Mexico | | | [removed: 3] [added: 4] | |

| New York | | | [removed: 28] [added: 32] | |

| North Dakota | | | [removed: 1] [added: 2] | |

| Ohio | | | [removed: 29] [added: 33] | |

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

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

| Pennsylvania | | | [removed: 28] [added: 32] | |

| South Carolina | | | [removed: 13] [added: 15] | |

| Tennessee | | | [removed: 10] [added: 16] | |

| Texas | | | [removed: 77] [added: 84] | |

| Virginia | | | [removed: 21] [added: 23] | |

| Washington | | | [removed: 16] [added: 20] | |

| West Virginia | | | [removed: 4] [added: 5] | |

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

As of January [removed: 31, 2015,] [added: 30, 2016,] we operated [removed: three] [added: four] distribution facilities located in Romeoville, Illinois, Phoenix, [removed: Arizona and] [added: Arizona,] Chambersburg, [removed: Pennsylvania.][added: Pennsylvania and Greenwood, Indiana.]

The Romeoville warehouse [removed: contains] [added: is] approximately [removed: 317,000] [added: 291,000] square [removed: feet, including an overflow facility.][added: feet.]

The Phoenix warehouse [removed: contains] [added: is] approximately 437,000 square feet.

_Stores_

| Alaska | | | 3 | |

| Total | | | 874 | |

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

_Distribution Centers_

The Greenwood warehouse is approximately 671,000 square feet.

_Corporate Office_

The corporate office is approximately 157,000 square feet with lease terms expiring from 2020 to 2028.

| | | | | |

| Total | | | 774 | |

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

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

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

The lease for the Bolingbrook office expires on August 31, 2018.

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

This additional office space has a lease that will expire September 30, 2016 with an option to extend to August 31, 2018.

| Mary N. Dillon | | | [removed: 53] [added: 54] | | | Chief Executive Officer and member of the Board of Directors |

| Scott M. Settersten | | | [removed: 54] [added: 55] | | | Chief Financial [removed: Officer] [added: Officer, Treasurer] and Assistant Secretary |

| Jeffrey J. Childs | | | [removed: 57] [added: 58] | | | Chief Human Resources Officer |

| David [added: C.] Kimbell | | | [removed: 48] [added: 49] | | | Chief Merchandising and Marketing Officer |

There is no family relationship between any of the Directors or executive officers and any other Director or executive officer of [removed: Ulta.][added: Ulta Beauty.]

Prior to joining Ulta Beauty, she was President and Chief Executive Officer and a [removed: Director] [added: director] of U.S. Cellular [removed: since] [added: from] June [removed: 2010.][added: 2010 to July 2013.]

Ms. Dillon [removed: served] [added: serves] as a member of the Board of Directors for [added: Starbucks Corporation and previously served on the board of] Target Corporation from 2007 to 2013.

Settersten._ Mr. Settersten was named Chief Financial [removed: Officer] [added: Officer, Treasurer] and Assistant Secretary in March 2013 after having previously served as Acting Chief Financial Officer and Assistant Secretary since October 18, 2012.

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

| Jodi J. Caro | | | 50 | | | General Counsel and Corporate Secretary |

_Jodi J.

Caro._ Ms. Caro was named General Counsel and Corporate Secretary in August 2015.

Prior to joining Ulta Beauty, she was Vice President, General Counsel and Secretary for Integrys Energy Group, in addition to holding

the role of Integrys’ Chief Compliance and Ethics Officer.

Prior to joining Integrys in 2008, Ms. Caro owned and operated her own law practice, which provided general counsel and corporate services to clients ranging from established multi-million dollar companies to medium and small early-stage enterprises.

Prior to opening her law practice in 2006, she was co-founder and General Counsel of Looking Glass Networks, a privately held, facilities-based telecommunications company, and served as an in-house attorney with MCI/WORLDCOM.

_David C.

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.

| Robert S. Guttman | | | 62 | | | Senior Vice President, General Counsel & Secretary |

| Janet Taake | | | 57 | | | Chief Merchandising Officer |

_Robert S.

Guttman._ Mr. Guttman has been our Senior Vice President, General Counsel & Secretary since August 2007.

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

From 2000 to 2005, Mr. Guttman served as Senior Vice President, General Counsel and Secretary of CCC Information Services, Inc. Prior to that time, Mr. Guttman was an Associate General Counsel with Sears, Roebuck and Co., having served in various positions as a lawyer with Sears from 1986 to 2000.

_Janet Taake._ Ms. Taake was named Chief Merchandising Officer in January 2014, after serving as Senior Vice President – Merchandising since December 2008.

Prior to joining Ulta Beauty, Ms. Taake was Senior Vice President of Merchandising for Babies “R” Us from 2006 to 2008.

From 2004 to 2006, Ms. Taake served as Vice President and General Merchandise Manager – Home Fashions for Sears Corporation.

From 1998 to 2006, she served in various senior merchandise management roles with Mervyn’s (Target Corporation).

Prior to 1998, Ms. Taake served in senior merchandise management and buyer roles with various national and regional retailers.

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: 2014] [added: 2015] and [removed: 2013:][added: 2014:]

| Fiscal Year [removed: 2013] [added: 2015] | | High | | | | Low | | |

The last reported sale price of our common stock on the NASDAQ Global Select Market on March [removed: 26, 2015] [added: 24, 2016] was [removed: $150.01] [added: $191.76] per share.

As of March [removed: 26, 2015,] [added: 24, 2016,] we had [removed: 49] [added: 48] holders of record of our common stock.

No cash dividends were declared on our common stock in [removed: 2014] [added: 2015] or [removed: 2013] [added: 2014] nor have any decisions been made to pay a dividend in the foreseeable future.

The following table sets forth repurchases of our common stock during the fourth quarter of [removed: 2014:][added: 2015:]

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

| (1) | There were [removed: 235,223] [added: 262,342] shares repurchased as part of our publicly announced share repurchase program during the three months ended January [removed: 31, 2015] [added: 30, 2016] and there were [removed: no] [added: 538] 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 [removed: revokes] [added: revoked] the previously [removed: authorized] [added: authorized,] but unused amounts of $112.7 million from [removed: the] [added: our prior] 2013 Share Repurchase Program. The 2014 Share Repurchase Program [removed: does] [added: did] not have an expiration date and [removed: may] [added: could] be suspended or discontinued at any time. [removed: 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. [added: As of January 30, 2016, $192.7 million remained available under the $400 million 2014 Share Repurchase Program.] |

The following table provides information about Ulta [added: Beauty] common stock that may be issued under our equity compensation plans as of January [removed: 31, 2015.][added: 30, 2016.]

| (2) | Includes [removed: 1,072,717] [added: 939,415] shares issuable pursuant to the exercise of outstanding stock [removed: options and 150,597] [added: options, 143,850] shares issuable pursuant to restricted stock [added: units and 20,252 shares issuable pursuant to performance-based] units. |

| (3) | Calculation of weighted-average exercise price of outstanding awards includes stock options, but does not include shares of restricted stock units [added: or performance-based 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 [added: and performance-based unit] awarded. |

Set forth below is a graph comparing the cumulative total stockholder return on [removed: Ulta’s] [added: Ulta Beauty’s] common stock with the NASDAQ Global Select Market Composite Index (NQGS) and the S&P Retail Index (RLX) for the period covering January 29, [removed: 2010] [added: 2011] through the end of [removed: Ulta’s] [added: Ulta Beauty’s] fiscal year ended January [removed: 31, 2015.][added: 30, 2016.]

The graph assumes an investment of $100 made at the closing of trading on January 29, [removed: 2010,] [added: 2011,] in (i) [removed: Ulta’s] [added: Ulta Beauty’s] common stock, (ii) the stocks comprising the NQGS and (iii) stocks comprising the RLX.

[removed: ][added: ]

| First quarter | | $ | 158.97 | | | $ | 128.11 | |

| Second quarter | | | 171.21 | | | | 149.12 | |

| Third quarter | | | 176.77 | | | | 120.38 | |

| Fourth quarter | | | 188.48 | | | | 151.52 | |

| November 1, 2015 to November 28, 2015 | | | 83,970 | | | $ | 167.90 | | | | 83,970 | | | $ | 224,705 | |

| November 29, 2015 to December 26, 2015 | | | 74,821 | | | | 179.46 | | | | 74,821 | | | | 211,277 | |

| December 27, 2015 to January 30, 2016 | | | 104,089 | | | | 179.62 | | | | 103,551 | | | | 192,680 | |

| 13 weeks ended January 30, 2016 | | | 262,880 | | | | 175.83 | | | | 262,342 | | | | 192,680 | |

On March 10, 2016, we announced that the Board of Directors authorized a new share repurchase program (the 2016 Share Repurchase Program) pursuant to which the Company may repurchase up to $425 million of the Company’s common stock.

The 2016 Share Repurchase Program authorization revokes the previously authorized but unused amounts from the 2014 Share Repurchase Program.

As part of the 2016 Share Repurchase Program, the Company entered into an Accelerated Share Repurchase agreement with Goldman, Sachs & Co. to repurchase $200 million of the Company’s common stock.

For additional information, see Note 16 to our consolidated financial statements, “Subsequent Event” included in this Annual Report on Form 10-K.

| Equity compensation plans approved by security holders(1) | | | 1,103,517 | | | $ | 104.58 | | | | 4,095,792 | |

| Total | | | 1,103,517 | | | $ | 104.58 | | | | 4,095,792 | |

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

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

| | | | | | | Fiscal year ended | | | | | | | | | | | | | | | | | | |

| Company / Index | | January 29, 2011 | | | | January 28, 2012 | | | | February 2, 2013 | | | | February 1, 2014 | | | | January 31, 2015 | | | | January 30, 2016 | | |

| Ulta | | $ | 100.00 | | | $ | 205.60 | | | $ | 267.05 | | | $ | 232.51 | | | $ | 360.20 | | | $ | 494.59 | |

| NASDAQ Global Select Market Com | | | 100.00 | | | | 104.69 | | | | 116.88 | | | | 152.20 | | | | 172.59 | | | | 172.82 | |

| S&P 500 Retailing Index | | | 100.00 | | | | 111.34 | | | | 140.19 | | | | 174.22 | | | | 206.88 | | | | 239.07 | |

| First quarter | | $ | 99.66 | | | $ | 73.96 | |

| Second quarter | | | 103.47 | | | | 84.13 | |

| Third quarter | | | 128.85 | | | | 97.24 | |

| Fourth quarter | | | 131.50 | | | | 80.93 | |

| 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 | |

| 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 | |

| | | January [added: 30, 2016 | | | | January] 31, 2015 | | | | February 1, 2014 | | | | February 2, 2013 | | | | January 28, 2012 | | | [removed: | January 29, 2011 | | |]

| Net sales(2) | | $ | [removed: 3,241,369] [added: 3,924,116] | | | $ | [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] | |

| Cost of sales | | | [removed: 2,104,582] [added: 2,539,783] | | | | [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] | |

| Gross profit | | | [removed: 1,136,787] [added: 1,384,333] | | | | [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] | |

| Selling, general and administrative expenses | | | [removed: 712,006] [added: 863,354] | | | | [removed: 596,390] [added: 712,006] | | | | [removed: 488,880] [added: 596,390] | | | | [removed: 410,658] [added: 488,880] | | | | [removed: 358,106] [added: 410,658] | |

| Pre-opening expenses | | | [removed: 14,366] [added: 14,682] | | | | [removed: 17,270] [added: 14,366] | | | | [removed: 14,816] [added: 17,270] | | | | [removed: 9,987] [added: 14,816] | | | | [removed: 7,095] [added: 9,987] | |

| Operating income | | | [removed: 410,415] [added: 506,297] | | | | [removed: 327,588] [added: 410,415] | | | | [removed: 279,978] [added: 327,588] | | | | [removed: 196,195] [added: 279,978] | | | | [removed: 118,884] [added: 196,195] | |

| Interest (income) expense, net | | | [removed: (894] [added: (1,143] | ) | | | [removed: (118] [added: (894] | ) | | | [removed: 185] [added: (118] | [added: )] | | | [removed: 587] [added: 185] | | | | [removed: 755] [added: 587] | |

| Income before income taxes | | | [removed: 411,309] [added: 507,440] | | | | [removed: 327,706] [added: 411,309] | | | | [removed: 279,793] [added: 327,706] | | | | [removed: 195,608] [added: 279,793] | | | | [removed: 118,129] [added: 195,608] | |

| Income tax expense | | | [removed: 154,174] [added: 187,432] | | | | [removed: 124,857] [added: 154,174] | | | | [removed: 107,244] [added: 124,857] | | | | [removed: 75,344] [added: 107,244] | | | | [removed: 47,099] [added: 75,344] | |

| Net income | | $ | [removed: 257,135] [added: 320,008] | | | $ | [removed: 202,849] [added: 257,135] | | | $ | [removed: 172,549] [added: 202,849] | | | $ | [removed: 120,264] [added: 172,549] | | | $ | [removed: 71,030] [added: 120,264] | |

| Basic | | $ | [removed: 4.00] [added: 5.00] | | | $ | [removed: 3.17] [added: 4.00] | | | $ | [removed: 2.73] [added: 3.17] | | | $ | [removed: 1.96] [added: 2.73] | | | $ | [removed: 1.20] [added: 1.96] | |

| Diluted | | $ | [removed: 3.98] [added: 4.98] | | | $ | [removed: 3.15] [added: 3.98] | | | $ | [removed: 2.68] [added: 3.15] | | | $ | [removed: 1.90] [added: 2.68] | | | $ | [removed: 1.16] [added: 1.90] | |

| Basic | | | [removed: 64,335] [added: 63,949] | | | | [removed: 63,992] [added: 64,335] | | | | [removed: 63,250] [added: 63,992] | | | | [removed: 61,259] [added: 63,250] | | | | [removed: 58,959] [added: 61,259] | |

| Diluted | | | [removed: 64,651] [added: 64,275] | | | | [removed: 64,461] [added: 64,651] | | | | [removed: 64,396] [added: 64,461] | | | | [removed: 63,334] [added: 64,396] | | | | [removed: 61,288] [added: 63,334] | |

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

| Retail and salon comparable sales | | | [removed: 8.1] [added: 10.0] | % | | | [removed: 6.1] [added: 8.1] | % | | | [removed: 8.8] [added: 6.1] | % | | | [removed: 10.9] [added: 8.8] | % | | | [removed: 11.0] [added: 10.9] | % |

| E-commerce comparable sales | | | [removed: 56.4] [added: 47.5] | % | | | [removed: 76.6] [added: 56.4] | % | | | [removed: 30.7] [added: 76.6] | % | | | [removed: 37.8] [added: 30.7] | % | | | [removed: 76.8] [added: 37.8] | % |

| Total comparable sales increase | | | [removed: 9.9] [added: 11.8] | % | | | [removed: 7.9] [added: 9.9] | % | | | [removed: 9.3] [added: 7.9] | % | | | [removed: 11.5] [added: 9.3] | % | | | [removed: 11.9] [added: 11.5] | % |

| Number of stores end of year | | | [removed: 774] [added: 874] | | | | [removed: 675] [added: 774] | | | | [removed: 550] [added: 675] | | | | [removed: 449] [added: 550] | | | | [removed: 389] [added: 449] | |

| Total square footage end of year | | | [removed: 8,182,404] [added: 9,225,957] | | | | [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] | |

| Total square footage per store(4) | | | [removed: 10,572] [added: 10,556] | | | | [removed: 10,605] [added: 10,572] | | | | [removed: 10,632] [added: 10,605] | | | | [removed: 10,573] [added: 10,632] | | | | [removed: 10,526] [added: 10,573] | |

| Average total square footage(5) | | | [removed: 7,690,742] [added: 8,724,581] | | | | [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] | |

| Net sales per average total square foot(6) | | $ | [removed: 421] [added: 450] | | | $ | [removed: 407] [added: 421] | | | $ | [removed: 418] [added: 407] | | | $ | [removed: 402] [added: 418] | | | $ | [removed: 382] [added: 402] | |

| Capital expenditures | | | [removed: 249,067] [added: 299,167] | | | | [removed: 226,024] [added: 249,067] | | | | [removed: 188,578] [added: 226,024] | | | | [removed: 128,636] [added: 188,578] | | | | [removed: 97,115] [added: 128,636] | |

| Depreciation and amortization | | | [removed: 131,764] [added: 165,049] | | | | [removed: 106,283] [added: 131,764] | | | | [removed: 88,233] [added: 106,283] | | | | [removed: 75,931] [added: 88,233] | | | | [removed: 64,936] [added: 75,931] | |

| Cash and cash equivalents | | $ | [removed: 389,149] [added: 345,840] | | | $ | [removed: 419,476] [added: 389,149] | | | $ | [removed: 320,475] [added: 419,476] | | | $ | [removed: 253,738] [added: 320,475] | | | $ | [removed: 111,185] [added: 253,738] | |

| Short-term investments | | | [removed: 150,209] [added: 130,000] | | | | [removed: —] [added: 150,209] | | | | — | | | | — | | | | — | |

| Working [removed: capital] [added: capital(7)] | | | [removed: 900,761] [added: 978,946] | | | | [removed: 735,886] [added: 900,761] | | | | [removed: 568,257] [added: 735,886] | | | | [removed: 415,377] [added: 568,257] | | | | [removed: 241,032] [added: 415,377] | |

| Property and equipment, net | | | [removed: 717,159] [added: 847,600] | | | | [removed: 595,736] [added: 717,159] | | | | [removed: 483,059] [added: 595,736] | | | | [removed: 376,985] [added: 483,059] | | | | [removed: 326,099] [added: 376,985] | |

| Total assets | | | [removed: 1,983,170] [added: 2,230,918] | | | | [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] | |

| Total stockholders’ equity | | | [removed: 1,247,509] [added: 1,442,886] | | | | [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] | |

| Repurchase of common shares | | | 167,396 | | | | 39,923 | | | | 37,337 | | | | — | | | | — | |

| (7) | The Company prospectively adopted Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes, in the fourth quarter of fiscal 2015. As a result of this adoption at January 30, 2016, current deferred tax assets were classified as non-current liabilities. |

| --- | --- |

See the [removed: index] [added: index, financial statements and notes to financial statements] included under Item 15, “Exhibits and Financial Statement Schedules”.

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Based on management’s evaluation as of January [removed: 31, 2015,] [added: 30, 2016,] 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 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 [removed: accounting principles] generally accepted [added: accounting principles] 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 January [removed: 31, 2015,] [added: 30, 2016,] based on the criteria established in [removed: “Internal] [added: Internal] Control [removed: —] [added: –] Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (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 January [removed: 31, 2015.][added: 30, 2016.]

Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, has audited the effectiveness of our internal control over financial reporting as of January [removed: 31, 2015] [added: 30, 2016] and has issued the attestation report included in Item 15 of this Annual Report on Form 10-K.

There were no changes to our internal controls over financial reporting during the three months ended January [removed: 31, 2015] [added: 30, 2016] that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

The information required by this item with respect to our executive officers is set forth after Part I, Item 4 of this [removed: report] [added: Annual Report on Form 10-K] under the caption “Executive Officers of the Registrant.” The additional information required by this item is [removed: incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January 31, 2015 pursuant to Regulation 14A] [added: included] under the [removed: Exchange Act in connection with our 2015 annual meeting] [added: captions “Corporate Governance and the Board] of [removed: stockholders.]

Directors – Election of Directors,” “Independent Registered Public Accounting Firm and Audit Committee – Audit Committee” and “Stock – Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for our 2016 Annual Meeting of Stockholders (the Proxy Statement) and is hereby incorporated herein by reference.

We have a Code of Business Conduct that applies to all of our employees, including our Chief Executive Officer, Chief Financial Officer, Controller and other persons performing similar functions.

We have posted a copy of our Code of Business Conduct under “Corporate Governance” in the Investor Relations section of our website located at http://ir.ulta.com, and such Code of Business Conduct is available in print, without charge, to any stockholder who requests it from our Corporate Secretary.

We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, the Code of Business Conduct by posting such information under “Corporate Governance” in the Investor Relations section of our website located at http://ir.ulta.com.

We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.

The information required by this item is included under the captions “Compensation Committee Report and Compensation Discussion and Analysis” and “Corporate Governance and the Board of Directors – Non-Executive Director Compensation for Fiscal 2015” in the Proxy Statement and is hereby incorporated herein by reference.

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January 31, 2015 pursuant to Regulation 14A under the Exchange Act in connection with our 2015 annual meeting of stockholders.

The information required by this item with respect to security ownership of certain beneficial owners and management is included under the caption “Stock – Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is hereby incorporated by reference.

The information required by this item with respect to compensation plans under which our equity securities are authorized for issuance as of January 30, 2016 is set forth in Item 5 of this Annual Report on Form 10-K under the caption “Securities authorized for issuance under equity compensation plans.”

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January 31, 2015 pursuant to Regulation 14A under the Exchange Act in connection with our 2015 annual meeting of stockholders.

The information required by this item is included under the captions “Corporate Governance and the Board of Directors – Corporate Governance – Independence,” Compensation Committee Report and Compensation Discussion and Analysis – Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Transactions” in the Proxy Statement and is hereby incorporated by reference.

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January 31, 2015 pursuant to Regulation 14A under the Exchange Act in connection with our 2015 annual meeting of stockholders.

The information required by this item is included under the caption “Independent Registered Public Accounting Firm and Audit Committee — Fees to Independent Registered Public Accounting Firm” in the Proxy Statement and is hereby incorporated by reference.

The information required by this item is incorporated by reference to our definitive proxy statement to be filed within 120 days after our fiscal year ended January 31, 2015 pursuant to Regulation 14A under the Exchange Act in connection with our 2015 annual meeting of stockholders.

| [Report of Independent Registered Public Accounting [removed: Firm](#tx842591_123)] [added: Firm](#tx101485_1)] | | | [removed: 49] [added: 44] | |

| [Consolidated Balance [removed: Sheets](#tx842591_124)] [added: Sheets](#tx101485_2)] | | | [removed: 51] [added: 46] | |

| [Consolidated Statements of [removed: Income](#tx842591_125)] [added: Income](#tx101485_3)] | | | [removed: 52] [added: 47] | |

| [Consolidated Statements of Cash [removed: Flows](#tx842591_126)] [added: Flows](#tx101485_4)] | | | [removed: 53] [added: 48] | |

| [Consolidated Statements of Stockholders’ [removed: Equity](#tx842591_127)] [added: Equity](#tx101485_5)] | | | [removed: 54] [added: 49] | |

| [Notes to Consolidated Financial [removed: Statements](#tx842591_128)] [added: Statements](#tx101485_6)] | | | [removed: 55] [added: 50] | |

We have audited the accompanying consolidated balance sheets of Ulta Salon, Cosmetics & Fragrance, Inc. as of January [removed: 31, 2015] [added: 30, 2016] and [removed: February 1, 2014,] [added: January 31, 2015,] and the related consolidated statements of income, cash flows, and stockholders’ equity for each of the three years in the period ended January [removed: 31, 2015.][added: 30, 2016.]

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 January [removed: 31, 2015] [added: 30, 2016] and [removed: February 1, 2014,] [added: January 31, 2015,] and the consolidated results of its operations and its cash flows for each of the three years in the period ended January [removed: 31, 2015,] [added: 30, 2016,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ulta Salon, Cosmetics & Fragrance, Inc.’s internal control over financial reporting as of January [removed: 31, 2015,] [added: 30, 2016,] based on criteria established in Internal Control [removed: —] [added: –] Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated [removed: April 1, 2015,] [added: March 30, 2016,] expressed an unqualified opinion thereon.

We have audited Ulta Salon, Cosmetics & Fragrance, Inc.’s internal control over financial reporting as of January [removed: 31, 2015,] [added: 30, 2016,] based on criteria established in Internal Control [removed: —] [added: –] Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Ulta Salon, Cosmetics & Fragrance, Inc. maintained, in all material respects, effective internal control over financial reporting as of January [removed: 31, 2015,] [added: 30, 2016,] 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 January [removed: 31, 2015] [added: 30, 2016] and [removed: February 1, 2014,] [added: January 31, 2015,] and the related consolidated statements of income, cash flows and stockholders’ equity for each of the three years in the period ended January [removed: 31, 2015] [added: 30, 2016] and our report dated [removed: April 1, 2015] [added: March 30, 2016] expressed an unqualified opinion thereon.

| (In thousands, except per share data) | | January [added: 30, 2016 | | | | January] 31, 2015 | | | | February 1, 2014 | | |

| Cash and cash equivalents [added: at beginning of year] | | [removed: $] | 389,149 | | | [removed: $] | 419,476 | | [added: | | 320,475 | |]

| Short-term investments | | | [removed: 150,209] [added: 130,000] | | | | [removed: —] [added: 150,209] | |

| Receivables, net | | | [removed: 52,440] [added: 64,992] | | | | [removed: 47,049] [added: 52,440] | |

| Merchandise inventories, net | | | [removed: 581,229] [added: 761,793] | | | | [removed: 457,933] [added: 581,229] | |

| Prepaid expenses and other current assets | | | [removed: 66,548] [added: 72,548] | | | | [removed: 55,993] [added: 66,548] | |

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

| Total current assets | | | [removed: 1,260,355] [added: 1,375,173] | | | | [removed: 1,002,697] [added: 1,260,355] | |

| Property and equipment, net | | | [removed: 717,159] [added: 847,600] | | | | [removed: 595,736] [added: 717,159] | |

| Deferred compensation plan assets | | | [removed: 5,656] [added: 8,145] | | | | [removed: 4,294] [added: 5,656] | |

| Total assets | | $ | [removed: 1,983,170] [added: 2,230,918] | | | $ | [removed: 1,602,727] [added: 1,983,170] | |

| Accounts payable | | $ | [removed: 190,778] [added: 196,174] | | | $ | [removed: 148,282] [added: 190,778] | |

| Accrued liabilities | | | [removed: 149,412] [added: 187,351] | | | | [removed: 103,180] [added: 149,412] | |

| Accrued income taxes | | | [removed: 19,404] [added: 12,702] | | | | [removed: 15,349] [added: 19,404] | |

| Total current liabilities | | | [removed: 359,594] [added: 396,227] | | | | [removed: 266,811] [added: 359,594] | |

| Deferred rent | | | [removed: 294,127] [added: 321,789] | | | | [removed: 261,630] [added: 294,127] | |

| Deferred income taxes | | | [removed: 74,498] [added: 59,527] | | | | [removed: 66,718] [added: 74,498] | |

| Other long-term liabilities | | | [removed: 7,442] [added: 10,489] | | | | [removed: 4,474] [added: 7,442] | |

| Total liabilities | | | [removed: 735,661] [added: 788,032] | | | | [removed: 599,633] [added: 735,661] | |

| Common stock, $.01 par value, 400,000 shares authorized; [removed: 64,762] [added: 64,131] and [removed: 64,793] [added: 64,762] shares issued; [removed: 64,184] [added: 63,540] and [removed: 64,231] [added: 64,184] shares outstanding; at January [added: 30, 2016, and January] 31, 2015, [removed: and February 1, 2014,] respectively | | | [removed: 647] [added: 641] | | | | 647 | |

| Treasury stock-common, at cost | | | [removed: (9,713] [added: (11,685] | ) | | | [removed: (8,125] [added: (9,713] | ) |

| Additional paid-in capital | | | [removed: 576,982] [added: 621,715] | | | | [removed: 548,194] [added: 576,982] | |

| Retained earnings | | | [removed: 679,593] [added: 832,215] | | | | [removed: 462,378] [added: 679,593] | |

| Total stockholders’ equity | | | [removed: 1,247,509] [added: 1,442,886] | | | | [removed: 1,003,094] [added: 1,247,509] | |

| Total liabilities and stockholders’ equity | | $ | [removed: 1,983,170] [added: 2,230,918] | | | $ | [removed: 1,602,727] [added: 1,983,170] | |

| (In thousands, except per share data) | | January [removed: 31, 2015] [added: 30, 2016] | | | | [removed: February 1, 2014] [added: January 31, 2015] | | | | February [removed: 2, 2013] [added: 1, 2014] | | |

| Net sales | | $ | [removed: 3,241,369] [added: 3,924,116] | | | $ | [removed: 2,670,573] [added: 3,241,369] | | | $ | [removed: 2,220,256] [added: 2,670,573] | |

| Cost of sales | | | [removed: 2,104,582] [added: 2,539,783] | | | | [removed: 1,729,325] [added: 2,104,582] | | | | [removed: 1,436,582] [added: 1,729,325] | |