Ulta Beauty (ULTA) 10-K risk factor changes: FY2018 vs FY2017

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

[removed: If any of the following] [added: The] risks [removed: occur,] [added: described below could materially and adversely affect] our business, financial condition, results of [removed: operations] [added: operations,] or future [removed: growth could suffer.][added: growth.]

[removed: _The] [added: 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, [removed: profitability] [added: profitability,] and cash [removed: flows._][added: flows.]

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

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

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

[removed: Additionally, the] [added: In addition, a] general deterioration in economic conditions could adversely affect our commercial partners including our 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.

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

[removed: _We] [added: We] may be unable to compete effectively in our highly competitive [removed: markets._][added: markets.]

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

We believe the principal bases upon which we compete are the breadth of merchandise, our value proposition, the quality of our guests’ shopping [removed: experience] [added: 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, [removed: marketing] [added: marketing,] and other resources and 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 [removed: recognition] [added: recognition,] or adopt more aggressive pricing policies than we can.

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

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

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

The secure processing, [removed: maintenance] [added: maintenance,] and transmission of this information is critical to our operations.

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

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

Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, [removed: lost] [added: lost,] or stolen.

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

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

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

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

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

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

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

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

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

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

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

| | [removed: •] [added: ·] | | actions by our existing or new [removed: competitors.] [added: competitors; and] |

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

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

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

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

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

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

If we are unable to anticipate and fulfill the merchandise needs of the consumer, our net sales may decrease and we may be forced to increase markdowns of slow-moving merchandise, either of which could have a material adverse effect on our business, financial condition, [removed: profitability] [added: profitability,] and cash flows.

[removed: _If] [added: If] we fail to retain our existing senior management team or attract qualified new personnel, such failure could have a material adverse effect on our business, financial condition, [removed: profitability] [added: profitability,] and cash [removed: flows._][added: flows.]

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

We could also be affected by additional risks that apply to all companies operating in the United States, as well as other risks that are not presently known to us or that we currently consider to be immaterial.

Additionally, volatility and disruption to the capital and credit markets in the recent global

| | · | | hurricanes, tornadoes, wildfires, earthquakes, mudslides, and other natural disasters. |

Our failure to effectively upgrade and expand our distribution capacity on a timely basis to keep pace with our anticipated growth in

We may

Our principal intellectual property rights include registered and common law trademarks on our name, “Ulta Beauty,” “Ulta,” “All Things Beauty.

significant penalties, claims, or product recalls, which could harm our results of operations or our ability to conduct our business.

An unfavorable resolution of litigation or other legal or

Natural disasters or other catastrophes could have a material adverse effect on our business, financial condition, profitability, and cash flows.

Natural disasters, such as hurricanes, tornados, wildfires, earthquakes, and mudslides, as well as acts of violence or terrorism, could result in physical damage to our properties, the temporary closure of stores and/or distribution centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods both to and from our distribution centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers.

Accordingly, if one or more natural disasters and/or acts of violence or terrorism were to occur, it could have a material adverse effect on our business, financial condition, profitability, and cash flows or may require us to incur increased costs.

Moreover, our landlords have occasionally been unable, due to the requirements of local zoning laws, to obtain in a

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We may

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_Investment in our common stock involves a high degree of risk and uncertainty.

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

While these declines have moderated, the level of consumer spending is not where it was prior to the global recession, and economic conditions could lead to further declines in consumer spending in the future.

Additionally, there can be no assurance that various governmental activities to stabilize the markets and stimulate the economy will restore consumer confidence or change spending habits.

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

and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet operations, website and software and other related operational systems.

efficacy data to the FDA.

aggregate.

As permitted by our certificate of incorporation and bylaws, we have a stockholder rights agreement, sometimes known as a “poison pill,” which provides for the issuance of a new series of preferred stock to holders of common stock.

In the event of a takeover attempt, this preferred stock gives rights to holders of common stock other than the acquirer to buy additional shares of common stock at a discount, leading to the dilution of the acquirer’s stake.

We paid a special cash dividend on May 15, 2012.

our stock.

[removed: _The] [added: 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.]

[removed: Overview][added: Overview]

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

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

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

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

Key aspects of our business 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 [removed: products] [added: products,] and salon styling tools, as well as a full-service salon in every store featuring hair, [removed: skin] [added: 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.

The continued growth of our business and any future increases in net sales, net [removed: income] [added: income,] and cash flows is dependent on our ability to execute our strategic imperatives: 1) acquire new guests and deepen loyalty with existing guests, 2) differentiate by delivering a distinctive and personalized guest experience across all channels, 3) offer relevant, [removed: innovative and often exclusive products that excite our guests, 4) deliver exceptional services in three core areas: hair, skin health and brows, 5) grow stores and e-commerce to reach and serve more guests, 6) invest in infrastructure to support our guest experience and growth, and capture scale efficiencies and 7) attract]

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

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

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, [removed: systems] [added: systems,] and supply chain required to support a 1,400 to 1,700 store chain with [removed: a] successful e-commerce [removed: business] and competitive omni-channel capabilities.

[removed: Basis] [added: Basis] of [removed: presentation][added: presentation]

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

Net sales include [added: retail] store and e-commerce merchandise sales as well as salon service revenue.

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

[removed: Stores] [added: Retail store] and e-commerce [removed: merchandise] sales are recorded net of estimated returns.

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

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

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

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

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

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

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

| | [removed: •] [added: ·] | | the cost of merchandise sold (retail [added: stores] and e-commerce), including substantially all vendor allowances, which are treated as a reduction of merchandise costs; |

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

| | [removed: •] [added: ·] | | shipping and handling costs; |

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

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

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

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

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

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

| | [removed: •] [added: ·] | | credit card program incentives; |

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

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

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

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

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

Interest income represents interest from [added: cash equivalents and] short-term investments with maturities of twelve months or less from the date of purchase.

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

We developed a unique specialty retail concept that offers All Things Beauty.

innovative, and often exclusive products that excite our guests, 4) deliver exceptional services in three core areas: hair, skin health, and brows, 5) grow stores and e-commerce to reach and serve more guests, 6) invest in infrastructure to support our guest experience and growth, and capture scale efficiencies, and 7) attract and retain talent that drives a winning culture.

E-commerce sales are recognized based on delivery of merchandise to the guest.

| | · | | gift card breakage; |

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

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

| | | | February 3, | | | January 28, | | | January 30, | |

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

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

| Retail stores and salon services comparable sales | | | | 7.1% | | | 13.4% | | | 10.0% |

| E-commerce comparable sales | | | | 59.9% | | | 56.2% | | | 47.5% |

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

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

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

| | | | February 3, | | | January 28, | | | January 30, | |

| Net sales | | | | 100.0% | | | 100.0% | | | 100.0% |

| Cost of sales | | | | 64.4% | | | 64.0% | | | 64.7% |

| Gross profit | | | | 35.6% | | | 36.0% | | | 35.3% |

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

| Selling, general and administrative expenses | | | | 21.9% | | | 22.1% | | | 22.0% |

| Pre-opening expenses | | | | 0.4% | | | 0.4% | | | 0.4% |

| Operating income | | | | 13.3% | | | 13.5% | | | 12.9% |

| Interest income, net | | | | 0.0% | | | 0.0% | | | 0.0% |

| Income before income taxes | | | | 13.3% | | | 13.5% | | | 12.9% |

| Income tax expense | | | | 3.9% | | | 5.1% | | | 4.8% |

| Net income | | | | 9.4% | | | 8.4% | | | 8.2% |

Net sales increased $1,029.8 million, or 21.2%, to $5,884.5 million in fiscal 2017 compared to $4,854.7 million in fiscal 2016.

The sales for the 53rd week of fiscal 2017 were approximately $108.8 million.

Excluding the impact of the 53rd week, salon service sales increased 12.8%.

E-commerce sales increased $223.4 million, or 64.7%, to $568.7 million compared

to $345.3 million in fiscal 2016.

Excluding the impact of the 53rd week, e-commerce sales increased 59.9%.

The inclusion of e-commerce resulted in an increase of approximately 390 basis points to the total comparable sales in fiscal 2017 compared to 240 basis points in fiscal 2016.

Gross profit increased $349.6 million, or 20.0%, to $2,096.8 million in fiscal 2017, compared to $1,747.2 million in fiscal 2016.

| | · | | 10 basis points deleverage due to the impact of a one-time bonus payment to hourly associates related to tax reform. |

Selling, general and administrative (SG&A) expenses increased $213.4 million, or 19.9%, to $1,287.2 million in fiscal 2017 compared to $1,073.8 million in fiscal 2016.

As a percentage of net sales, SG&A expenses decreased 20 basis points to 21.9% in fiscal 2017 compared to 22.1% in fiscal 2016.

The leverage in SG&A expenses was primarily due to:

| | · | | 30 basis points deleverage due to investments in store labor; and |

| | · | | 20 basis points deleverage due to the impact of a one-time bonus payment related to tax reform. |

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

and retain talent that drives a winning culture.

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

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

| Retail and salon comparable sales | | | 13.4 | % | | | 10.0 | % | | | 8.1 | % |

| E-commerce comparable sales | | | 56.2 | % | | | 47.5 | % | | | 56.4 | % |

| Cost of sales | | | 64.0 | % | | | 64.7 | % | | | 64.9 | % |

| Operating income | | | 13.5 | % | | | 12.9 | % | | | 12.7 | % |

| Income before income taxes | | | 13.5 | % | | | 12.9 | % | | | 12.7 | % |

Non-comparable stores, which include stores opened in fiscal 2016 as well

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.

The inclusion of the e-commerce business resulted in an increase of approximately 180 basis points to the Company’s consolidated same store sales calculation for fiscal 2015 and 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. |

SG&A expenses increased $151.3 million, or 21.3%, to $863.4 million in fiscal 2015 compared to $712.0 million in fiscal 2014.

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.

We did not utilize our credit facility during fiscal 2015 or 2014.

The lower tax rate in fiscal 2015 is primarily due to a decrease in state taxes and increase in federal income tax credits compared to 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.

During fiscal 2016, we opened 104 new stores, remodeled 12 stores and relocated two stores, compared to 103 new stores, four remodels and five relocations during fiscal 2015 and 100 new stores, nine remodels and two relocations during fiscal 2014.

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

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

| Merchandising | | | 100 | | | | 83 | | | | 42 | | | | 19 | |

| | | $ | 463 | | | $ | 374 | | | $ | 299 | | | $ | 249 | |

In 2017, new, remodeled and relocated stores and merchandising capital expenditure increases reflect the prestige brand expansions and the related in-store merchandising upgrades, as well as incremental spend related to non-prototypical store locations.

During fiscal year 2014, we purchased 321,113 shares of common stock for $39.9 million at an average price of $124.31.

On March 9, 2017, we announced that the Board of Directors authorized a new share repurchase program (the 2017 Share Repurchase Program) pursuant to which the Company may repurchase up to $425 million of the Company’s common stock.

The Loan Agreement contains a requirement to maintain a minimum amount of excess borrowing availability at all times.

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

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

| Operating lease obligations(1) | | $ | 2,006,041 | | | $ | 270,684 | | | $ | 534,500 | | | $ | 474,282 | | | $ | 726,575 | |

| Purchase obligations | | | 47,463 | | | | 40,518 | | | | 6,945 | | | | — | | | | — | |

| Total | | $ | 2,053,504 | | | $ | 311,202 | | | $ | 541,445 | | | $ | 474,282 | | | $ | 726,575 | |

| --- | --- |

results of each store over its remaining lease term.

In fiscal 2016, we recognized $3.1 million of fixed asset impairment charges related to store closures in Chicago, Illinois and Denham Springs, Louisiana.

[removed: Interest] [added: Interest] rate [removed: sensitivity][added: sensitivity]

Interest [removed: expense is offset by interest] income from [added: cash equivalents and] short-term investments with maturities of twelve months or less from the date of [removed: purchase.][added: purchase is partially offset by interest expense, which represents interest from borrowings and various fees associated with the credit facility.]

We did not have any outstanding borrowings on our credit facility as of February 3, 2018, January 28, 2017, or January 30, 2016.

We did not utilize the credit facility during fiscal 2016, 2015 or 2014.

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

[removed: Overview][added: Overview]

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

We provide unmatched product breadth, [removed: value] [added: value,] and convenience in a distinctive specialty retail environment.

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

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

We believe we offer the widest selection of categories across prestige and mass cosmetics, fragrance, haircare, skincare, bath and body [removed: products] [added: products,] and salon styling tools.

We also offer a full-service salon in every store featuring hair, [removed: skin] [added: skin,] and brow services.

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

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

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

Our store design, [removed: fixtures] [added: fixtures,] and open layout provide the flexibility to respond to consumer trends and changes in our merchandising strategy.

As of [removed: January 28, 2017,] [added: February 3, 2018,] we operated [removed: 974] [added: 1,074] retail stores across 48 states and the District of Columbia, as well as an e-commerce website.

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

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

On January 29, 2017, we implemented a holding company reorganization [removed: (the Reorganization)] pursuant to which Ulta Beauty, Inc., which was incorporated as a Delaware corporation in December 2016, became the successor to Ulta Salon, Cosmetics & Fragrance, Inc., the former publicly-traded company and now a wholly owned subsidiary of Ulta Beauty.

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 our Financial Statements and Supplementary Data included in Item 8 of this Annual Report on Form [removed: 10-K.][added: 10‑K.]

[removed: Our strategy][added: Our strategy]

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

We [removed: are also deploying additional] [added: continue to leverage our direct mail advertising, catalogs, and newspaper inserts to communicate with our guests, as well as] marketing [removed: tactics,] [added: tactics] such as digital, [added: television,] in-store [removed: events] [added: events,] and public relations to drive brand engagement, deepen the guest connection to Ulta [removed: Beauty] [added: Beauty,] and strengthen our authority in the beauty category.

[removed: We use this proprietary database] [added: In addition, we continue] to [added: leverage our loyalty program and CRM platform to] drive traffic, better understand our guests’ purchasing [removed: patterns] [added: patterns,] and support new store site selection.

We have approximately [removed: 23] [added: 28] million active Ulta Beauty guests enrolled in our Ultamate Rewards loyalty program.

[added: Loyalty] member transactions represent more than 90% of our annual total net sales, and the transaction data demonstrates that loyalty members shop with higher frequency and spend more per visit as compared to non-members.

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

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

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

To enable an elevated and engaging in-store guest experience, we are focusing on three key areas: process improvements, store and technology [removed: enhancements] [added: enhancements,] and labor and staffing [removed: solutions.]

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

For example, we have improved our mobile [removed: app, launched] [added: app and mobile site experience, offer] a try-on app called “Glamlab” to digitally test [removed: products] [added: products,] and expanded our online [removed: assortment.][added: assortment to include online only brands.]

[removed: _Offer relevant, innovative and often exclusive products that excite our guests._] We believe our broad selection of merchandise across categories, price [removed: points] [added: points,] and brands offers a unique shopping experience for our guests.

While the products we sell can be found in department stores, specialty stores, salons, drug [removed: stores and] [added: stores,] mass merchandisers, [added: and pure-play e-commerce companies,] we offer approximately 500 brands in one retail format so that our guests can find everything they need in one shopping trip.

Our vision is to be the undisputed destination for All Things [removed: Beauty, All in One Place™.][added: Beauty.]

We also continue to upgrade and enhance the Ulta Beauty Collection, our private label, which offers products in key categories such as cosmetics, [removed: skincare] [added: skincare,] and bath.

Because of our broad array of categories, [removed: brand] [added: brand,] and price points, we appeal to a wide range of consumers [removed: including women] of all ages, [removed: demographics] [added: demographics,] and lifestyles.

[removed: _Deliver] [added: Deliver] exceptional services in three core areas: hair, skin [removed: health] [added: health,] and [removed: brows._ Our services offerings play an important role on delivering on our brand promise to be All Things Beauty, All in One Place™.][added: brows.]

[added: All in One Place.™] We plan to establish Ulta 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 [removed: health] [added: health,] and brows.

We provide haircare services in our [removed: full service] [added: full-service] salons, using high quality Redken products and offering trend-right hairstyles and color.

Salon guests shop more frequently and spend [removed: almost] three times more than non-salon guests based on loyalty guest data.

We believe focusing on guest satisfaction, increasing effectiveness of [removed: promotions] [added: promotions,] and optimizing staffing and scheduling will make our services business an even stronger differentiator in our stores.

[removed: _Grow stores and e-commerce to reach and serve more guests._] Our real estate vision is to make Ulta Beauty accessible and convenient to more consumers across a variety of markets, a key part of how we plan to double our market share over the next several years.

We believe that over the [removed: long-term,] [added: long term,] we have the potential to grow our store base to between 1,400 to 1,700 Ulta Beauty stores in the United States.

All Things Beauty.

Collection.

Our Value Proposition.

Convenience.

We developed a unique specialty retail concept that offers All Things Beauty.

Acquire new guests and deepen loyalty with existing guests.

Differentiate by delivering a distinctive and personalized guest experience across all channels.

solutions.

Offer relevant, innovative, and often exclusive products that excite our guests.

All in One Place.™ To achieve this vision, we continue to evolve our product assortment with a focus on newness and exclusivity.

Our service offerings play an important role in delivering on our brand promise to be All Things Beauty.

Grow stores and e-commerce to reach and serve more guests.

E-commerce sales represented 9.7% of total net sales in the fiscal year ended February 3, 2018, and we expect it to continue to grow as a percentage of our mix in the future.

Invest in infrastructure to support our guest experience and growth and capture scale efficiencies.

We expect to capture operational

Attract and retain talent that drives a winning culture.

In addition to opening new stores, we also remodeled, relocated, or refreshed (prestige boutiques and related in-store merchandising upgrades) certain stores, as shown in the following table:

| | | | | | | |

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

| | | | | | | |

| | | | | | | |

| Stores relocated | | 7 | | 2 | | 5 |

| Stores refreshed | | 190 | | 213 | | 163 |

We also have an internal elite artistic team that consists of 12 stylists and six pro team members.

E-commerce

A typical Ulta Beauty store carries more than 20,000 products from approximately 500 well-established and emerging beauty brands across all categories and price points, including Ulta Beauty's own private label, the Ulta Beauty Collection.

brand image.

| | | | | | | |

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

| | | February 3, 2018 | | January 28, 2017 | | January 30, 2016 |

| Cosmetics | | 51% | | 51% | | 46% |

| | | 100% | | 100% | | 100% |

In fiscal 2017, we expanded our gift card program to increase distribution to thousands of supermarkets and other retailers through a partnership with a third party.

merchandise movement at the store level.

| --- | --- |

We continue to leverage our direct mail advertising, catalogs and newspaper inserts to communicate with our guests.

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

Loyalty

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

To achieve this vision, we continue to evolve our product assortment with a focus on newness, exclusivity and category dominance and we focus on three key areas: prestige cosmetics, mass cosmetics and professional hair care in order to maximize our leadership in these categories.

interactive, enjoyable way that reinforces the Ulta Beauty brand driving traffic to our stores, website, and native applications.

Our goal is to grow our e-commerce business from approximately 7% of sales as of January 28, 2017 to approximately 10% of total sales by the end of fiscal 2019.

Approximately 99% of our stores feature our most current store design.

We expect in 2017, the net investment to open a new store will increase

due to prestige brand expansions and several higher cost non-prototypical store locations expected to open in fiscal 2017.

We opened 104 (100 net of store closures) new stores during our fiscal year ended January 28, 2017 (fiscal 2016), representing an 11% increase in square footage growth compared to 103 (100 net of store closures) new stores in our fiscal year ended January 30, 2016 (fiscal 2015).

We also remodeled twelve stores and relocated two stores in fiscal 2016.

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

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

| | | 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | |

Ulta.com

Our e-commerce business represented approximately 7% of our total sales and grew 56.2% in fiscal 2016.

We expect Ulta.com to maintain rapid growth with the goal of reaching 10% of total sales by fiscal 2019.

A typical Ulta Beauty store carries more than 20,000 prestige, mass and professional beauty products.

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

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

| Cosmetics | | | 51 | % | | | 46 | % | | | 42 | % |

| | | | 100 | % | | | 100 | % | | | 100 | % |

We believe this structure maximizes

reports to the general manager.

See Note 4 to our consolidated financial statements, “Commitments and contingencies [removed: –] [added: -] General litigation,” for information on legal proceedings.

| --- | --- |

[removed: 10-K 1 d329810d10k.htm] FORM [removed: 10-K][added: 10‑K]

[removed: ##### [Table of Contents](#toc)][added: TABLE OF CONTENTS]

[removed: UNITED STATES] SECURITIES AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] DC [removed: 20549][added: 20549]

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

[removed: | | | For] [added: For] the fiscal year ended [removed: January 28, 2017 |][added: February 3, 2018]

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

[removed: | | | For] [added: For] the transition period from [removed: to |][added: _____________ to _____________]

[removed: Commission] [added: Commission] File Number: [removed: 001-33764][added: 001‑33764]

[removed: ULTA] [added: ULTA] BEAUTY, [removed: INC.][added: INC.]

[removed: _(Exact] [added: (Exact] name of Registrant as specified in its [removed: charter)_][added: charter)]

| [removed: Delaware _(State] [added: Delaware (State] or other jurisdiction of incorporation or [removed: organization)_ |] [added: organization)] | [removed: 38-4022268 _(I.R.S.] [added: 38‑4022268 (I.R.S.] Employer Identification [removed: No.)_] [added: No.)] |

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

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code: (630) [removed: 410-4800][added: 410‑4800]

| [removed: Title] [added: Title] of each [removed: class |] [added: class] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| Common stock, par value $0.01 per share | [removed: |] The NASDAQ Global Select Market |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

[removed: ☑] [added: ☒] Yes ☐ No

☐ Yes [removed: ☑] [added: ☒] No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or emerging growth] company.

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

| [removed: Large accelerated filer ☑ | | Accelerated filer ☐ | |] Non-accelerated filer ☐ [added: (Do not check if a smaller reporting company)] | | Smaller reporting company ☐ | [added: Emerging growth company ☐ |]

Indicate by check mark whether the registrant is a shell company (as defined in Rule [removed: 12b-2] [added: 12b‑2] of the Act).

The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on July [removed: 29, 2016,] [added: 28, 2017,] as reported on the NASDAQ Global Select Market, was approximately [removed: $10,919,168,000.][added: $9,854,201,000.]

Shares of the registrant’s common stock held by each executive officer and director and by each entity or person that, to the registrant’s knowledge, owned 5% or more of the registrant’s outstanding common stock as of July [removed: 29, 2016] [added: 28, 2017] 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: 23, 2017] [added: 29, 2018] was [removed: 62,132,265] [added: 60,611,334] shares.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Information required in response to Part III of Form [removed: 10-K] [added: 10‑K] (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference from portions of the registrant’s Proxy Statement for the [added: 2018] Annual Meeting of [removed: Stockholders to be held during 2017.][added: Stockholders.]

[removed: | Part I | | | | | | |][added: Part I]

| [removed: Item 1. | | [Business](#toc329810_1)] [added: [Item 1.](#Item1Business_571097)] | | [added: [Business](#Item1Business_571097)] | [removed: 2] | [added: 1] |

| [removed: Item 1A. | | [Risk Factors](#toc329810_2)] [added: [Item 1A.](#Item1ARiskFactors_628368)] | | [added: [Risk Factors](#Item1ARiskFactors_628368)] | [removed: 11] | [added: 10] |

| [removed: Item 1B.] [added: [Item 1B.](#Item1BUnresolvedStaffComments_655706)] | | [removed: [Unresolved] [added: [Unresolved] Staff [removed: Comments](#toc329810_3) | |] [added: Comments](#Item1BUnresolvedStaffComments_655706)] | [removed: 22] | [added: 21] |

| [removed: Item 2. | | [Properties](#toc329810_4)] [added: [Item 2.](#Item2Properties_676325)] | | [added: [Properties](#Item2Properties_676325)] | [removed: 22] | [added: 22] |

| [removed: Item 3. | | [Legal Proceedings](#toc329810_5)] [added: [Item 3.](#Item3LegalProceedings_817269)] | | [added: [Legal Proceedings](#Item3LegalProceedings_817269)] | [removed: 24] | [added: 23] |

| [removed: Item 4.] [added: [Item 4.](#Item4MineSafetyDisclosures_491985)] | | [removed: [Mine] [added: [Mine] Safety [removed: Disclosures](#toc329810_6) | |] [added: Disclosures](#Item4MineSafetyDisclosures_491985)] | [removed: 24] | [added: 23] |

| [removed: Item 5.] [added: [Item 5.](#Item5MarketforRegistrantsCommonEquityRel)] | | [removed: [Market] [added: [Market] for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#toc329810_7) | |] [added: Securities](#Item5MarketforRegistrantsCommonEquityRel)] | [removed: 25] | [added: 24] |

| [removed: Item 6.] [added: [Item 6.](#Item6_835160)] | | [removed: [Selected] [added: [Selected] Financial [removed: Data](#toc329810_8) | |] [added: Data](#Item6_835160)] | [removed: 29] | [added: 27] |

| [removed: Item 7.] [added: [Item 7.](#Item7_651497)] | | [removed: [Management’s] [added: [Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#toc329810_9) | |] [added: Operations](#Item7_651497)] | [removed: 30] | [added: 28] |

| [removed: Item 7A.] [added: [Item 7A.](#Item7AQuantitativeandQualitativeDisclosu)] | | [removed: [Quantitative] [added: [Quantitative] and Qualitative Disclosures about Market [removed: Risk](#toc329810_10) | |] [added: Risk](#Item7AQuantitativeandQualitativeDisclosu)] | [removed: 42] | [added: 41] |

10-K 1 ulta-20180203x10k.htm 10-K

UNITED STATES

or

| incorporation or organization) | Identification No.) |

| --- | --- |

| | |

| --- | --- |

☒ Yes ☐ No

☒ Yes ☐ No

| | | | |

| Large accelerated filer ☒ | | Accelerated filer ☐ | |

| | | | |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐ Yes ☒ No

Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended February 3, 2018.

ULTA BEAUTY, INC.

| | | | | |

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

| [Part I](#PartI_472203) | | | | 1 |

| [Part II](#PartII_970038) | | | | 24 |

| [Part IV](#PartIV_745687) | | | | 44 |

| [Item 16.](#Item16_10KSummary) | | [Form 10-K Summary](#Item16_10KSummary) | | 71 |

| [Signatures](#Signatures) | | | | 72 |

FORM 10-K

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

or

| | | |

| | | | | | | |

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

| | | (Do not check if a smaller reporting company) | | | | |

TABLE OF CONTENTS

| Part II | | | | | | |

| Part IV | | | | | | |

| | • | | the impact of weakness in the economy; |

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

| | • | | 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; |

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

Part I

| --- | --- |

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

[removed: _Stores_][added: Retail stores]

Our retail stores are predominantly located in convenient, [removed: high-traffic,] [added: high-traffic] locations such as power centers.

As of [removed: January 28, 2017,] [added: February 3, 2018,] we operated [removed: 974] [added: 1,074] retail stores in 48 states and the District of Columbia, as shown in the table below:

| Alabama | | [added: 17] | [removed: 15] | [added: Montana] | [added: | 6 |]

| Alaska | | [removed: |] 3 | | [added: Nebraska | | 5 |]

| Arizona | | [removed: |] 25 | | [added: Nevada | | 14 |]

| District of Columbia | | [removed: |] 1 | | [added: North Dakota | | 3 |]

| Florida | | [added: 72] | [removed: 66] | [added: Ohio] | [added: | 40 |]

| Georgia | | [added: 33] | [removed: 29] | [added: Oklahoma] | [added: | 19 |]

| Idaho | | [added: 8] | [removed: 7] | [added: Oregon] | [added: | 12 |]

| Illinois | | [added: 52] | [removed: 47] | [added: Pennsylvania] | [added: | 40 |]

| Kentucky | | [added: 11] | [removed: 10] | [added: Tennessee] | [added: | 21 |]

| Maine | | [removed: |] 3 | | [added: Utah | | 13 |]

| Maryland | | [added: 18] | [removed: 15] | [added: Virginia] | [added: | 25 |]

| Massachusetts | | [added: 17] | [removed: 15] | [added: Washington] | [added: | 26 |]

| Minnesota | | [added: 15] | [removed: 13] | [added: Wisconsin] | [added: | 20 |]

| Mississippi | | [added: 9] | [removed: 8] | [added: Wyoming] | [added: | 2 |]

| [added: Arkansas | | 9 | |] New Hampshire | | [removed: |] 7 | [removed: |]

| [removed: New Jersey] [added: California] | | [added: 135] | [removed: 26] | [added: New Jersey] | [added: | 29 |]

| [added: Colorado | | 24 | |] New Mexico | | [removed: |] 6 | [removed: |]

| [removed: New York] [added: Connecticut] | | [added: 13] | [removed: 36] | [added: New York] | [added: | 41 |]

| [added: Delaware | | 3 | |] North Carolina | | [removed: |] 28 | [removed: |]

| [removed: Rhode Island] [added: Indiana] | | [added: 22] | [removed: 2] | [added: Rhode Island] | [added: | 3 |]

| [added: Iowa | | 9 | |] South Carolina | | [removed: |] 15 | [removed: |]

| [added: Kansas | | 11 | |] South Dakota | | [removed: |] 2 | [removed: |]

| [added: Michigan | | 45 | |] West Virginia | | [removed: |] 6 | [removed: |]

[removed: _Distribution Centers_][added: Distribution centers]

We currently [added: lease and] operate five distribution centers located in Romeoville, Illinois; Phoenix, Arizona; Chambersburg, Pennsylvania; Greenwood, Indiana; and Dallas, Texas.

Our standard distribution center [removed: leases provide] [added: lease provides] for a fixed minimum annual rent and generally [removed: have] [added: has] a 10 or [removed: 15-year] [added: 15‑year] initial term with three or four renewal options with [removed: terms of five years each.]

The general location, approximate size, and lease expiration [removed: dates,] [added: dates] of our [removed: leased] distribution centers at [removed: January 28, 2017,] [added: February 3, 2018,] are set forth below:

| [removed: Location] [added: Location] | | [removed: Approximate] Square [removed: Feet | |] [added: Feet] | | [removed: Lease Expiration Date] [added: Date] |

| Romeoville, Illinois | | [removed: | 317,000 |] [added: 291,000] | | April 30, 2020 |

| Phoenix, Arizona | | [removed: |] 437,000 | | [removed: |] March 31, 2019 |

| Chambersburg, Pennsylvania | | [removed: |] 373,000 | | [removed: |] March 31, 2027 |

| Greenwood, Indiana | | [removed: |] 671,000 | | [removed: |] July 31, 2025 |

| Dallas, Texas | | [removed: |] 671,000 | | [removed: |] July 31, 2026 |

[removed: _Corporate Office_][added: Corporate office]

The corporate office is approximately 308,000 square feet with lease terms expiring from [removed: 2020] [added: 2018] to 2028.

In [added: fiscal] 2016, we opened a satellite corporate office in Chicago, Illinois.

| | | Number of | | | | Number of |

| Location | | stores | | Location | | stores |

| Louisiana | | 16 | | Texas | | 100 |

| Missouri | | 20 | | Total | | 1,074 |

terms of five years each.

| | | Approximate | | Lease Expiration |

In February 2017, we entered into a lease for a distribution center located in Fresno, California.

The Fresno distribution center is approximately 671,000 square feet with a lease expiration date of July 31, 2028 and is expected to open in fiscal 2018.

| --- | --- |

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

| | | | | |

| State | | Number of stores | | |

| Arkansas | | | 7 | |

| California | | | 121 | |

| Colorado | | | 20 | |

| Connecticut | | | 12 | |

| Delaware | | | 3 | |

| Indiana | | | 17 | |

| Iowa | | | 8 | |

| Kansas | | | 9 | |

| Louisiana | | | 16 | |

| Michigan | | | 43 | |

| Missouri | | | 16 | |

| Montana | | | 5 | |

| Nebraska | | | 4 | |

| Nevada | | | 14 | |

| North Dakota | | | 3 | |

| Ohio | | | 37 | |

| Oklahoma | | | 15 | |

| Oregon | | | 11 | |

| Pennsylvania | | | 36 | |

| Tennessee | | | 19 | |

| Texas | | | 95 | |

| Utah | | | 12 | |

| Virginia | | | 24 | |

| Washington | | | 22 | |

| Wisconsin | | | 18 | |

| Wyoming | | | 2 | |

| Total | | | 974 | |

[removed: EXECUTIVE] [added: EXECUTIVE] OFFICERS OF THE [removed: REGISTRANT][added: REGISTRANT]

The names of our executive officers, their ages and their positions are shown [removed: below.][added: below:]

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

| Mary N. Dillon | | [removed: | 55 |] [added: 56] | | Chief Executive Officer and member of the Board of Directors |

| Scott M. Settersten | | [removed: | 56 |] [added: 57] | | Chief Financial Officer, Treasurer and Assistant Secretary |

| Jodi J. Caro | | [removed: | 51 |] [added: 52] | | General [removed: Counsel and] [added: Counsel, Chief Compliance Officer &] Corporate Secretary |

| Jeffrey J. Childs | | [removed: | 59 |] [added: 60] | | Chief Human Resources Officer |

| David C. Kimbell | | [removed: | 50 |] [added: 51] | | Chief Merchandising and Marketing Officer |

[removed: _Mary] [added: Mary] N.

[removed: Dillon._] Ms. Dillon was named Chief Executive Officer effective July 2013.

[removed: _Scott] [added: Scott] M.

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

Prior to this role, Mr. Settersten served as Vice President of Accounting since 2010 and was responsible for accounting, tax, [removed: external reporting and investor relations.]

He joined Ulta Beauty in January 2005 [added: as a Director of Financial Reporting.]

[removed: _Jodi] [added: Jodi] J.

[removed: Caro._] Ms. Caro was named General [removed: Counsel and] [added: Counsel, Chief Compliance Officer &] Corporate Secretary in August 2015.

[removed: _Jeffrey] [added: Jeffrey] J.

[removed: _David] [added: David] C.

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

[removed: Part II][added: Part II]

| | | | | |

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

Dillon.

Settersten.

external reporting and investor relations.

Caro.

Childs.

Kimbell.

| --- | --- |

| | | | | | | |

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

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

as a Director of Financial Reporting.

Childs_.

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

The following table sets forth the high and low sales prices for our common stock on the NASDAQ Global Select Market during fiscal years [removed: 2016] [added: 2017] and [removed: 2015:][added: 2016:]

| [removed: Fiscal Year 2016] | | [removed: High] [added: High] | | | [added: Low] | [removed: Low] | | | [added: | | High | | | | | | Low | | |]

| First quarter | | $ | [added: 289.27 | | $ | 266.40 | | | | | $ |] 212.92 | | | [added: | |] $ | 146.77 | |

| Second quarter | | | [added: 314.86 | | | 243.61 | | | | | |] 262.12 | | | | [added: | |] 202.28 | |

| Third quarter | | | [added: 257.06 | | | 187.96 | | | | | |] 278.63 | | | | [added: | |] 230.10 | |

| Fourth quarter | | | [added: 249.30 | | | 191.80 | | | | | |] 273.99 | | | | [added: | |] 225.13 | |

[removed: _Holders] [added: Holders] of the registrant’s common [removed: stock_][added: stock]

The last reported sale price of our common stock on the NASDAQ Global Select Market on March [removed: 23, 2017] [added: 29, 2018] was [removed: $281.22] [added: $204.27] per share.

As of March [removed: 23, 2017,] [added: 29, 2018,] we had [removed: 43] [added: 42] holders of record of our common stock.

[removed: _Dividends_][added: Dividends]

No cash dividends were declared on our common stock in [removed: 2016] [added: fiscal 2017] or [removed: 2015] [added: fiscal 2016] nor have any decisions been made to pay a dividend in the future.

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

[removed: _Purchases] [added: Purchases] of equity securities by the issuer and affiliated [removed: purchasers_][added: purchasers]

The following table sets forth repurchases of our common stock during the fourth quarter of [removed: 2016:][added: fiscal 2017:]

| [added: |] (1) | [added: |] There were [removed: 189,632] [added: 265,596] shares repurchased as part of our publicly announced share repurchase program during the [removed: three months] [added: 14 weeks] ended [removed: January 28, 2017] [added: February 3, 2018] and there were [removed: 383] [added: 163] shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the period. |

| [added: |] (2) | [added: |] On March [removed: 10, 2016,] [added: 9, 2017,] we announced [removed: the 2016 Share Repurchase Program] [added: our 2017 share repurchase program] pursuant to which the Company may repurchase up to [removed: $425] [added: $425.0] million of the Company’s common stock. The [removed: 2016 Share Repurchase Program] [added: 2017 share repurchase program] does not have an expiration date and may be suspended or discontinued at any time. As of [removed: January 28, 2017, $101.0] [added: February 3, 2018, $78.6] million remained available under the [removed: $425] [added: $425.0] million [removed: 2016 Share Repurchase Program.] [added: 2017 share repurchase program.] On March [removed: 9, 2017,] [added: 15, 2018,] we announced the [removed: 2017 Share Repurchase Program.] [added: 2018 share repurchase program.] For additional information on the [removed: 2017 Share Repurchase Program] [added: 2018 share repurchase program] see Note 15 to our consolidated financial statements, “Subsequent event.” |

[removed: _Recent] [added: Recent] sales of unregistered [removed: securities_][added: securities]

[removed: _Securities] [added: Securities] authorized for issuance under equity compensation [removed: plans_][added: plans]

The following table provides information about Ulta Beauty common stock that may be issued under our equity compensation plans as of [removed: January 28, 2017:][added: February 3, 2018:]

| Equity compensation plans [removed: not] approved by security holders [removed: | | | — | |] [added: (1)] | | [removed: —] [added: 977,476] | | [added: $] | [added: 147.76] | [removed: —] | [added: 3,726,889] |

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

[added: | |] (2) [added: | |] Includes [removed: 830,072] [added: 765,536] shares issuable pursuant to the exercise of outstanding stock options, [removed: 141,922] [added: 133,705] shares issuable pursuant to restricted stock units and [removed: 41,305] [added: 78,235] shares issuable pursuant to performance-based units. [added: |]

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

[added: | |] (4) [added: | |] Represents shares that are available for issuance pursuant to the Amended and Restated 2011 Incentive Award Plan. [added: 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 and performance-based unit awarded. |]

[removed: _Stock] [added: Stock] performance [removed: graph_][added: graph]

[removed: _The] [added: The] following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such [removed: filing._][added: filing.]

Set forth below is a graph comparing the cumulative total stockholder return on 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 [removed: January 28, 2012] [added: February 2, 2013] through the end of Ulta Beauty’s fiscal year ended [removed: January 28, 2017.][added: February 3, 2018.]

The graph assumes an investment of $100 made at the closing of trading on [removed: January 28, 2012] [added: February 2, 2013] in (i) Ulta Beauty’s common stock, (ii) the stocks comprising the NQGS and (iii) stocks comprising the RLX.

[added: All values assume reinvestment] of the full amount of all dividends, if any, into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the applicable time period.

[removed: ][added: ]

| | | [removed: Fiscal] [added: Fiscal] year [removed: ended | | | | | |] [added: ended] | | | | | | | | | | | | | | | | |

| [removed: Company] [added: Company] / [removed: Index | | January 28, 2012 | | | | February 2, 2013] [added: Index] | | [added: 2013] | | [removed: February 1, 2014] | [added: 2014] | | | [removed: January 31, 2015] [added: 2015] | | | [added: 2016] | [removed: January 30, 2016] | | [added: 2017] | | [removed: January 28, 2017] | [added: 2018] | |

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

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

| | | Fiscal 2017 | | | | | | | | | Fiscal 2016 | | | | | | | | |

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

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

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

| | | | | | | | | | Approximate dollar | |

| | | Total | | | | | Total number of | | value of shares that may | |

| | | number of | | | | | shares purchased | | yet to be purchased | |

| | | shares | | Average | | | as part of publicly | | under plans or | |

| | | purchased | | price paid | | | announced plans | | programs | |

| Period | | (1) | | per share | | | or programs (2) | | (in thousands) (2) | |

| October 29, 2017 to November 25, 2017 | | 86,334 | | $ | 203.41 | | 86,334 | | $ | 118,828 |

| November 26, 2017 to December 30, 2017 | | 101,241 | | | 220.08 | | 101,078 | | | 96,582 |

| December 31, 2017 to February 3, 2018 | | 78,184 | | | 230.32 | | 78,184 | | | 78,575 |

| 14 weeks ended February 3, 2018 | | 265,759 | | $ | 217.68 | | 265,596 | | $ | 78,575 |

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

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

| | | | | | | | |

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

| | | | | | | | Number of securities |

| | | Number of securities | | | | | remaining available |

| | | to be issued upon | | Weighted-average | | | for future issuance |

| | | exercise of outstanding | | exercise price of | | | under equity |

| | | options, warrants | | outstanding options, | | | compensation |

| Plan category | | and rights (2) | | warrants and rights (3) | | | plans (4) |

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

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

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

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

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

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

| | | February 2, | | | February 1, | | | January 31, | | | January 30, | | | January 28, | | | February 3, | |

| Ulta Beauty | | $ | 100.00 | | $ | 87.07 | | $ | 134.88 | | $ | 185.21 | | $ | 278.35 | | $ | 227.05 |

| NQGS | | | 100.00 | | | 130.22 | | | 147.66 | | | 147.86 | | | 179.82 | | | 237.68 |

| RLX | | | 100.00 | | | 124.27 | | | 147.57 | | | 170.53 | | | 199.22 | | | 286.56 |

| --- | --- |

| | | | | | | | | |

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

| Fiscal Year 2015 | | High | | | | Low | | |

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

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

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

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

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

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

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

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

| October 30, 2016 to November 26, 2016 | | | 87,925 | | | $ | 237.04 | | | | 87,925 | | | $ | 127,458 | |

| November 27, 2016 to December 24, 2016 | | | 49,927 | | | | 257.05 | | | | 49,544 | | | | 114,721 | |

| December 25, 2016 to January 28, 2017 | | | 52,163 | | | | 262.68 | | | | 52,163 | | | | 101,019 | |

| 13 weeks ended January 28, 2017 | | | 190,015 | | | $ | 249.34 | | | | 189,632 | | | $ | 101,019 | |

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

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

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

| Equity compensation plans approved by security holders(1) | | | 1,013,299 | | | $ | 120.78 | | | | 3,912,453 | |

| Total | | | 1,013,299 | | | $ | 120.78 | | | | 3,912,453 | |

We currently grant awards only under the Amended and Restated 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 and performance-based unit awarded.

All values assume reinvestment

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

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

| Ulta Beauty | | $ | 100.00 | | | $ | 129.89 | | | $ | 113.09 | | | $ | 175.20 | | | $ | 240.57 | | | $ | 361.55 | |

| NASDAQ Global Select Market Com | | | 100.00 | | | | 111.65 | | | | 145.39 | | | | 164.87 | | | | 165.09 | | | | 200.78 | |

| S&P 500 Retailing Index | | | 100.00 | | | | 125.91 | | | | 156.47 | | | | 185.81 | | | | 214.72 | | | | 250.85 | |

The table should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form [removed: 10-K.][added: 10‑K.]

| | | [removed: Fiscal] [added: Fiscal] year [removed: ended(1) | | | | |] [added: ended (1)] | | | | | | | | | | | | | |

| | | [removed: January 28, 2017 | | | | January 30, 2016 |] [added: 2018 (2)] | | | [removed: January 31, 2015] [added: 2017] | | | [added: 2016] | [removed: February 1, 2014] | | [added: 2015] | | [removed: February 2, 2013] | [added: 2014] | |

| | | [removed: (In] [added: (In] thousands, except per [removed: share and per] [added: share,] square [removed: foot data) | | | | |] [added: foot, and store count data)] | | | | | | | | | | | | | |

| [removed: Income statement: | | | | |] [added: Income statement:] | | | | | | | | | | | | | | | |

| Net [removed: sales(2)] [added: sales (2)] | | $ | [removed: 4,854,737 |] [added: 5,884,506] | | $ | [removed: 3,924,116 |] [added: 4,854,737] | | $ | [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: 3,107,508] [added: 3,787,697] | | | [added: 3,107,508] | [removed: 2,539,783] | | [added: 2,539,783] | | [removed: 2,104,582] | [added: 2,104,582] | | | 1,729,325 | [removed: | | | 1,436,582 | |]

| Gross profit | | | [removed: 1,747,229] [added: 2,096,809] | | | [added: 1,747,229] | [removed: 1,384,333] | | [added: 1,384,333] | | [removed: 1,136,787] | [added: 1,136,787] | | | 941,248 | [removed: | | | 783,674 | |]

| Selling, general and administrative expenses | | | [removed: 1,073,834] [added: 1,287,232] | | | [added: 1,073,834] | [removed: 863,354] | | [added: 863,354] | | [removed: 712,006] | [added: 712,006] | | | 596,390 | [removed: | | | 488,880 | |]

| Pre-opening expenses | | | [removed: 18,571] [added: 24,286] | | | [added: 18,571] | [removed: 14,682] | | [added: 14,682] | | [removed: 14,366] | [added: 14,366] | | | 17,270 | [removed: | | | 14,816 | |]

| Operating income | | | [removed: 654,824] [added: 785,291] | | | [added: 654,824] | [removed: 506,297] | | [added: 506,297] | | [removed: 410,415] | [added: 410,415] | | | 327,588 | [removed: | | | 279,978 | |]

| Interest [removed: (income) expense,] [added: income,] net | | | [removed: (890 | ) | | | (1,143 | )] [added: (1,568)] | | | [removed: (894] [added: (890)] | [removed: )] | | [added: (1,143)] | [removed: (118] | [removed: )] | [added: (894)] | | [removed: 185] | [added: (118)] |

| Income before income taxes | | | [removed: 655,714] [added: 786,859] | | | [added: 655,714] | [removed: 507,440] | | [added: 507,440] | | [removed: 411,309] | [added: 411,309] | | | 327,706 | [removed: | | | 279,793 | |]

| Income tax expense [added: (3)] | | | [removed: 245,954] [added: 231,625] | | | [added: 245,954] | [removed: 187,432] | | [added: 187,432] | | [removed: 154,174] | [added: 154,174] | | | 124,857 | [removed: | | | 107,244 | |]

| Net income | | $ | [removed: 409,760 |] [added: 555,234] | | $ | [removed: 320,008 |] [added: 409,760] | | $ | [removed: 257,135 |] [added: 320,008] | | $ | [removed: 202,849 |] [added: 257,135] | | $ | [removed: 172,549 |] [added: 202,849] |

| Net income per common share: | | | | | | | | | | | | | | | | [removed: | | | | |]

| Basic | | $ | [removed: 6.55 |] [added: 9.02] | | $ | [removed: 5.00 |] [added: 6.55] | | $ | [removed: 4.00 |] [added: 5.00] | | $ | [removed: 3.17 |] [added: 4.00] | | $ | [removed: 2.73 |] [added: 3.17] |

| Diluted | | $ | [removed: 6.52 |] [added: 8.96] | | $ | [removed: 4.98 |] [added: 6.52] | | $ | [removed: 3.98 |] [added: 4.98] | | $ | [removed: 3.15 |] [added: 3.98] | | $ | [removed: 2.68 |] [added: 3.15] |

| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | [removed: | | | | |]

| Basic | | | [removed: 62,519] [added: 61,556] | | | [added: 62,519] | [removed: 63,949] | | [added: 63,949] | | [removed: 64,335] | [added: 64,335] | | | 63,992 | [removed: | | | 63,250 | |]

| Diluted | | | [removed: 62,851] [added: 61,975] | | | [added: 62,851] | [removed: 64,275] | | [added: 64,275] | | [removed: 64,651] | [added: 64,651] | | | 64,461 | [removed: | | | 64,396 | |]

| [removed: Other] [added: Other] operating [removed: data: | | | | |] [added: data:] | | | | | | | | | | | | | | | |

| Comparable sales [removed: increase:(3) | | | | |] [added: increase: (4)] | | | | | | | | | | | | | | | |

| Number of stores end of year | | | [removed: 974] [added: 1,074] | | | [added: 974] | [removed: 874] | | [added: 874] | | [removed: 774] | [added: 774] | | | 675 | [removed: | | | 550 | |]

| Total square footage end of year | | | [removed: 10,271,184] [added: 11,300,920] | | | [added: 10,271,184] | [removed: 9,225,957] | | [added: 9,225,957] | | [removed: 8,182,404] | [added: 8,182,404] | | | 7,158,286 | [removed: | | | 5,847,393 | |]

| Total square footage per [removed: store(4)] [added: store (5)] | | | [removed: 10,545] [added: 10,522] | | | [added: 10,545] | [removed: 10,556] | | [added: 10,556] | | [removed: 10,572] | [added: 10,572] | | | 10,605 | [removed: | | | 10,632 | |]

| Average total square [removed: footage(5)] [added: footage (6)] | | | [removed: 9,641,367] [added: 10,742,874] | | | [added: 9,641,367] | [removed: 8,724,581] | | [added: 8,724,581] | | [removed: 7,690,742] | [added: 7,690,742] | | | 6,555,960 | [removed: | | | 5,315,653 | |]

| Retail sales per average total square [removed: foot(6)] [added: foot (7)] | | $ | [removed: 468 |] [added: 548] | | $ | [removed: 424 |] [added: 504] | | $ | [removed: 402 |] [added: 450] | | $ | [removed: 393 |] [added: 421] | | $ | 407 | [removed: |]

| Capital expenditures | | | [removed: 373,747] [added: 440,714] | | | [added: 373,747] | [removed: 299,167] | | [added: 299,167] | | [removed: 249,067] | [added: 249,067] | | | 226,024 | [removed: | | | 188,578 | |]

| Depreciation and amortization | | | [removed: 210,295] [added: 252,713] | | | [added: 210,295] | [removed: 165,049] | | [added: 165,049] | | [removed: 131,764] | [added: 131,764] | | | 106,283 | [removed: | | | 88,233 | |]

| Repurchase of common shares | | | [removed: 344,275] [added: 367,581] | | | [added: 344,275] | [removed: 167,396] | | [added: 167,396] | | [removed: 39,923] | [added: 39,923] | | | 37,337 | [removed: | | | — | |]

| [removed: Balance] [added: Balance] sheet [removed: data: | | | | |] [added: data:] | | | | | | | | | | | | | | | |

| Cash and cash equivalents | | $ | [removed: 385,010 |] [added: 277,445] | | $ | [removed: 345,840 |] [added: 385,010] | | $ | [removed: 389,149 |] [added: 345,840] | | $ | [removed: 419,476 |] [added: 389,149] | | $ | [removed: 320,475 |] [added: 419,476] |

| Short-term investments | | | [removed: 30,000 | | | | 130,000 |] [added: 120,000] | | | [removed: 150,209] [added: 30,000] | | | [added: 130,000] | [removed: —] | | [added: 150,209] | | [removed: —] | [added: –] |

| Working [removed: capital(7)] [added: capital (8)] | | | [removed: 1,006,894] [added: 1,051,577] | | | [added: 1,006,894] | [removed: 978,946] | | [added: 978,946] | | [removed: 900,761] | [added: 900,761] | | | 735,886 | [removed: | | | 568,257 | |]

| Property and equipment, net | | | [removed: 1,004,358] [added: 1,189,453] | | | [added: 1,004,358] | [removed: 847,600] | | [added: 847,600] | | [removed: 717,159] | [added: 717,159] | | | 595,736 | [removed: | | | 483,059 | |]

| Total assets | | | [removed: 2,551,878] [added: 2,908,687] | | | [added: 2,551,878] | [removed: 2,230,918] | | [added: 2,230,918] | | [removed: 1,983,170] | [added: 1,983,170] | | | 1,602,727 | [removed: | | | 1,275,249 | |]

| Total [removed: stockholders’] [added: stockholders'] equity | | | [removed: 1,550,218] [added: 1,774,217] | | | [added: 1,550,218] | [removed: 1,442,886] | | [added: 1,442,886] | | [removed: 1,247,509] | [added: 1,247,509] | | | 1,003,094 | [removed: | | | 786,942 | |]

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

| [removed: (3)] | [added: (4) | |] Comparable sales increase reflects sales for stores beginning on the first day of the 14th month of operation. Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or comparable prior year. |

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

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

| | | February 3, | | | January 28, | | | January 30, | | | January 31, | | | February 1, | |

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

| Retail and salon comparable sales | | | 7.1% | | | 13.4% | | | 10.0% | | | 8.1% | | | 6.1% |

| E-commerce comparable sales | | | 59.9% | | | 56.2% | | | 47.5% | | | 56.4% | | | 76.6% |

| Total comparable sales increase | | | 11.0% | | | 15.8% | | | 11.8% | | | 9.9% | | | 7.9% |

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

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

| | (2) | | Fiscal 2017 includes 53 weeks; all other fiscal years reported include 52 weeks. Net sales for the 53rd week of fiscal 2017 were approximately $108.8 million. |

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

| | (3) | | Income tax expense of $231.6 million in fiscal 2017 represents an effective tax rate of 29.4% compared to fiscal 2016 tax expense of $246.0 million and an effective tax rate of 37.5%. On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. This new legislation reduced the federal corporate tax rate to 21.0% effective January 1, 2018. In accordance with Section 15 of the Internal Revenue Code, the Company will utilize a blended rate of 33.7% for the fiscal 2017 tax year, by applying a prorated percentage of the number of days prior to and subsequent to the January 1, 2018 effective date. |

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

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

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

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

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

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

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

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

| Dividends declared per common share | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1.00 | |

| Retail and salon comparable sales | | | 13.4 | % | | | 10.0 | % | | | 8.1 | % | | | 6.1 | % | | | 8.8 | % |

| E-commerce comparable sales | | | 56.2 | % | | | 47.5 | % | | | 56.4 | % | | | 76.6 | % | | | 30.7 | % |

| Total comparable sales increase | | | 15.8 | % | | | 11.8 | % | | | 9.9 | % | | | 7.9 | % | | | 9.3 | % |

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

| --- | --- |

| (2) | Fiscal 2012 was a 53-week operating year. The sales for the 53rd week of fiscal 2012 were approximately $55 million. |

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

[removed: Evaluation] [added: Evaluation] of disclosure controls and procedures over financial [removed: reporting][added: reporting]

Based on management’s evaluation as of [removed: January 28, 2017,] [added: February 3, 2018,] our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules [removed: 13a-15(e)] [added: 13a‑15(e)] and [removed: 15d-15(e)] [added: 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, [removed: summarized] [added: summarized,] and reported within the time periods specified in the SEC’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.

[removed: Management’s] [added: Management’s] annual report on internal control over financial [removed: reporting][added: reporting]