ULTA BEAUTY, INC., 10-Q filed on 12/3/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
9 Months Ended
Oct. 31, 2020
Nov. 30, 2020
Cover [Abstract]    
Entity Registrant Name Ulta Beauty, Inc.  
Document Quarterly Report true  
Document Transition Report false  
Entity Central Index Key 0001403568  
Document Type 10-Q  
Document Period End Date Oct. 31, 2020  
Amendment Flag false  
Current Fiscal Year End Date --01-30  
Entity File Number 001-33764  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 38-4022268  
Entity Address, Address Line One 1000 Remington Blvd.  
Entity Address, Address Line Two Suite 120  
Entity Address, City or Town Bolingbrook  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60440  
City Area Code 630  
Local Phone Number 410-4800  
Title of 12(b) Security Common Stock  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   56,338,639
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Trading Symbol ULTA  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Oct. 31, 2020
Feb. 01, 2020
Nov. 02, 2019
Current assets:      
Cash and cash equivalents $ 560,902 $ 392,325 $ 208,843
Short-term investments   110,000  
Receivables, net 136,271 139,337 112,888
Merchandise inventories, net 1,439,098 1,293,701 1,616,920
Prepaid expenses and other current assets 99,810 103,567 118,343
Prepaid income taxes 8,928 16,387 40,474
Total current assets 2,245,009 2,055,317 2,097,468
Property and equipment, net 1,042,262 1,205,524 1,233,412
Operating lease assets 1,510,030 1,537,565 1,529,524
Goodwill 10,870 10,870 10,870
Other intangible assets, net 2,696 3,391 3,622
Deferred compensation plan assets 30,141 27,849 26,269
Other long-term assets 29,986 23,356 27,683
Total assets 4,870,994 4,863,872 4,928,848
Current liabilities:      
Accounts payable 478,501 414,009 594,993
Accrued liabilities 268,310 246,088 249,112
Deferred revenue 224,862 237,535 190,188
Current operating lease liabilities 252,171 239,629 222,627
Accrued income taxes 6,499    
Total current liabilities 1,230,343 1,137,261 1,256,920
Non-current operating lease liabilities 1,661,750 1,698,718 1,706,806
Deferred income taxes 89,112 89,367 83,856
Other long-term liabilities 35,352 36,432 34,110
Total liabilities 3,016,557 2,961,778 3,081,692
Commitments and contingencies (Note 8)
Stockholders' equity:      
Common stock, $0.01 par value, 400,000 shares authorized; 57,024, 57,285 and 57,959 shares issued; 56,332, 56,609 and 57,283 shares outstanding; at October 31, 2020 (unaudited), February 1, 2020, and November 2, 2019 (unaudited), respectively 570 573 580
Treasury stock-common, at cost (37,704) (34,448) (34,272)
Additional paid-in capital 831,817 807,492 800,986
Retained earnings 1,059,840 1,128,477 1,079,862
Accumulated other comprehensive income (loss) (86)    
Total stockholders' equity 1,854,437 1,902,094 1,847,156
Total liabilities and stockholders' equity $ 4,870,994 $ 4,863,872 $ 4,928,848
v3.20.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
shares in Thousands
Oct. 31, 2020
Feb. 01, 2020
Nov. 02, 2019
Consolidated Balance Sheets      
Common stock, par value $ 0.01 $ 0.01 $ 0.01
Common stock, shares authorized 400,000 400,000 400,000
Common stock, shares issued 57,024 57,285 57,959
Common stock, shares outstanding 56,332 56,609 57,283
v3.20.2
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Oct. 31, 2020
Nov. 02, 2019
Oct. 31, 2020
Nov. 02, 2019
Consolidated Statements of Operations        
Net sales $ 1,552,033 $ 1,682,514 $ 3,953,252 $ 5,092,150
Cost of sales 1,006,514 1,059,081 2,775,121 3,217,971
Gross profit 545,519 623,433 1,178,131 1,874,179
Selling, general and administrative expenses 416,378 449,198 1,068,877 1,245,174
Impairment, restructuring and other costs 23,624   83,924  
Pre-opening expenses 4,240 6,455 12,782 15,667
Operating income 101,277 167,780 12,548 613,338
Interest expense (income), net 1,383 (900) 5,272 (4,617)
Income before income taxes 99,894 168,680 7,276 617,955
Income tax expense 25,096 38,933 2,935 134,729
Net income $ 74,798 $ 129,747 $ 4,341 $ 483,226
Net income per common share:        
Basic $ 1.33 $ 2.25 $ 0.08 $ 8.31
Diluted $ 1.32 $ 2.25 $ 0.08 $ 8.27
Weighted average common shares outstanding:        
Basic 56,327 57,568 56,355 58,123
Diluted 56,546 57,763 56,524 58,396
v3.20.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Oct. 31, 2020
Nov. 02, 2019
Oct. 31, 2020
Nov. 02, 2019
Consolidated Statements of Comprehensive Income        
Net income $ 74,798 $ 129,747 $ 4,341 $ 483,226
Other comprehensive income (loss):        
Foreign currency translation adjustments (116)   (86)  
Comprehensive income $ 74,682 $ 129,747 $ 4,255 $ 483,226
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Oct. 31, 2020
Nov. 02, 2019
Operating activities    
Net income $ 4,341 $ 483,226
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 226,386 219,207
Non-cash lease expense 196,354 219,220
Long-lived asset impairment charge 69,932  
Deferred income taxes (255) (8)
Stock-based compensation expense 22,979 19,108
Loss on disposal of property and equipment 5,219 4,821
Change in operating assets and liabilities:    
Receivables 3,066 5,812
Merchandise inventories (145,397) (402,591)
Prepaid expenses and other current assets 3,007 (5,487)
Income taxes 13,958 (23,477)
Accounts payable 62,337 190,977
Accrued liabilities 24,582 23,109
Deferred revenue (12,673) (8,866)
Operating lease liabilities (212,665) (198,181)
Other assets and liabilities (2,126) 30,636
Net cash provided by operating activities 259,045 557,506
Investing activities    
Purchases of short-term investments   (245,000)
Proceeds from short-term investments 110,000 245,000
Capital expenditures (116,745) (241,136)
Acquisitions, net of cash acquired (1,220)  
Purchases of equity investments (5,665) (43,757)
Net cash used in investing activities (13,630) (284,893)
Financing activities    
Proceeds from long-term debt 800,000  
Payments on long-term debt (800,000)  
Repurchase of common shares (72,981) (506,868)
Stock options exercised 1,346 43,211
Purchase of treasury shares (3,256) (9,364)
Debt issuance costs (1,861)  
Net cash used in financing activities (76,752) (473,021)
Effect of exchange rate changes on cash and cash equivalents (86)  
Net increase (decrease) in cash and cash equivalents 168,577 (200,408)
Cash and cash equivalents at beginning of period 392,325 409,251
Cash and cash equivalents at end of period 560,902 208,843
Supplemental information    
Cash paid for interest 701  
Income taxes paid, net of refunds 8,100 126,719
Non-cash capital expenditures $ 27,916 $ 44,271
v3.20.2
Consolidated Statements of Stockholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Common Stock
Treasury - Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total
Balance at Feb. 02, 2019 $ 592 $ (24,908) $ 738,671 $ 1,105,863   $ 1,820,218
Balance (in shares) at Feb. 02, 2019 59,232 (648)        
Increase (Decrease) in Stockholders' Equity            
Net income (loss)       192,221   192,221
Stock-based compensation     6,030     6,030
Adoption of accounting standards | ASU 2016-02, Leases (Topic 842)       (2,375)   (2,375)
Stock options exercised and other awards $ 4   42,052     42,056
Stock options exercised and other awards (in shares) 348          
Purchase of treasury shares   $ (9,183)       (9,183)
Purchase of treasury shares (in shares)   (27)        
Repurchase of common shares $ (3)     (107,396)   (107,399)
Repurchase of common shares (in shares) (318)          
Balance at May. 04, 2019 $ 593 $ (34,091) 786,753 1,188,313   1,941,568
Balance (in shares) at May. 04, 2019 59,262 (675)        
Balance at Feb. 02, 2019 $ 592 $ (24,908) 738,671 1,105,863   1,820,218
Balance (in shares) at Feb. 02, 2019 59,232 (648)        
Increase (Decrease) in Stockholders' Equity            
Net income (loss)           483,226
Repurchase of common shares           $ (506,868)
Repurchase of common shares (in shares)           (1,639)
Balance at Nov. 02, 2019 $ 580 $ (34,272) 800,986 1,079,862   $ 1,847,156
Balance (in shares) at Nov. 02, 2019 57,959 (676)       57,283
Balance at May. 04, 2019 $ 593 $ (34,091) 786,753 1,188,313   $ 1,941,568
Balance (in shares) at May. 04, 2019 59,262 (675)        
Increase (Decrease) in Stockholders' Equity            
Net income (loss)       161,258   161,258
Stock-based compensation     6,736     6,736
Stock options exercised and other awards     879     879
Stock options exercised and other awards (in shares) 15          
Purchase of treasury shares   $ (89)       (89)
Repurchase of common shares $ (8)     (270,893)   (270,901)
Repurchase of common shares (in shares) (792)          
Balance at Aug. 03, 2019 $ 585 $ (34,180) 794,368 1,078,678   1,839,451
Balance (in shares) at Aug. 03, 2019 58,485 (675)        
Increase (Decrease) in Stockholders' Equity            
Net income (loss)       129,747   129,747
Stock-based compensation     6,342     6,342
Stock options exercised and other awards     276     276
Stock options exercised and other awards (in shares) 4          
Purchase of treasury shares   $ (92)       (92)
Purchase of treasury shares (in shares)   (1)        
Repurchase of common shares $ (5)     (128,563)   (128,568)
Repurchase of common shares (in shares) (530)          
Balance at Nov. 02, 2019 $ 580 $ (34,272) 800,986 1,079,862   $ 1,847,156
Balance (in shares) at Nov. 02, 2019 57,959 (676)       57,283
Balance at Feb. 01, 2020 $ 573 $ (34,448) 807,492 1,128,477   $ 1,902,094
Balance (in shares) at Feb. 01, 2020 57,285 (676)       56,609
Increase (Decrease) in Stockholders' Equity            
Net income (loss)       (78,509)   $ (78,509)
Stock-based compensation     6,182     6,182
Foreign currency translation adjustments         $ (75) (75)
Stock options exercised and other awards     250     250
Stock options exercised and other awards (in shares) 45          
Purchase of treasury shares   $ (3,002)       (3,002)
Purchase of treasury shares (in shares)   (15)        
Repurchase of common shares $ (3)     (72,978)   (72,981)
Repurchase of common shares (in shares) (327)          
Balance at May. 02, 2020 $ 570 $ (37,450) 813,924 976,990 (75) 1,753,959
Balance (in shares) at May. 02, 2020 57,003 (691)        
Balance at Feb. 01, 2020 $ 573 $ (34,448) 807,492 1,128,477   $ 1,902,094
Balance (in shares) at Feb. 01, 2020 57,285 (676)       56,609
Increase (Decrease) in Stockholders' Equity            
Net income (loss)           $ 4,341
Repurchase of common shares           $ (72,981)
Repurchase of common shares (in shares)           (327)
Balance at Oct. 31, 2020 $ 570 $ (37,704) 831,817 1,059,840 (86) $ 1,854,437
Balance (in shares) at Oct. 31, 2020 57,024 (692)       56,332
Balance at May. 02, 2020 $ 570 $ (37,450) 813,924 976,990 (75) $ 1,753,959
Balance (in shares) at May. 02, 2020 57,003 (691)        
Increase (Decrease) in Stockholders' Equity            
Net income (loss)       8,052   8,052
Stock-based compensation     8,413     8,413
Foreign currency translation adjustments         105 105
Stock options exercised and other awards     327     327
Stock options exercised and other awards (in shares) 11          
Purchase of treasury shares   $ (63)       (63)
Balance at Aug. 01, 2020 $ 570 $ (37,513) 822,664 985,042 30 1,770,793
Balance (in shares) at Aug. 01, 2020 57,014 (691)        
Increase (Decrease) in Stockholders' Equity            
Net income (loss)       74,798   74,798
Stock-based compensation     8,384     8,384
Foreign currency translation adjustments         (116) (116)
Stock options exercised and other awards     769     769
Stock options exercised and other awards (in shares) 10          
Purchase of treasury shares   $ (191)       (191)
Purchase of treasury shares (in shares)   (1)        
Balance at Oct. 31, 2020 $ 570 $ (37,704) $ 831,817 $ 1,059,840 $ (86) $ 1,854,437
Balance (in shares) at Oct. 31, 2020 57,024 (692)       56,332
v3.20.2
Business and basis of presentation
9 Months Ended
Oct. 31, 2020
Business and basis of presentation  
Business and basis of presentation

1.Business and basis of presentation

On January 29, 2017, Ulta Salon, Cosmetics & Fragrance, Inc. implemented a holding company reorganization. Pursuant to the reorganization, 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, Inc. As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc. and its consolidated subsidiaries.

The Company was originally founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services. The stores also feature full-service salons. As of October 31, 2020, the Company operated 1,262 stores across 50 states, as shown in the table below.

Number of

Number of

Location

    

stores

    

Location

    

stores

Alabama

22

Montana

6

Alaska

3

Nebraska

5

Arizona

30

Nevada

15

Arkansas

10

New Hampshire

7

California

156

New Jersey

41

Colorado

26

New Mexico

7

Connecticut

17

New York

49

Delaware

3

North Carolina

34

Florida

86

North Dakota

3

Georgia

38

Ohio

43

Hawaii

4

Oklahoma

21

Idaho

9

Oregon

17

Illinois

55

Pennsylvania

44

Indiana

24

Rhode Island

3

Iowa

10

South Carolina

20

Kansas

13

South Dakota

3

Kentucky

15

Tennessee

27

Louisiana

18

Texas

117

Maine

3

Utah

14

Maryland

27

Vermont

1

Massachusetts

21

Virginia

30

Michigan

48

Washington

34

Minnesota

18

West Virginia

7

Mississippi

10

Wisconsin

20

Missouri

25

Wyoming

3

Total

1,262

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X. These financial statements were prepared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are of a normal

recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented.

The novel coronavirus (COVID-19) pandemic has had, and will continue to have, a negative impact on the Company’s business, financial condition, profitability, cash flows, and supply chain, although the full extent is uncertain. See Note 3, “Impact of the COVID-19 pandemic,” for additional details. In addition, the Company’s business is subject to seasonal fluctuation, with significant portions of the Company’s net sales and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season. As a result, the results for the 13 and 39 weeks ended October 31, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending January 30, 2021, or for any other future interim period or for any future year.

These interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020. All amounts are stated in thousands, with the exception of per share amounts and number of stores.

v3.20.2
Summary of significant accounting policies
9 Months Ended
Oct. 31, 2020
Summary of significant accounting policies  
Summary of significant accounting policies

2.Summary of significant accounting policies

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” in the Annual Report.

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s third quarter in fiscal 2020 and 2019 ended on October 31, 2020 and November 2, 2019, respectively.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and operating lease assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments. The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact the Company’s results of operations. While the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates, and such differences could be material.

Recent accounting pronouncements not yet adopted

Taxes – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intraperiod allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

Recently adopted accounting pronouncements

Intangibles – Goodwill and Other-Internal-Use Software. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The Company adopted the new guidance prospectively as of February 2, 2020, and its adoption did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

v3.20.2
Impact of the COVID-19 pandemic
9 Months Ended
Oct. 31, 2020
Impact of the COVID-19 pandemic  
Impact of the COVID-19 pandemic

3.Impact of the COVID-19 pandemic

In March 2020, the World Health Organization declared COVID-19 a global pandemic. In response to federal, state, and local government restrictions and recommendations and for the health and safety of our associates and guests, the Company temporarily closed all stores effective March 19, 2020. Effective April 19, 2020, the Company temporarily furloughed many store and salon associates and introduced curbside pickup, and on May 11, 2020, the Company started a phased store reopening process. By July 20, 2020, the full fleet of Ulta Beauty stores was operational. By October 31, 2020, salon and brow services had resumed in almost all stores. Reflecting operational limitations related to COVID-19 and the partial resumption of services, the Company has reactivated more than half of the furloughed associates.

Results of operations for the 13 and 39 weeks ended October 31, 2020 were significantly impacted by the effects of COVID-19, and the pandemic is expected to continue to have a negative impact on the Company’s business, financial condition, profitability, cash flows, and supply chain, although the full extent is uncertain. As COVID-19 continues to evolve and resurgences occur, the extent of the impact on the Company’s business, financial condition, profitability, cash flows, and supply chain will depend on future developments, including, but not limited to, the potential temporary reclosing of certain stores, the potential temporary restrictions on certain store operating hours and/or in-store capacity, the duration of potential future quarantines, shelter-in-place and other travel restrictions within the U.S. and other affected countries, the severity of the virus, the duration and spread of the virus, the duration, timing and severity of the impact on consumer spending, how quickly and to what extent normal economic and operating conditions can resume, and the public’s response to resurgences of the virus and its eventual aftermath, all of which are highly uncertain and cannot be predicted.

The multi-year, strategic investments the Company has made to enhance omnichannel and supply chain capabilities, combined with the ongoing commitment of the Company’s distribution associates, have enabled the Company to support increased e-commerce demand and guest engagement.

The Company has taken the following steps to preserve financial liquidity through these unprecedented circumstances:

the drawdown of $800,000 on March 18, 2020 under the Company’s revolving credit facility, which was repaid in full on September 2, 2020;
limited new hires and delayed merit increases for all corporate, store, and salon associates;
reduced marketing, travel and controllable expenses;
aligned inventory receipts with current sales trends;
prioritized payment obligations;
reduced new store openings, relocations and remodel projects; and
suspended the Company’s stock repurchase program, which may be resumed in the fourth quarter of fiscal 2020.

The Company evaluates long-lived assets for indicators of impairment quarterly or when events or changes in circumstances indicate that their carrying amounts may not be recoverable. As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain stores, which resulted in the recording of certain long-lived asset impairment and restructuring charges. See Note 5, “Impairment, restructuring and other costs,” for additional details.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll taxes, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  The most significant relief measures which the Company qualifies for are the employee retention credit, payroll tax deferral, and technical corrections to tax depreciation.

The Company recognizes government grants for which there is a reasonable assurance of compliance with grant conditions and receipt of credits. The Company believes there is a reasonable assurance that it will comply with the relevant conditions of the employee retention credit provision of the CARES Act and that it will receive the credit. The Company will continue to assess the treatment of the CARES Act to the extent additional guidance and regulations are issued, the further applicability of the CARES Act to the Company, and the potential impacts on the business.

Employee retention credit (ERC) and payroll tax deferral. The ERC allows for a refundable tax credit against certain employment taxes equal to 50% of the first ten thousand dollars in qualified wages paid to each employee commencing on March 13, 2020 and through January 1, 2021. To be eligible, the Company must (i) have had operations fully or partially suspended because of a shut-down order from a governmental authority related to COVID-19, or (ii) have had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019. Qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 pandemic. During the 13 and 39 weeks ended October 31, 2020, the Company recognized $2,402 and $50,583, respectively, related to the ERC as a reduction of the associated costs within selling, general and administrative expenses on the consolidated statements of operations and within accounts receivable, net on the consolidated balance sheets. 

Additionally, the CARES Act contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020. As of October 31, 2020, the Company has deferred $34,060 in social security tax payments, of which 50% are required to be remitted by December 2021 and the remaining 50% by December 2022. The deferred amounts are recorded as a liability within accrued liabilities on the Company’s consolidated balance sheets.

Technical corrections to tax depreciation. The CARES Act also includes a technical correction of tax depreciation methods for qualified improvement property, which changes 39-year property to 15-year property eligible for 100% tax bonus depreciation. This provision of the CARES Act resulted in a cash tax refund of $4,600 relating to property and equipment, from filing an amended federal income tax return, as of October 31, 2020. Furthermore, the Company expects the changes to qualified impairment property depreciation to result in reductions to estimated income tax payments for fiscal 2020.

v3.20.2
Revenue
9 Months Ended
Oct. 31, 2020
Revenue  
Revenue

4.Revenue

The Company’s net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue. Other revenue sources include the private label and co-branded credit card programs, as well as deferred revenue related to the loyalty program and gift card breakage.

Disaggregated revenue

The following table sets forth the approximate percentage of net sales by primary category:

13 Weeks Ended  

39 Weeks Ended

(Percentage of net sales)

October 31,

2020

November 2,

2019

October 31,

2020

November 2,

2019

Cosmetics

45%

51%

46%

50%

Skincare, bath, and fragrance

26%

21%

26%

21%

Haircare products and styling tools

21%

18%

20%

19%

Services

4%

6%

4%

6%

Other (nail products, accessories, and other)

4%

4%

4%

4%

100%

100%

100%

100%

Deferred revenue

Deferred revenue primarily represents contract liabilities for the Company’s obligation to transfer additional goods or services to a guest for which the Company has received consideration, such as unredeemed Ultamate Rewards loyalty points and unredeemed Ulta Beauty gift cards. In addition, the Company recognizes breakage on gift cards proportionately as redemption occurs.

The following table provides a summary of the changes included in deferred revenue:

13 Weeks Ended

39 Weeks Ended  

(In thousands)

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Beginning balance

$

207,746

$

171,953

$

230,011

$

193,585

Additions to contract liabilities (1)

40,932

66,167

128,402

145,728

Deductions to contract liabilities (2)

(39,032)

(62,816)

(148,767)

(164,009)

Ending balance

$

209,646

$

175,304

$

209,646

$

175,304

(1)Loyalty points and gift cards issued in the current period but not redeemed or expired.
(2)Revenue recognized in the current period related to the beginning liability.

Other amounts included in deferred revenue were $15,216 and $14,884 at October 31, 2020 and November 2, 2019, respectively.

v3.20.2
Impairment, restructuring and other costs
9 Months Ended
Oct. 31, 2020
Impairment, restructuring and other costs  
Impairment, restructuring and other costs

5.Impairment, restructuring and other costs

Impairment of long-lived tangible assets

The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets. The asset group identified is at the store level and includes both property and equipment and operating lease assets.

Significant estimates are used in determining future cash flows of each store over its remaining lease term including our expectations of future projected cash flows including revenues, operating expenses, and market conditions. An impairment loss is recorded if the carrying amount of the long-lived asset exceeds its fair value.

The Company evaluates long-lived assets for indicators of impairment quarterly or when events or changes in circumstances indicate that their carrying amounts may not be recoverable. The Company performs an undiscounted cash flow analysis over the long-lived assets. Asset groups are written down only to the extent that their carrying value is lower than their respective fair value. Fair values of the asset group are determined by discounting the cash flows at a rate that approximates the cost of capital of a market participant. Management’s forecast of future cash flows is based on the income approach. The fair value of individual operating lease assets is determined using estimated market rent assessments.

As a result of the COVID-19 pandemic, the Company experienced lower than projected revenues and identified indicators of impairment for certain stores. The Company’s analysis indicated that the carrying values of certain long-lived assets exceeded their respective fair values. As a result, the Company recognized an impairment charge of $40,428 for the 26 weeks ended August 1, 2020. There were no asset impairment charges recognized during the 13 weeks ended October 31, 2020. These charges are recorded in impairment, restructuring and other costs in the consolidated statements of operations. These impairment charges were primarily driven by lower than projected revenues, lower market rate assessments, and the effect of temporary store closures as a result of the COVID-19 pandemic.

The determination of estimated market rent used in the fair value estimate of the Company’s operating lease assets included within the respective store asset group requires significant management judgment. Changes in these estimates could have a significant impact on whether long-lived store assets should be further evaluated for impairment and could have a significant impact on the resulting impairment charge.

The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include: the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses, and market conditions.

Restructuring and other costs

The following table provides a summary of the restructuring and other charges included in impairment, restructuring and other costs in the consolidated statements of operations:

13 Weeks Ended

39 Weeks Ended

October 31,

October 31,

(In thousands)

    

2020

    

2020

Store Closures

Long-lived asset impairment charges (1)

$

$

19,569

Lease termination costs

1,844

1,844

Severance (2)

186

489

Suspension of Canadian expansion

Long-lived asset impairment charges (1)

$

9,935

$

9,935

Lease termination costs

5,317

5,317

Severance (2)

634

634

Other Severance (2)

$

5,708

$

5,708

Total

$

23,624

$

43,496

(1)The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include: the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses, and market conditions.
(2)As of October 31, 2020, the Company's restructuring accrual recorded in accrued liabilities on the consolidated balance sheets was $6,202 and is primarily for severance.

Store closures. During the second quarter of fiscal 2020, the Company announced that after evaluating its store portfolio, it would permanently close 19 stores in the third quarter of fiscal 2020. Accordingly, for the 13 and 39 weeks ended October 31, 2020, the Company recognized restructuring charges related to store closures of $2,030 and $21,902, respectively. There were no related restructuring charges for the 13 and 39 weeks ended November 2, 2019. The impairment charges reduced the carrying value of the lease asset to its estimated fair value. Fair value was estimated using an income-approach based on management's forecast of future cash flows expected to be derived from the property based on current sublease market rent.

Suspension of Canadian expansion. In 2019, the Company announced plans to expand internationally with an initial launch into Canada. The Company continues to believe international markets provide a long-term growth opportunity for the Company. However, given the current operating environment, in September 2020 the Company decided to prioritize growth of its U.S. operations at this time and suspended its planned expansion to Canada. Investments to support the expansion into Canada have largely been limited to early-stage infrastructure buildout and lease obligations for a small number of stores. In conjunction with this decision, the Company expects to incur pre-tax costs in the range of $30,000 to $40,000, the majority of which will be recognized in fiscal 2020. During the 13 and 39 weeks ended October 31, 2020, the Company recognized restructuring charges related to suspension of the Canada expansion of $15,886. The remaining estimated charges primarily relate to lease termination costs. There were no related restructuring charges for the 13 and 39 weeks ended November 2, 2019.

Other severance. As part of the efforts to optimize its cost structure, the Company eliminated the salon manager and prestige manager roles and created a new, single service manager. During the 13 and 39 weeks ended October 31, 2020, the Company recognized severance charges of $5,708. There were no related severance charges for the 13 and 39 weeks ended November 2, 2019.

v3.20.2
Goodwill and Other Intangible Assets
9 Months Ended
Oct. 31, 2020
Goodwill and Other Intangible Assets  
Goodwill and Other Intangible Assets

6.Goodwill and other intangible assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $10,870 at October 31, 2020, February 1, 2020, and November 2, 2019. No additional goodwill was recognized during the 13 and 39 weeks ended October 31, 2020. The Company reviews the recoverability of goodwill annually during the fourth quarter or more frequently if an event occurs or circumstances change that would indicate that impairment may exist.

Other intangible assets with finite useful lives are amortized over their useful lives. The Company reviews the recoverability of long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.

As a result of the COVID-19 pandemic and decline in the macroeconomic environment, the Company performed an interim impairment analysis as of October 31, 2020, which indicated that no impairment existed for goodwill or other intangible assets.

v3.20.2
Leases
9 Months Ended
Oct. 31, 2020
Leases  
Leases

7.Leases

The Company leases retail stores, distribution and fast fulfillment centers, corporate offices, and certain equipment under non-cancellable operating leases with various expiration dates through 2033. Leases generally have an initial lease term of 10 years and include renewal options under substantially the same terms and conditions as the original leases. Leases do not contain any material residual value guarantees or material restrictive covenants.

All retail store, distribution and fast fulfillment center, and corporate office leases are classified as operating leases. The Company does not have any finance leases.

Lease cost

The majority of operating lease cost relates to retail stores and distribution and fast fulfillment centers and is classified within cost of sales. Operating lease cost for corporate offices is classified within selling, general and administrative expenses. Operating lease cost from the control date through store opening date is classified within pre-opening expenses. Operating lease cost was $75,649 and $72,467 for the 13 weeks ended October 31, 2020 and November 2, 2019, respectively. Operating lease cost was $228,881 and $215,388 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.

Other information

The following table presents supplemental disclosures of cash flow information related to operating leases:

39 Weeks Ended

(In thousands)

October 31,

2020

November 2,

2019

Cash paid for operating lease liabilities (1)

$

263,893

$

251,468

Operating lease assets obtained in exchange for operating lease liabilities (non-cash)

188,240

287,645

(1)Excludes cash received for tenant incentives of $22,789 and $57,160 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.
v3.20.2
Commitments and contingencies
9 Months Ended
Oct. 31, 2020
Commitments and contingencies  
Commitments and contingencies

8.Commitments and contingencies

The Company is involved in various legal proceedings that are incidental to the conduct of the business including both class action and single plaintiff litigation. In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

v3.20.2
Debt
9 Months Ended
Oct. 31, 2020
Debt  
Debt

9.Debt

On March 11, 2020, the Company entered into Amendment No. 1 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender; PNC Bank, National Association, as Documentation Agent and a Lender; and the other lenders party thereto. The Loan Agreement matures on March 11, 2025, provides maximum revolving loans equal to the lesser of $1,000,000 or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $50,000 subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $100,000, subject to the consent by each lender and other conditions. The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement. Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0% to 0.125% or the London Interbank Offered Rate plus a margin of 1.125% to 1.250%, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20% per annum.

As of October 31, 2020, February 1, 2020, and November 2, 2019, the Company had no borrowings outstanding under the credit facility and the weighted average interest rate was 1.56% for the 39 weeks ended October 31, 2020. As of October 31, 2020, the Company was in compliance with all terms and covenants of the Loan Agreement.

v3.20.2
Fair value measurements
9 Months Ended
Oct. 31, 2020
Fair value measurements  
Fair value measurements

10.Fair value measurements

The carrying value of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximates their estimated fair values due to the short maturities of these instruments.

Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows:

Level 1 – observable inputs such as quoted prices for identical instruments in active markets.
Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.
Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of October 31, 2020, February 1, 2020, and November 2, 2019, the Company held financial liabilities included in other long-term liabilities on the consolidated balance sheets of $29,240, $29,442, and $27,417, respectively, related to its non-qualified deferred compensation plan. The liabilities have been categorized as Level 2 as they are based on third-party reported values, which are based primarily on quoted market prices of underlying assets of the funds within the plan.

Some assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. These assets can include long-lived assets and goodwill that are reduced to fair value when impaired. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

v3.20.2
Investments
9 Months Ended
Oct. 31, 2020
Investments  
Investments

11. Investments

Short-term investments typically consist of certificates of deposit and are carried at cost, which approximates fair value and are recorded in the consolidated balance sheets in short-term investments. The Company did not have short-term investments as of October 31, 2020 and November 2, 2019. The Company’s short-term investments were $110,000 as of February 1, 2020.

The Company’s investments in renewable energy projects are accounted for under the equity method of accounting.  The balance of these investments was $3,642, $3,936, and $11,000 as of October 31, 2020, February 1, 2020, and November 2, 2019, respectively, and is included in other long-term assets on the consolidated balance sheets. The Company contributed capital of $5,665 and received distributions including $1,690 of investment tax credits during the 39 weeks ended October 31, 2020. The Company contributed capital of $43,757 and received distributions including $31,554 of investment tax credits during the 39 weeks ended November 2, 2019.

v3.20.2
Stock-based compensation
9 Months Ended
Oct. 31, 2020
Stock-based compensation  
Stock-based compensation

12.Stock-based compensation

The Company measures stock-based compensation expense on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite service period for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model using the following weighted-average assumptions for the periods indicated:

    

39 Weeks Ended

October 31,

November 2,

    

2020

    

2019

Volatility rate

 

43.0%

31.0%

Average risk-free interest rate

 

0.3%

2.3%

Average expected life (in years)

 

3.4

 

3.5

Dividend yield

 

None

 

None

The Company granted 248 and 97 stock options during the 39 weeks ended October 31, 2020 and November 2, 2019, respectively. The stock-based compensation expense for stock options was $2,900 and $2,204 for the 13 weeks ended October 31, 2020 and November 2, 2019, respectively. The stock-based compensation expense for stock options was $8,247 and $6,523 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively. The weighted-average grant date fair value of these stock options was $54.40 and $89.91 for the 39 weeks ended October 31, 2020 and

November 2, 2019, respectively. At October 31, 2020, there was approximately $20,691 of unrecognized stock-based compensation expense related to unvested stock options.

The Company issued 161 and 52 restricted stock units during the 39 weeks ended October 31, 2020 and November 2, 2019, respectively. The stock-based compensation expense for restricted stock units was $5,098 and $3,429 for the 13 weeks ended October 31, 2020 and November 2, 2019, respectively. The stock-based compensation expense for restricted stock units was $14,446 and $9,672 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively. At October 31, 2020, there was approximately $34,048 of unrecognized stock-based compensation expense related to restricted stock units.

The Company did not issue any performance-based restricted stock units during the 39 weeks ended October 31, 2020. The Company issued 21 performance-based restricted stock units during the 39 weeks ended November 2, 2019. The stock-based compensation expense for performance-based restricted stock units was $386 for the 13 weeks ended October 31, 2020. The stock-based compensation benefit for performance-based restricted stock units was $122 for the 13 weeks ended November 2, 2019. The stock-based compensation expense for performance-based restricted stock units was $286 and $2,979 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively. At October 31, 2020, there was approximately $613 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

v3.20.2
Income Taxes
9 Months Ended
Oct. 31, 2020
Income Taxes  
Income Taxes

13.Income taxes

Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which the Company operates stores. Income tax expense of $25,096 for the 13 weeks ended October 31, 2020 represents an effective tax rate of 25.1%, compared to $38,933 of tax expense representing an effective tax rate of 23.1% for the 13 weeks ended November 2, 2019. The higher effective tax rate is primarily due to less investment tax credits received.

Income tax expense of $2,935 for the 39 weeks ended October 31, 2020 represents an effective tax rate of 40.3%, compared to $134,729 of tax expense representing an effective tax rate of 21.8% for the 39 weeks ended November 2, 2019. The higher effective tax rate is primarily due to a near break-even pre-tax operating income in fiscal 2020, less investment tax credits received, and tax expense from the income tax accounting for share-based compensation compared to a tax benefit in fiscal 2019.

v3.20.2
Net income per common share
9 Months Ended
Oct. 31, 2020
Net income per common share  
Net income per common share

14.Net income per common share

The following is a reconciliation of net income and the number of shares of common stock used in the computation of net income per basic and diluted share:

13 Weeks Ended

39 Weeks Ended

October 31,

November 2,

October 31,

November 2,

(In thousands, except per share data)

    

2020

    

2019

    

2020

    

2019

Numerator:

Net income

    

$

74,798

$

129,747

$

4,341

$

483,226

Denominator:

Weighted-average common shares – Basic

56,327

57,568

56,355

58,123

Dilutive effect of stock options and non-vested stock

219

195

169

273

Weighted-average common shares – Diluted

56,546

57,763

56,524

58,396

Net income per common share:

Basic

$

1.33

$

2.25

$

0.08

$

8.31

Diluted

$

1.32

$

2.25

$

0.08

$

8.27

The denominator for diluted net income per common share for the 13 weeks ended October 31, 2020 and November 2, 2019 excludes 246 and 219 employee stock options and restricted stock units, respectively, due to their anti-dilutive

effects. The denominator for diluted net income per common share for the 39 weeks ended October 31, 2020 and November 2, 2019 excludes 562 and 217 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects. Outstanding performance-based restricted stock units are included in the computation of dilutive shares only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be considered satisfied if the end of the reporting period were the end of the related contingency period and the results would be dilutive under the treasury stock method.

v3.20.2
Share repurchase program
9 Months Ended
Oct. 31, 2020
Share repurchase program  
Share repurchase program

15.Share repurchase program

On March 15, 2018, the Company announced that the Board of Directors authorized a share repurchase program (the 2018 Share Repurchase Program) pursuant to which the Company could repurchase up to $625,000 of the Company’s common stock. The 2018 Share Repurchase Program authorization revoked the previously authorized but unused amount of $41,317 from the earlier share repurchase program. The 2018 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

On March 14, 2019, the Company announced that the Board of Directors authorized a new share repurchase program (the 2019 Share Repurchase Program) pursuant to which the Company could repurchase up to $875,000 of the Company’s common stock. The 2019 Share Repurchase Program authorization revoked the previously authorized but unused amount of $25,435 from the 2018 Share Repurchase Program. The 2019 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

On March 12, 2020, the Company announced that the Board of Directors authorized a new share repurchase program (the 2020 Share Repurchase Program) pursuant to which the Company may repurchase up to $1,600,000 of the Company’s common stock. The 2020 Share Repurchase Program authorization revoked the previously authorized but unused amounts of $165,309 from the 2019 Share Repurchase Program. The 2020 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time. On April 2, 2020, the Company announced that the share repurchase program had been suspended in order to strengthen its liquidity and preserve cash in the early stages of the COVID-19 pandemic. The Company may resume the 2020 Share Repurchase Program in the fourth quarter of fiscal 2020.

A summary of the Company’s common stock repurchase activity is presented in the following table:

39 Weeks Ended  

(In thousands)

October 31,

2020

November 2,

2019

Shares repurchased

327

1,639

Total cost of shares repurchased

$

72,981

$

506,868

v3.20.2
Summary of significant accounting policies (Policies)
9 Months Ended
Oct. 31, 2020
Summary of significant accounting policies  
Fiscal quarter

Fiscal quarter

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s third quarter in fiscal 2020 and 2019 ended on October 31, 2020 and November 2, 2019, respectively.

Use of estimates

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and operating lease assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments. The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact the Company’s results of operations. While the full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated, the Company has made accounting estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates, and such differences could be material.

Recent accounting pronouncements not yet adopted and Recently adopted accounting pronouncements

Recent accounting pronouncements not yet adopted

Taxes – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intraperiod allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

Recently adopted accounting pronouncements

Intangibles – Goodwill and Other-Internal-Use Software. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The Company adopted the new guidance prospectively as of February 2, 2020, and its adoption did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. 

v3.20.2
Business and basis of presentation (Tables)
9 Months Ended
Oct. 31, 2020
Business and basis of presentation  
Schedule of stores operated by geographic area

Number of

Number of

Location

    

stores

    

Location

    

stores

Alabama

22

Montana

6

Alaska

3

Nebraska

5

Arizona

30

Nevada

15

Arkansas

10

New Hampshire

7

California

156

New Jersey

41

Colorado

26

New Mexico

7

Connecticut

17

New York

49

Delaware

3

North Carolina

34

Florida

86

North Dakota

3

Georgia

38

Ohio

43

Hawaii

4

Oklahoma

21

Idaho

9

Oregon

17

Illinois

55

Pennsylvania

44

Indiana

24

Rhode Island

3

Iowa

10

South Carolina

20

Kansas

13

South Dakota

3

Kentucky

15

Tennessee

27

Louisiana

18

Texas

117

Maine

3

Utah

14

Maryland

27

Vermont

1

Massachusetts

21

Virginia

30

Michigan

48

Washington

34

Minnesota

18

West Virginia

7

Mississippi

10

Wisconsin

20

Missouri

25

Wyoming

3

Total

1,262

v3.20.2
Revenue (Tables)
9 Months Ended
Oct. 31, 2020
Revenue  
Schedule of approximate percentage of net sales by primary category

The following table sets forth the approximate percentage of net sales by primary category:

13 Weeks Ended  

39 Weeks Ended

(Percentage of net sales)

October 31,

2020

November 2,

2019

October 31,

2020

November 2,

2019

Cosmetics

45%

51%

46%

50%

Skincare, bath, and fragrance

26%

21%

26%

21%

Haircare products and styling tools

21%

18%

20%

19%

Services

4%

6%

4%

6%

Other (nail products, accessories, and other)

4%

4%

4%

4%

100%

100%

100%

100%

Summary of changes in deferred revenue

13 Weeks Ended

39 Weeks Ended  

(In thousands)

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Beginning balance

$

207,746

$

171,953

$

230,011

$

193,585

Additions to contract liabilities (1)

40,932

66,167

128,402

145,728

Deductions to contract liabilities (2)

(39,032)

(62,816)

(148,767)

(164,009)

Ending balance

$

209,646

$

175,304

$

209,646

$

175,304

v3.20.2
Impairment, restructuring and other costs (Tables)
9 Months Ended
Oct. 31, 2020
Impairment, restructuring and other costs  
Summary of the restructuring and other charges included in impairment, restructuring and other costs

13 Weeks Ended

39 Weeks Ended

October 31,

October 31,

(In thousands)

    

2020

    

2020

Store Closures

Long-lived asset impairment charges (1)

$

$

19,569

Lease termination costs

1,844

1,844

Severance (2)

186

489

Suspension of Canadian expansion

Long-lived asset impairment charges (1)

$

9,935

$

9,935

Lease termination costs

5,317

5,317

Severance (2)

634

634

Other Severance (2)

$

5,708

$

5,708

Total

$

23,624

$

43,496

(1)The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include: the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses, and market conditions.
(2)As of October 31, 2020, the Company's restructuring accrual recorded in accrued liabilities on the consolidated balance sheets was $6,202 and is primarily for severance.
v3.20.2
Leases (Tables)
9 Months Ended
Oct. 31, 2020
Leases  
Schedule of cash flow information related to operating leases

The following table presents supplemental disclosures of cash flow information related to operating leases:

39 Weeks Ended

(In thousands)

October 31,

2020

November 2,

2019

Cash paid for operating lease liabilities (1)

$

263,893

$

251,468

Operating lease assets obtained in exchange for operating lease liabilities (non-cash)

188,240

287,645

(1)Excludes cash received for tenant incentives of $22,789 and $57,160 for the 39 weeks ended October 31, 2020 and November 2, 2019, respectively.
v3.20.2
Stock-based compensation (Tables)
9 Months Ended
Oct. 31, 2020
Stock-based compensation  
Schedule of weighted average assumptions to determine grant date fair value of employee stock options

    

39 Weeks Ended

October 31,

November 2,

    

2020

    

2019

Volatility rate

 

43.0%

31.0%

Average risk-free interest rate

 

0.3%

2.3%

Average expected life (in years)

 

3.4

 

3.5

Dividend yield

 

None

 

None

v3.20.2
Net income per common share (Tables)
9 Months Ended
Oct. 31, 2020
Net income per common share  
Schedule reconciliation of net income and the number of shares of common stock used in the computation of net income per basic and diluted share

13 Weeks Ended

39 Weeks Ended

October 31,

November 2,

October 31,

November 2,

(In thousands, except per share data)

    

2020

    

2019

    

2020

    

2019

Numerator:

Net income

    

$

74,798

$

129,747

$

4,341

$

483,226

Denominator:

Weighted-average common shares – Basic

56,327

57,568

56,355

58,123

Dilutive effect of stock options and non-vested stock

219

195

169

273

Weighted-average common shares – Diluted

56,546

57,763

56,524

58,396

Net income per common share:

Basic

$

1.33

$

2.25

$

0.08

$

8.31

Diluted

$

1.32

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