COVID-19 Has Ugly Impact on Ulta Beauty
Efforts to mitigate the spread of COVID-19 had an ugly effect on Ulta Beauty's first quarter financial results which saw a huge loss and a 33% sales decline.
All of Ulta Beauty’s 1,264 stores were temporarily closed on March 19 as the company was deemed a non-essential retailer. When its first quarter ended on May 2, sales had declined 32.7% to $1,273 billion. The lost revenue caused the company to post a net loss of $78.5 million compared to a prior year profit of $192 million.
“For much of the first quarter, Ulta Beauty operated as a digital-only business, and while e-commerce sales exceeded our expectations, it was not enough to fully offset the impact of our store closings,” said Ulta Beauty CEO Mary Dillon. “With safety continuing to guide our decisions, we have begun to reopen stores, and today more than 800 stores offer curbside pickup and more than 330 stores are open to guests,” she said on May 28 when the company reported results.
Dillon said the company is seeing stronger-than-expected sales in reopened stores, but did not indicated what the company’s expectations were for re-opened stores and cautioned that it is still early.
“At Ulta Beauty, we have a strong, differentiated operating model, a brand that is known and loved, and passionate and optimistic associates, and I am confident we will emerge from this crisis well positioned to accelerate our market share gains and extend our competitive advantages,” Dillon said.
The curbside pick-up option was made available at select stores beginning on April 23 and by May 11 the company had also begun re-opening some stores. As of May 28, the company had re-opened 333 stores and offered curbside pick-up at 840 stores. As the impact of COVID-19 varies by region, the company said it plans to continue to reopen stores and expand its service offerings on a phased timeline, taking a thoughtful, measured approach based on a variety of criteria, including state and local guidelines.
Meanwhile, like many other companies concerned by the disruption to cash flows, Ulta took measures to reinforce its financial position and preserve cash. It drew down $800 million under its $1 billion revolving credit facility, suspended new hires, deferred merit pay increases for all corporate, store, and salon employees, reduced marketing and other discretionary expenses and reduced this year's store expansion plan to a range of 30 to 40 locations.
As result, the company ended the quarter with $1.2 billion in cash, cash equivalents, and short term investments and said it is confident that it currently has sufficient liquidity to fund operations.