ULTA BEAUTY, INC., 10-K filed on 4/1/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Jan. 31, 2015
Mar. 26, 2015
Aug. 2, 2014
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Jan. 31, 2015 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
ULTA 
 
 
Entity Registrant Name
Ulta Salon, Cosmetics & Fragrance, Inc. 
 
 
Entity Central Index Key
0001403568 
 
 
Current Fiscal Year End Date
--01-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
64,230,316 
 
Entity Public Float
 
 
$ 4,117,508,000 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Feb. 1, 2014
Current assets:
 
 
Cash and cash equivalents
$ 389,149 
$ 419,476 
Short-term investments
150,209 
 
Receivables, net
52,440 
47,049 
Merchandise inventories, net
581,229 
457,933 
Prepaid expenses and other current assets
66,548 
55,993 
Deferred income taxes
20,780 
22,246 
Total current assets
1,260,355 
1,002,697 
Property and equipment, net
717,159 
595,736 
Deferred compensation plan assets
5,656 
4,294 
Total assets
1,983,170 
1,602,727 
Current liabilities:
 
 
Accounts payable
190,778 
148,282 
Accrued liabilities
149,412 
103,180 
Accrued income taxes
19,404 
15,349 
Total current liabilities
359,594 
266,811 
Deferred rent
294,127 
261,630 
Deferred income taxes
74,498 
66,718 
Other long-term liabilities
7,442 
4,474 
Total liabilities
735,661 
599,633 
Commitments and contingencies (note 4)
   
   
Stockholders' equity:
 
 
Common stock, $.01 par value, 400,000 shares authorized; 64,762 and 64,793 shares issued; 64,184 and 64,231 shares outstanding; at January 31, 2015, and February 1, 2014, respectively
647 
647 
Treasury stock-common, at cost
(9,713)
(8,125)
Additional paid-in capital
576,982 
548,194 
Retained earnings
679,593 
462,378 
Total stockholders' equity
1,247,509 
1,003,094 
Total liabilities and stockholders' equity
$ 1,983,170 
$ 1,602,727 
Consolidated Balance Sheets (Parenthetical) (USD $)
Jan. 31, 2015
Feb. 1, 2014
Statement of Financial Position [Abstract]
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
400,000,000 
400,000,000 
Common stock, shares issued
64,762,000 
64,793,000 
Common stock, shares outstanding
64,184,000 
64,231,000 
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Income Statement [Abstract]
 
 
 
Net sales
$ 3,241,369 
$ 2,670,573 
$ 2,220,256 
Cost of sales
2,104,582 
1,729,325 
1,436,582 
Gross profit
1,136,787 
941,248 
783,674 
Selling, general and administrative expenses
712,006 
596,390 
488,880 
Pre-opening expenses
14,366 
17,270 
14,816 
Operating income
410,415 
327,588 
279,978 
Interest (income) expense, net
(894)
(118)
185 
Income before income taxes
411,309 
327,706 
279,793 
Income tax expense
154,174 
124,857 
107,244 
Net income
$ 257,135 
$ 202,849 
$ 172,549 
Net income per common share:
 
 
 
Basic
$ 4.00 
$ 3.17 
$ 2.73 
Diluted
$ 3.98 
$ 3.15 
$ 2.68 
Weighted average common shares outstanding:
 
 
 
Basic
64,335 
63,992 
63,250 
Diluted
64,651 
64,461 
64,396 
Dividends declared per common share
$ 0.00 
$ 0.00 
$ 1.00 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Operating activities
 
 
 
Net income
$ 257,135 
$ 202,849 
$ 172,549 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
131,764 
106,283 
88,233 
Deferred income taxes
9,246 
3,868 
8,673 
Non-cash stock compensation charges
14,923 
16,003 
13,375 
Excess tax benefits from stock-based compensation
(3,229)
(13,378)
(47,345)
Loss on disposal of property and equipment
4,468 
3,902 
1,074 
Change in operating assets and liabilities:
 
 
 
Receivables
(5,391)
(5,534)
(15,362)
Merchandise inventories
(123,296)
(96,808)
(116,478)
Prepaid expenses and other current assets
(10,555)
(5,541)
(9,888)
Income taxes
7,284 
18,673 
53,397 
Accounts payable
42,496 
29,396 
32,444 
Accrued liabilities
37,644 
14,215 
13,789 
Deferred rent
32,497 
53,627 
44,540 
Other assets and liabilities
1,606 
170 
 
Net cash provided by operating activities
396,592 
327,725 
239,001 
Investing activities
 
 
 
Purchases of short-term investments
(200,209)
 
 
Proceeds from short-term investments
50,000 
 
 
Purchases of property and equipment
(249,067)
(226,024)
(188,578)
Net cash used in investing activities
(399,276)
(226,024)
(188,578)
Financing activities
 
 
 
Repurchase of common shares
(39,923)
(37,337)
 
Dividends paid
 
 
(62,482)
Stock options exercised
10,639 
21,890 
31,530 
Excess tax benefits from stock-based compensation
3,229 
13,378 
47,345 
Purchase of treasury shares
(1,588)
(631)
(79)
Net cash (used in) provided by financing activities
(27,643)
(2,700)
16,314 
Net (decrease) increase in cash and cash equivalents
(30,327)
99,001 
66,737 
Cash and cash equivalents at beginning of year
419,476 
320,475 
253,738 
Cash and cash equivalents at end of year
389,149 
419,476 
320,475 
Supplemental cash flow information
 
 
 
Cash paid for income taxes (net of refunds)
137,180 
101,598 
45,354 
Noncash investing activities:
 
 
 
Change in property and equipment included in accrued liabilities
$ 8,588 
$ (3,161)
$ 6,803 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands
Total
Common Stock [Member]
Treasury - Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Balance at Jan. 28, 2012
$ 584,704 
$ 627 
$ (7,415)
$ 404,698 
$ 186,794 
Balance, Shares at Jan. 28, 2012
 
 
(555)
 
 
Balance, Shares at Jan. 28, 2012
 
62,764 
 
 
 
Stock options exercised and other awards
31,530 
18 
 
31,512 
 
Stock options exercised and other awards, Shares
 
1,801 
 
 
 
Purchase of treasury shares
(79)
 
(79)
 
 
Purchase of treasury shares, Shares
 
 
(1)
 
 
Net income
172,549 
 
 
 
172,549 
Excess tax benefits from stock-based compensation
47,345 
 
 
47,345 
 
Stock compensation charge
13,375 
 
 
13,375 
 
Dividends paid
(62,482)
 
 
 
(62,482)
Balance at Feb. 02, 2013
786,942 
645 
(7,494)
496,930 
296,861 
Balance, Shares at Feb. 02, 2013
 
 
(556)
 
 
Balance, Shares at Feb. 02, 2013
 
64,565 
 
 
 
Stock options exercised and other awards
21,890 
 
21,883 
 
Stock options exercised and other awards, Shares
 
729 
 
 
 
Purchase of treasury shares
(631)
 
(631)
 
 
Purchase of treasury shares, Shares
 
 
(6)
 
 
Net income
202,849 
 
 
 
202,849 
Excess tax benefits from stock-based compensation
13,378 
 
 
13,378 
 
Stock compensation charge
16,003 
 
 
16,003 
 
Repurchase of common shares
(37,337)
(5)
 
 
(37,332)
Repurchase of common shares, Shares
 
(501)
 
 
 
Balance at Feb. 01, 2014
1,003,094 
647 
(8,125)
548,194 
462,378 
Balance, Shares at Feb. 01, 2014
 
 
(562)
 
 
Balance, Shares at Feb. 01, 2014
 
64,793 
 
 
 
Stock options exercised and other awards
10,639 
 
10,636 
 
Stock options exercised and other awards, Shares
 
290 
 
 
 
Purchase of treasury shares
(1,588)
 
(1,588)
 
 
Purchase of treasury shares, Shares
 
 
(16)
 
 
Net income
257,135 
 
 
 
257,135 
Excess tax benefits from stock-based compensation
3,229 
 
 
3,229 
 
Stock compensation charge
14,923 
 
 
14,923 
 
Repurchase of common shares
(39,923)
(3)
 
 
(39,920)
Repurchase of common shares, Shares
 
(321)
 
 
 
Balance at Jan. 31, 2015
$ 1,247,509 
$ 647 
$ (9,713)
$ 576,982 
$ 679,593 
Balance, Shares at Jan. 31, 2015
 
 
(578)
 
 
Balance, Shares at Jan. 31, 2015
 
64,762 
 
 
 
Business and basis of presentation
Business and basis of presentation

1.    Business and basis of presentation

Ulta Salon, Cosmetics & Fragrance, Inc. was incorporated in the state of Delaware on January 9, 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 January 31, 2015, the Company operated 774 stores in 47 states. As used in these notes and throughout this Annual Report on Form 10-K, all references to “we,” “us,” “our,” “Ulta,” “Ulta Beauty” or the “Company” refer to Ulta Salon, Cosmetics & Fragrance, Inc. and its consolidated subsidiary, Ulta Inc. All amounts are stated in thousands, with the exception of per share amounts and number of stores.

The Company has determined its operating segments on the same basis that it uses to internally evaluate performance. The Company has combined its three operating segments: retail stores, salon services and e-commerce into one reportable segment because they have a similar class of consumer, economic characteristics, nature of products and distribution methods.

Summary of significant accounting policies
Summary of significant accounting policies

2.    Summary of significant accounting policies

Fiscal year

The Company’s fiscal year is the 52 or 53 weeks ending on the Saturday closest to January 31. The Company’s fiscal years ended January 31, 2015 (fiscal 2014), February 1, 2014 (fiscal 2013) and February 2, 2013 (fiscal 2012) were 52, 52 and 53 week years, respectively.

Consolidation

The Company’s consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts, transactions and unrealized profit were eliminated in consolidation.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) 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. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with maturities of three months or less from the date of purchase. Cash equivalents include amounts due from third-party credit card receivables because such amounts generally convert to cash within one to three days with little or no default risk.

Short-term investments

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

Receivables

Receivables consist principally of amounts receivable from vendors and landlord construction allowances earned but not yet received. These receivables are computed based on provisions of the vendor and lease agreements in place and the Company’s completed performance. The Company’s vendors are primarily U.S.-based producers of consumer products and real estate developers and landlords. The Company does not require collateral on its receivables and does not accrue interest. Credit risk with respect to receivables is limited due to the diversity of vendors and landlords comprising the Company’s vendor base. The Company performs ongoing credit evaluations of its vendors and evaluates the collectability of its receivables based on the length of time the receivable is past due and historical experience. The receivable for vendor allowances was $39,629 and $30,591 as of January 31, 2015 and February 1, 2014, respectively and the receivable for landlord allowances was $8,357 and $14,128 as of January 31, 2015 and February 1, 2014, respectively. The allowance for doubtful receivables totaled $1,346 and $915 as of January 31, 2015 and February 1, 2014, respectively.

Merchandise inventories

Merchandise inventories are stated at the lower of cost or market. Cost is determined using the weighted-average cost method and includes costs incurred to purchase and distribute goods. Inventory cost also includes vendor allowances related to co-op advertising, markdowns, and volume discounts. The Company maintains reserves for lower of cost or market and shrinkage.

Fair value of financial instruments

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximates their estimated fair values due to the short maturities of these instruments. The Company had no outstanding debt as of January 31, 2015 and February 1, 2014.

Property and equipment

The Company’s property and equipment are stated at cost net of accumulated depreciation and amortization. Maintenance and repairs are charged to operating expense as incurred. The Company’s assets are depreciated or amortized using the straight-line method, over the shorter of their estimated useful lives or the expected lease term as follows:

 

Equipment and fixtures

     3 to 10 years   

Leasehold improvements

     10 years   

Electronic equipment and software

     3 to 5 years   

The Company capitalizes costs incurred during the application development stage in developing or purchasing internal use software. These costs are amortized over the estimated useful life of the software.

The Company periodically evaluates whether changes have occurred that would require revision of the remaining useful life of equipment and leasehold improvements or render them not recoverable. If such circumstances arise, the Company uses an estimate of the undiscounted sum of expected future operating cash flows during their holding period to determine whether the long-lived assets are impaired. If the aggregate undiscounted cash flows are less than the carrying amount of the assets, the resulting impairment charges to be recorded are calculated based on the excess of the carrying value of the assets over the fair value of such assets, with the fair value determined based on an estimate of discounted future cash flows. No significant impairments charges have been recognized in fiscal 2014, 2013 or 2012.

Customer loyalty program

In early fiscal 2014, we completed the conversion of all our loyalty members to ULTAmate Rewards, a points-based program. ULTAmate Rewards enables customers to earn points based on their purchases. Points earned by members are valid for at least one year and may be redeemed on any product we sell. Prior to this conversion, we ran both ULTAmate Rewards and our prior program, The Club at Ulta. The Club at Ulta was a certificate program offering customers reward certificates for free beauty products based on the level of purchases. The Company accrues the cost of anticipated redemptions related to these programs at the time of the initial purchase based on historical experience. The accrued liability related to these loyalty programs at January 31, 2015 and February 1, 2014 was $15,032 and $7,740 respectively. The cost of these programs, which was $42,096, $27,588 and $22,044 in fiscal 2014, 2013 and 2012, respectively, is included in cost of sales in the statements of income.

Deferred rent

Many of the Company’s operating leases contain predetermined fixed increases of the minimum rental rate during the lease. For these leases, the Company recognizes the related rental expense on a straight-line basis over the expected lease term and records the difference between the amounts charged to expense and the rent paid as deferred rent. The lease term commences on the earlier of the date when the Company becomes legally obligated for rent payments or the date the Company takes possession of the leased space.

As part of many lease agreements, the Company receives construction allowances from landlords for tenant improvements. These leasehold improvements made by the Company are capitalized and amortized over the shorter of the lease term or 10 years. The construction allowances are recorded as deferred rent and amortized on a straight-line basis over the lease term as a reduction of rent expense.

Revenue recognition

Net sales include merchandise sales, salon service revenue and e-commerce revenue. Revenue from merchandise sales at stores is recognized at the time of sale, net of estimated returns. The Company provides refunds for product returns within 60 days from the original purchase date. Salon revenue is recognized when services are rendered. Salon service revenue amounted to $175,533, $145,815 and $121,357 for fiscal 2014, 2013 and 2012, respectively. Company coupons and other incentives are recorded as a reduction of net sales. State sales taxes are presented on a net basis as the Company considers itself a pass-through conduit for collecting and remitting state sales tax. E-commerce sales are recorded based on delivery of merchandise to the customer. E-commerce revenue amounted to $149,857, $95,809 and $55,086 for fiscal 2014, 2013 and 2012, respectively.

The Company’s gift card sales are deferred and recognized in net sales when the gift card is redeemed for product or services. The Company’s gift cards do not expire and do not include service fees that decrease customer balances. The Company has maintained Company-specific, historical data related to its large pool of similar gift card transactions sold and redeemed over a significant time frame. The Company recognizes gift card breakage to the extent there is no requirement for remitting balances to governmental agencies under unclaimed property laws. Gift card breakage is recognized over the same performance period, and in the same proportion, that the Company’s data has demonstrated that gift cards are redeemed. Gift card breakage was $2,720 and $2,181 at January 31, 2015 and February 1, 2014, respectively, and is recorded as a decrease in selling, general and administrative expense in the statements of income. Deferred gift card revenue was $22,681 and $16,439 at January 31, 2015 and February 1, 2014, respectively, and is included in accrued liabilities – accrued customer liabilities (Note 5).

Vendor allowances

The Company receives allowances from vendors in the normal course of business including advertising and markdown allowances, purchase volume discounts and rebates, and reimbursement for defective merchandise, and certain selling and display expenses. Substantially all vendor allowances are recorded as a reduction of the vendor’s product cost and are recognized in cost of sales as the product is sold.

Advertising

Advertising expense consists principally of paper, print and distribution costs related to the Company’s advertising circulars. The Company expenses the production and distribution costs related to its advertising circulars in the period the related promotional event occurs. Total advertising costs, exclusive of incentives from vendors and start-up advertising expense, amounted to $157,847, $140,774 and $118,365 for fiscal 2014, 2013 and 2012, respectively. Advertising expense as a percentage of sales was 4.9%, 5.3% and 5.3% for fiscal 2014, 2013 and 2012, respectively. Prepaid advertising costs included in prepaid expenses and other current assets were $8,899 and $6,891 as of January 31, 2015 and February 1, 2014, respectively.

Pre-opening expenses

Non-capital expenditures incurred prior to the grand opening of a new, remodeled or relocated store are charged against earnings as incurred.

Cost of sales

Cost of sales includes the cost of merchandise sold including a majority of vendor allowances, which are treated as a reduction of merchandise costs; warehousing and distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities, and insurance; shipping and handling costs; store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, licenses, and cleaning expenses; salon payroll and benefits; customer loyalty program expense; and shrink and inventory valuation reserves.

Selling, general and administrative expenses

Selling, general and administrative expenses includes payroll, bonus, and benefit costs for retail and corporate employees; advertising and marketing costs; occupancy costs related to our corporate office facilities; public company expense including Sarbanes-Oxley compliance expenses; stock-based compensation expense; depreciation and amortization for all assets except those related to our retail and warehouse operations, which are included in cost of sales; and legal, finance, information systems and other corporate overhead costs.

Income taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. The amounts reported were derived using the enacted tax rates in effect for the year the differences are expected to reverse.

Income tax benefits related to uncertain tax positions are recognized only when it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Penalties and interest related to unrecognized tax positions are recorded in income tax expense.

Share-based compensation

Share-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized on a straight-line method over the requisite service period for awards expected to vest. The Company recorded stock compensation expense of $14,923, $16,003 and $13,375 for fiscal 2014, 2013 and 2012, respectively (see Note 10, “Share-based awards”).

Insurance expense

The Company has insurance programs with third party insurers for employee health, workers compensation and general liability, among others, to limit the Company’s liability exposure. The insurance programs are premium based and include retentions, deductibles and stop loss coverage. Current stop loss coverage per claim is $150 for employee health claims, $100 for general liability claims and $250 for workers compensation claims. The Company makes collateral and premium payments during the plan year and accrues expenses in the event additional premium is due from the Company based on actual claim results.

Net income per common share

Basic net income per common share is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share includes dilutive common stock equivalents, using the treasury stock method (see Note 11, “Net income per common share”).

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, issued as a new Topic, Accounting Standards Codification Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that the Company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. This standard is effective beginning in fiscal year 2017 and allows for either full retrospective or modified retrospective adoption. The Company is currently evaluating the application method and the impact of this new standard on its consolidated financial position, results of operations and cash flows.

Property and equipment
Property and equipment

3.    Property and equipment

Property and equipment consist of the following:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Equipment and fixtures

   $ 447,782       $ 390,650   

Leasehold improvements

     431,999         376,796   

Electronic equipment and software

     272,937         218,979   

Construction-in-progress

     90,531         36,231   
  

 

 

    

 

 

 
     1,243,249         1,022,656   

Less accumulated depreciation and amortization

     (526,090      (426,920
  

 

 

    

 

 

 

Property and equipment, net

   $ 717,159       $ 595,736   
  

 

 

    

 

 

 

The Company had no capitalized interest for fiscal 2014 and 2013 as a result of not utilizing the credit facility during the year.

Commitments and contingencies
Commitments and contingencies

4.    Commitments and contingencies

Leases — The Company leases retail stores, distribution and office facilities, and certain equipment. Original non-cancelable lease terms range from three to ten years, and store leases generally contain renewal options for additional years. A number of the Company’s store leases provide for contingent rentals based upon sales. Contingent rent amounts were insignificant in fiscal 2014, 2013 and 2012. Total rent expense under operating leases was $159,245, $138,086 and $115,755 for fiscal 2014, 2013 and 2012, respectively. Future minimum lease payments under operating leases as of January 31, 2015, are as follows:

 

Fiscal year

   Operating
Leases
(in thousands)
 

2015

   $ 214,479   

2016

     218,879   

2017

     207,223   

2018

     189,683   

2019

     173,111   

2020 and thereafter

     599,542   
  

 

 

 

Total minimum lease payments

   $ 1,602,917   
  

 

 

 

Included in the operating lease schedule above is $184,376 of minimum lease payments for stores that are expected to open in fiscal 2015.

Contractual obligations — As of January 31, 2015, the Company had obligations of $34,521 related to commitments made to a third party for products and services for future distribution centers for which a lease had been signed, advertising and other goods and service contracts entered into in the ordinary course of business. The amount relates primarily to the multi-year supply chain initiatives and payments under this commitment were $38,212 and $6,222 for fiscal 2014 and 2013, respectively.

General litigation — On March 2, 2012, a putative employment class action lawsuit was filed against us and certain unnamed defendants in state court in Los Angeles County, California. On April 12, 2012, the Company removed the case to the United States District Court for the Central District of California. On August 8, 2013, the plaintiff asked the court to certify the proposed class and the Company opposed the plaintiff’s request and is waiting for the court to issue a decision. The plaintiff and members of the proposed class are alleged to be (or to have been) non-exempt hourly employees. The suit alleges that Ulta violated various provisions of the California labor laws and failed to provide plaintiff and members of the proposed class with full meal periods, paid rest breaks, certain wages, overtime compensation and premium pay. The suit seeks to recover damages and penalties as a result of these alleged practices. The Company denies plaintiff’s allegations and is vigorously defending the matter.

The Company has not recorded any accruals for this matter because the Company’s potential liability for the matter is not probable and cannot be reasonably estimated based on currently available information. The Company cannot determine a reasonable estimate of the maximum possible loss or range of loss for this matter given that it is in the early stage of the litigation process and is subject to the inherent uncertainties of litigation (such as the strength of the Company’s legal defenses and the availability of insurance recovery). Although the maximum amount of liability that may ultimately result from this matter cannot be predicted with certainty, management expects that this matter, when ultimately resolved, will not have a material adverse effect on the Company’s consolidated financial position or liquidity. It is possible, however, that the ultimate resolution of this matter could have a material adverse effect on the Company’s results of operations in a particular quarter or year if such resolution results in a significant liability for the Company.

The Company is also involved in various legal proceedings that are incidental to the conduct of our business. In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not be material.

Accrued liabilities
Accrued liabilities

5.    Accrued liabilities

Accrued liabilities consist of the following:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Accrued vendor liabilities (including accrued property and equipment costs)

   $ 24,705       $ 15,631   

Accrued customer liabilities

     39,593         25,507   

Accrued payroll, bonus and employee benefits

     50,931         33,642   

Accrued taxes, other

     17,824         12,788   

Other accrued liabilities

     16,359         15,612   
  

 

 

    

 

 

 

Accrued liabilities

   $ 149,412       $ 103,180   
  

 

 

    

 

 

Income taxes
Income taxes

6.    Income taxes

The provision for income taxes consists of the following:

 

(In thousands)

   Fiscal
2014
     Fiscal
2013
     Fiscal
2012
 

Current:

        

Federal

   $ 128,159       $ 105,731       $ 83,606   

State

     16,909         15,310         14,832   
  

 

 

    

 

 

    

 

 

 

Total current

     145,068         121,041         98,438   

Deferred:

        

Federal

     8,392         3,891         8,950   

State

     714         (75      (144
  

 

 

    

 

 

    

 

 

 

Total deferred

     9,106         3,816         8,806   
  

 

 

    

 

 

    

 

 

 

Provision for income taxes

   $ 154,174       $ 124,857       $ 107,244   
  

 

 

    

 

 

    

 

 

 

 

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:

 

     Fiscal
2014
    Fiscal
2013
    Fiscal
2012
 

Federal statutory rate

     35.0     35.0     35.0

State effective rate, net of federal tax benefit

     2.8     3.0     3.4

Other

     (0.3 %)      0.1     (0.1 %) 
  

 

 

   

 

 

   

 

 

 

Effective tax rate

     37.5     38.1     38.3
  

 

 

   

 

 

   

 

 

 

Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Deferred tax assets:

     

Reserves not currently deductible

   $ 22,380       $ 24,721   

Employee benefits

     8,782         6,290   

Credit carryforwards

     338         402   

Accrued liabilities

     8,231         3,927   

Inventory valuation

     617         1,708   
  

 

 

    

 

 

 

Total deferred tax assets

     40,348         37,048   

Deferred tax liabilities:

     

Property and equipment

     44,882         44,288   

Deferred rent obligation

     38,409         28,529   

Prepaid expenses

     10,775         8,703   
  

 

 

    

 

 

 

Total deferred tax liabilities

     94,066         81,520   
  

 

 

    

 

 

 

Net deferred tax liability

   $ (53,718    $ (44,472
  

 

 

    

 

 

 

At January 31, 2015, the Company had $338 credit carryforwards for state income tax purposes.

The Company accounts for uncertainty in income taxes in accordance with the ASC rules for income taxes. The reserve for uncertain tax positions was $1,414 and $795 at January 31, 2015 and February 1, 2014, respectively. The balance is the Company’s best estimate of the potential liability for uncertain tax positions. A reconciliation of the Company’s unrecognized tax benefits, excluding interest and penalties, is as follows:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Balance at beginning of the period

   $ 795       $   

Increase due to a current year position

     670         795   

Decrease due to a prior period position

     (51        
  

 

 

    

 

 

 

Balance at the end of the period

   $ 1,414       $ 795   
  

 

 

    

 

 

 

The Company acknowledges that the amount of unrecognized tax benefits may change in the next twelve months. However, it does not expect the change to have a significant impact on its consolidated financial statements. Income tax-related interest and penalties were insignificant for fiscal 2014 and 2013.

The Company files tax returns in the U.S. Federal and State jurisdictions. The Company is no longer subject to U.S. Federal examinations by the Internal Revenue Services for years before 2011 and this applies to examinations by the State authorities before 2010.

Notes payable
Notes payable

7.    Notes payable

On October 19, 2011, the Company entered into an Amended and Restated Loan and Security Agreement (the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder, Wells Fargo Capital Finance LLC as a Lender, J.P. Morgan Securities LLC as a Lender, JP Morgan Chase Bank, N.A. as a Lender and PNC Bank, National Association, as a Lender. The Loan Agreement amended and restated the Loan and Security Agreement, dated as of August 31, 2010, by and among the lenders. The Loan Agreement extends the maturity of the Company’s credit facility to October 2016, provides maximum revolving loans equal to the lesser of $200,000 or a percentage of eligible owned inventory, contains a $10,000 subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $50,000, subject to consent by each lender and other conditions. The Loan Agreement contains a requirement to maintain a minimum amount of excess borrowing availability at all times.

On September 5, 2012, the Company entered into Amendment No. 1 to the Amended and Restated Loan and Security Agreement (the Amendment) with the lender group. The Amendment updated certain administrative terms and conditions and provides the Company greater flexibility to take certain corporate actions. There were no changes to the revolving loan amounts available, interest rates, covenants or maturity date under terms of the Loan Agreement.

On December 6, 2013, the Company entered into Amendment No. 2 to the Amended and restated Loan and Security Agreement (the Loan Amendment) with the lender group. The Loan Amendment extends the maturity of the facility to December 2018. Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the facility. Outstanding borrowings will bear interest at the prime rate or LIBOR plus 1.50% and the unused line fee is 0.20%.

As of January 31, 2015 and February 1, 2014, the Company had no borrowings outstanding under the credit facility and the Company was in compliance with all terms and covenants of the agreement.

Fair value measurements
Fair value measurements

8.    Fair value measurements

The carrying value of cash and cash equivalents, 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:

a. Level 1 — observable inputs such as quoted prices for identical instruments in active markets.

b. Level 2 — inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.

c. 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 January 31, 2015, the Company held financial liabilities of $5,574 related to its non-qualified deferred compensation plan. The liabilities have been categorized as Level 2 as they are based on third-party reported net asset values which are based primarily on quoted market prices of underlying assets of the funds within the plan.

Investments
Investments

9.    Investments

The Company’s short-term investments as of January 31, 2015 consist of $150,209 in certificates of deposit. These short-term investments are carried at cost, which approximates fair value and are recorded in the Consolidated Balance Sheets in Short-term investments. The contractual maturity of the Company’s investments was less than twelve months at January 31, 2015.

Share-based awards
Share-based awards

10.    Share-based awards

Equity incentive plans

The Company has had a number of equity incentive plans over the years. The plans were adopted in order to attract and retain the best available personnel for positions of substantial authority and to provide additional incentive to employees, directors, and consultants to promote the success of the Company’s business. Incentive compensation was awarded under the Amended and Restated Restricted Stock Option Plan until April 2002 and under the 2002 Equity Incentive Plan through July 2007, at which time the 2007 Incentive Award Plan was adopted. All of the plans generally provided for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, and other types of awards to employees, consultants and directors. Unless provided otherwise by the administrator of the plan, options vested over four years at the rate of 25% per year from the date of grant and most must be exercised within ten years. Options were granted with the exercise price equal to the fair value of the underlying stock on the date of grant.

2011 Incentive award plan

In June 2011, the Company adopted the 2011 Incentive Award Plan (the 2011 Plan). The 2011 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, dividend equivalent rights, stock payments, deferred stock and cash-based awards to employees, consultants, and directors. Following its adoption, awards are only being made under the 2011 Plan, and no further awards will be made under any prior plan. As of January 31, 2015, the 2011 Plan reserves for the issuance upon grant or exercise of awards up to 4,409 shares of the Company’s common stock.

The Company recorded stock compensation expense of $14,923, $16,003 and $13,375 for fiscal 2014, 2013 and 2012, respectively. Cash received from option exercises under all share-based payment arrangements for fiscal 2014, 2013 and 2012 was $10,639, $21,890 and $31,530, respectively. The total income tax benefit recognized in the income statement for equity compensation arrangements was $3,526, $4,812 and $5,364 for fiscal 2014, 2013 and 2012, respectively. The actual tax benefit realized for the tax deductions from option exercise and restricted stock vesting of the share-based payment arrangements totaled $6,892, $18,169 and $51,886, respectively, for fiscal 2014, 2013 and 2012.

Employee stock options

The Company measures share-based compensation cost on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line method 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:

 

     Fiscal
2014
    Fiscal
2013
    Fiscal
2012
 

Volatility rate

     40.7     49.2     53.5

Average risk-free interest rate

     1.4     0.9     1.2

Average expected life (in years)

     3.8        4.4        6.3   

Dividend yield

     None        None        None   

During fiscal 2013, the Company made changes to update the valuation assumptions to Company specific information. These changes are reflected in the table above and had no material impact on the calculation. For fiscal 2014 and 2013, the expected volatility was based on the historical volatility of the ULTA Common Shares. The risk free interest rate was based on the United States Treasury yield curve in effect on the date of grant for the respective expected life of the option. The expected life represents the time the options granted are expected to be outstanding. For fiscal 2014 and 2013, the expected life of options granted was derived from historical data on Ulta stock option exercises. Prior to 2013, we had limited historical data related to exercise behavior since our initial public offering on October 30, 2007. As a result, the Company elected to use the shortcut approach to determine the expected life in accordance with the SEC Staff Accounting Bulletin on share-based payments and the expected volatility was based on the historical volatility of a peer group of publicly-traded companies. Beginning in fiscal 2013, the Company introduced a forfeiture rate. Forfeitures of options are estimated at the grant date based on historical rates of the Company’s stock option activity and reduce the compensation expense recognized. The Company does not currently pay a regular dividend. The dividend paid in May 2012 was a one-time special cash dividend.

 

The Company granted 371 stock options during fiscal 2014. The compensation cost that has been charged against income for stock option grants was $9,078, $10,214, and $11,967 for fiscal 2014, 2013, and 2012, respectively. The weighted-average grant date fair value of options granted in fiscal 2014, 2013 and 2012 was $32.38, $34.31 and $46.29, respectively. The total fair value of stock options issued that vested during fiscal 2014, 2013 and 2012 was $8,799, $10,544 and $12,089, respectively. At January 31, 2015, there was approximately $16,628 of unrecognized compensation expense related to unvested stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately two years. The total intrinsic value of options exercised was $15,032, $49,404 and $138,291 in fiscal 2014, 2013 and 2012, respectively.

A summary of the status of the Company’s stock option activity is presented in the following table (shares in thousands):

 

     Fiscal 2014      Fiscal 2013      Fiscal 2012  
     Shares     Weighted-
average
exercise price
     Shares     Weighted-
average
exercise price
     Shares     Weighted-
average
exercise price
 

Common stock options outstanding

              

Beginning of year

     1,090      $ 56.94         1,807      $ 41.60         3,559      $ 26.46   

Granted

     371        99.40         302        84.50         241        89.99   

Exercised

     (238     44.79         (705     31.07         (1,795     17.57   

Forfeited

     (150     72.57         (314     53.15         (198     46.28   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

End of year

     1,073      $ 72.12         1,090      $ 56.94         1,807      $ 41.60   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Exercisable at end of year

     440      $ 43.98         363      $ 34.37         563      $ 24.85   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Vested and Expected to vest

     1,028      $ 71.28         1,046      $ 56.47         1,807      $ 41.60   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

The following table presents information related to options outstanding and options exercisable at January 31, 2015, under the Company’s stock option plans based on ranges of exercise prices (shares in thousands):

 

     Options outstanding      Options exercisable  

Options outstanding

   Number of
options
     Weighted-
average
remaining
contractual life
(years)
     Weighted-
average
exercise price
     Number
of options
     Weighted-
average
remaining
contractual life
(years)
     Weighted-
average
exercise price
 

$1.11 - 15.81

     132         4       $ 12.20         132         4       $ 12.20   

22.86 - 37.85

     128         6         28.17         128         6         28.17   

47.19 - 69.96

     184         7         66.74         97         7         67.96   

74.91 - 89.79

     181         8         80.97         44         8         82.29   

91.12 - 99.66

     373         9         97.54         30         8         96.52   

101.35 - 127.15

     75         9         118.08         9         9         116.98   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

End of year

     1,073         7       $ 72.12         440         6       $ 43.98   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The aggregate intrinsic value of outstanding and exercisable options as of January 31, 2015 was $64,167 and $38,669, respectively. The last reported sale price of our common stock on the NASDAQ Global Select Market on January 31, 2015 was $131.94 per share.

Restricted stock awards

The Company issues restricted stock to certain employees and its Board of Directors. Employee grants will generally cliff vest after 3 years and director grants will cliff vest within one year. The compensation expense recorded in fiscal 2014, 2013 and 2012 was $5,845, $5,789 and $1,408, respectively. Beginning in fiscal 2013, the Company introduced a forfeiture rate. Forfeitures of restricted stock awards are estimated at the grant date based on historical rates of the Company’s restricted stock award activity and reduce the compensation expense recognized. At January 31, 2015, unrecognized compensation cost related to restricted stock awards was $7,770. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately two years.

A summary of the status of the Company’s restricted stock activity is presented in the following table (shares in thousands):

 

     Fiscal 2014      Fiscal 2013      Fiscal 2012  
     Shares     Weighted-
average
grant date
fair value
     Shares     Weighted-
average
grant date
fair value
     Shares     Weighted-
average
grant date
fair value
 

Restricted stock outstanding

              

Beginning of year

     162      $ 87.54         62      $ 81.81         22      $ 55.72   

Granted

     71        97.73         141        86.07         65        90.18   

Vested

     (52     91.91         (25     81.41         (5     66.88   

Forfeited

     (30     82.91         (16     75.39         (20     75.30   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

End of year

     151      $ 91.74         162      $ 87.54         62      $ 81.81   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Expected to vest

     140      $ 91.74         152      $ 87.54         62      $ 81.81   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net income per common share
Net income per common share

11.    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:

 

     Fiscal year ended  

(In thousands, except per share data)

   January 31,
2015
     February 1,
2014
     February 2,
2013
 

Numerator for diluted net income per share — net income

   $ 257,135       $ 202,849       $ 172,549   

Denominator for basic net income per share — weighted-average common shares

     64,335         63,992         63,250   

Dilutive effect of stock options and non-vested stock

     316         469         1,146   
  

 

 

    

 

 

    

 

 

 

Denominator for diluted net income per share

     64,651         64,461         64,396   

Net income per common share:

        

Basic

   $ 4.00       $ 3.17       $ 2.73   

Diluted

   $ 3.98       $ 3.15       $ 2.68   

The denominator for diluted net income per common share for fiscal years 2014, 2013 and 2012 exclude 686, 658 and 533 employee options, respectively, due to their anti-dilutive effects.

Employee benefit plans
Employee benefit plans

12.    Employee benefit plans

The Company provides a 401(k) retirement plan covering all employees who qualify as to age and length of service. The plan is funded through employee contributions and a Company match. In fiscal 2014, 2013 and 2012, the Company match was 100% of the first 3.0% of eligible compensation. As of January 31, 2015 and February 1, 2014, the liability for the Company match was $4,104 and $3,532, respectively.

The Company also has a non-qualified deferred compensation plan for highly compensated employees whose contributions are limited under qualified defined contribution plans. The plan is funded through employee contributions and, beginning in 2014, a Company match. In fiscal 2014, the Company match was 100% of the first 3.0% of salary. For fiscal year 2014, the liability for the Company match was $465. Amounts contributed and deferred under the plan are credited or charged with the performance of investment options offered under the plan as elected by the participants. In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors. The liability for compensation deferred under the Company’s plan included in other long-term liabilities was $5,574 and $3,678 as of January 31, 2015 and February 1, 2014, respectively. The Company manages the risk of changes in the fair value of the liability for deferred compensation by electing to match its liability under the plan with investment vehicles that offset a substantial portion of its exposure. The cash value of the investment vehicles included in deferred compensation plan assets was $5,656 and $4,294 as of January 31, 2015 and February 1, 2014, respectively. Total expense recorded under this plan is included in selling, general and administrative expenses and was insignificant during fiscal 2014 and 2013.

Valuation and qualifying accounts
Valuation and qualifying accounts

13.    Valuation and qualifying accounts

 

Description

   Balance at
beginning
of period
    Charged to
costs and
expenses
     Deductions     Balance at
end

of period
 
     (In thousands)  

Fiscal 2014

         

Allowance for doubtful accounts

   $ 915      $ 874       $ (443 )(a)    $ 1,346   

Shrink reserve

     9,358        22,374         (20,134     11,598   

Inventory — lower of cost or market reserve

     4,861        4,368         (3,976     5,253   

Insurance:

         

Workers Comp / General Liability Prepaid Asset

     (1,817 )(b)      6,899         (6,871     (1,789

Employee Health Care Accrued Liability

     2,606        41,335         (41,506     2,435   

Fiscal 2013

         

Allowance for doubtful accounts

   $ 973      $ 300       $ (358 )(a)    $ 915   

Shrink reserve

     4,020        16,298         (10,960     9,358   

Inventory — lower of cost or market reserve

     2,364        4,522         (2,025     4,861   

Insurance:

         

Workers Comp / General Liability Prepaid Asset

     (2,400 )(b)      7,060         (6,477     (1,817

Employee Health Care Accrued Liability

     2,232        34,422         (34,048     2,606   

Fiscal 2012

         

Allowance for doubtful accounts

   $ 556      $ 419       $ (2 )(a)    $ 973   

Shrink reserve

     2,445        8,077         (6,502     4,020   

Inventory — lower of cost or market reserve

     2,070        1,099         (805     2,364   

Insurance:

         

Workers Comp / General Liability Prepaid Asset

     (2,084 )(b)      4,864         (5,180     (2,400

Employee Health Care Accrued Liability

     1,929        26,584         (26,281     2,232   

 

 

(a) Represents write-off of uncollectible accounts

 

(b) Represents prepaid insurance
Selected quarterly financial data (unaudited)
Selected quarterly financial data (unaudited)

14.    Selected quarterly financial data (unaudited)

The following tables set forth the Company’s unaudited quarterly results of operations for each of the quarters in fiscal 2014 and fiscal 2013. The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31 and January 31.

 

    2014     2013  
    First     Second     Third     Fourth     First     Second     Third     Fourth  
(In thousands, except per
share data)
                                               

Net sales

  $ 713,770      $ 734,236      $ 745,722      $ 1,047,641      $ 582,712      $ 600,998      $ 618,781      $ 868,082   

Cost of sales

    467,817        474,894        463,967        697,904        378,763        388,921        387,120        574,521   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    245,953        259,342        281,755        349,737        203,949        212,077        231,661        293,561   

Selling, general and administrative expenses

    162,443        157,768        181,093        210,702        133,048        134,400        151,306        177,636   

Pre-opening expenses

    2,629        3,595        6,574        1,568        3,206        4,809        7,468        1,787   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    80,881        97,979        94,088        137,467        67,695        72,868        72,887        114,138   

Interest income, net

    (200     (209     (254     (231     (24     (18     (7     (69
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    81,081        98,188        94,342        137,698        67,719        72,886        72,894        114,207   

Income tax expense

    31,128        37,394        35,218        50,434        25,893        27,975        27,464        43,525   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 49,953      $ 60,794      $ 59,124      $ 87,264      $ 41,826      $ 44,911      $ 45,430      $ 70,682   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

               

Basic

  $ 0.78      $ 0.94      $ 0.92      $ 1.36      $ 0.66      $ 0.70      $ 0.71      $ 1.10   

Diluted

  $ 0.77      $ 0.94      $ 0.91      $ 1.35      $ 0.65      $ 0.70      $ 0.70      $ 1.09   

The sum of the quarterly net income per common share may not equal the annual total due to quarterly changes in the weighted average shares and share equivalents outstanding.

Stock repurchase program
Stock repurchase program

15.    Stock repurchase program

On March 18, 2013, the Company announced that our Board of Directors had authorized a share repurchase program (the 2013 Share Repurchase Program) pursuant to which the Company could repurchase up to $150,000 of the Company’s common stock. Repurchases pursuant to the terms of the 2013 Share Repurchase Program were made from time to time in the open market, in privately negotiated transactions or otherwise, at prices the Company deemed appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company’s sole discretion. The 2013 Share Repurchase Program did not have an expiration date, but provided for suspension or discontinuation at any time.

On September 11, 2014, the Company announced that our Board of Directors authorized a new share repurchase program (the 2014 Share Repurchase Program) pursuant to which the Company may repurchase up to $300,000 of the Company’s common stock. The 2014 Share Repurchase Program authorization revokes the previously authorized but unused amounts of $112,664 from the 2013 Share Repurchase Program. The 2014 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.

During fiscal year 2013, we purchased 501 shares of common stock for $37,337 at an average price of $74.58 from the 2013 Share Repurchase Program. During fiscal 2014, we purchased 321 shares of common stock for $39,923 at an average price of $124.31 from the 2014 Share Repurchase Program.

Subsequent event
Subsequent event

16.    Subsequent event

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

Summary of significant accounting policies (Policies)

Fiscal year

The Company’s fiscal year is the 52 or 53 weeks ending on the Saturday closest to January 31. The Company’s fiscal years ended January 31, 2015 (fiscal 2014), February 1, 2014 (fiscal 2013) and February 2, 2013 (fiscal 2012) were 52, 52 and 53 week years, respectively.

Consolidation

The Company’s consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts, transactions and unrealized profit were eliminated in consolidation.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) 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. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with maturities of three months or less from the date of purchase. Cash equivalents include amounts due from third-party credit card receivables because such amounts generally convert to cash within one to three days with little or no default risk.

Short-term investments

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

Receivables

Receivables consist principally of amounts receivable from vendors and landlord construction allowances earned but not yet received. These receivables are computed based on provisions of the vendor and lease agreements in place and the Company’s completed performance. The Company’s vendors are primarily U.S.-based producers of consumer products and real estate developers and landlords. The Company does not require collateral on its receivables and does not accrue interest. Credit risk with respect to receivables is limited due to the diversity of vendors and landlords comprising the Company’s vendor base. The Company performs ongoing credit evaluations of its vendors and evaluates the collectability of its receivables based on the length of time the receivable is past due and historical experience. The receivable for vendor allowances was $39,629 and $30,591 as of January 31, 2015 and February 1, 2014, respectively and the receivable for landlord allowances was $8,357 and $14,128 as of January 31, 2015 and February 1, 2014, respectively. The allowance for doubtful receivables totaled $1,346 and $915 as of January 31, 2015 and February 1, 2014, respectively.

Merchandise inventories

Merchandise inventories are stated at the lower of cost or market. Cost is determined using the weighted-average cost method and includes costs incurred to purchase and distribute goods. Inventory cost also includes vendor allowances related to co-op advertising, markdowns, and volume discounts. The Company maintains reserves for lower of cost or market and shrinkage.

Fair value of financial instruments

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximates their estimated fair values due to the short maturities of these instruments. The Company had no outstanding debt as of January 31, 2015 and February 1, 2014.

Property and equipment

The Company’s property and equipment are stated at cost net of accumulated depreciation and amortization. Maintenance and repairs are charged to operating expense as incurred. The Company’s assets are depreciated or amortized using the straight-line method, over the shorter of their estimated useful lives or the expected lease term as follows:

 

Equipment and fixtures

     3 to 10 years   

Leasehold improvements

     10 years   

Electronic equipment and software

     3 to 5 years   

The Company capitalizes costs incurred during the application development stage in developing or purchasing internal use software. These costs are amortized over the estimated useful life of the software.

The Company periodically evaluates whether changes have occurred that would require revision of the remaining useful life of equipment and leasehold improvements or render them not recoverable. If such circumstances arise, the Company uses an estimate of the undiscounted sum of expected future operating cash flows during their holding period to determine whether the long-lived assets are impaired. If the aggregate undiscounted cash flows are less than the carrying amount of the assets, the resulting impairment charges to be recorded are calculated based on the excess of the carrying value of the assets over the fair value of such assets, with the fair value determined based on an estimate of discounted future cash flows. No significant impairments charges have been recognized in fiscal 2014, 2013 or 2012.

Customer loyalty program

In early fiscal 2014, we completed the conversion of all our loyalty members to ULTAmate Rewards, a points-based program. ULTAmate Rewards enables customers to earn points based on their purchases. Points earned by members are valid for at least one year and may be redeemed on any product we sell. Prior to this conversion, we ran both ULTAmate Rewards and our prior program, The Club at Ulta. The Club at Ulta was a certificate program offering customers reward certificates for free beauty products based on the level of purchases. The Company accrues the cost of anticipated redemptions related to these programs at the time of the initial purchase based on historical experience. The accrued liability related to these loyalty programs at January 31, 2015 and February 1, 2014 was $15,032 and $7,740 respectively. The cost of these programs, which was $42,096, $27,588 and $22,044 in fiscal 2014, 2013 and 2012, respectively, is included in cost of sales in the statements of income.

Deferred rent

Many of the Company’s operating leases contain predetermined fixed increases of the minimum rental rate during the lease. For these leases, the Company recognizes the related rental expense on a straight-line basis over the expected lease term and records the difference between the amounts charged to expense and the rent paid as deferred rent. The lease term commences on the earlier of the date when the Company becomes legally obligated for rent payments or the date the Company takes possession of the leased space.

As part of many lease agreements, the Company receives construction allowances from landlords for tenant improvements. These leasehold improvements made by the Company are capitalized and amortized over the shorter of the lease term or 10 years. The construction allowances are recorded as deferred rent and amortized on a straight-line basis over the lease term as a reduction of rent expense.

Revenue recognition

Net sales include merchandise sales, salon service revenue and e-commerce revenue. Revenue from merchandise sales at stores is recognized at the time of sale, net of estimated returns. The Company provides refunds for product returns within 60 days from the original purchase date. Salon revenue is recognized when services are rendered. Salon service revenue amounted to $175,533, $145,815 and $121,357 for fiscal 2014, 2013 and 2012, respectively. Company coupons and other incentives are recorded as a reduction of net sales. State sales taxes are presented on a net basis as the Company considers itself a pass-through conduit for collecting and remitting state sales tax. E-commerce sales are recorded based on delivery of merchandise to the customer. E-commerce revenue amounted to $149,857, $95,809 and $55,086 for fiscal 2014, 2013 and 2012, respectively.

The Company’s gift card sales are deferred and recognized in net sales when the gift card is redeemed for product or services. The Company’s gift cards do not expire and do not include service fees that decrease customer balances. The Company has maintained Company-specific, historical data related to its large pool of similar gift card transactions sold and redeemed over a significant time frame. The Company recognizes gift card breakage to the extent there is no requirement for remitting balances to governmental agencies under unclaimed property laws. Gift card breakage is recognized over the same performance period, and in the same proportion, that the Company’s data has demonstrated that gift cards are redeemed. Gift card breakage was $2,720 and $2,181 at January 31, 2015 and February 1, 2014, respectively, and is recorded as a decrease in selling, general and administrative expense in the statements of income. Deferred gift card revenue was $22,681 and $16,439 at January 31, 2015 and February 1, 2014, respectively, and is included in accrued liabilities – accrued customer liabilities (Note 5).

Vendor allowances

The Company receives allowances from vendors in the normal course of business including advertising and markdown allowances, purchase volume discounts and rebates, and reimbursement for defective merchandise, and certain selling and display expenses. Substantially all vendor allowances are recorded as a reduction of the vendor’s product cost and are recognized in cost of sales as the product is sold.

Advertising

Advertising expense consists principally of paper, print and distribution costs related to the Company’s advertising circulars. The Company expenses the production and distribution costs related to its advertising circulars in the period the related promotional event occurs. Total advertising costs, exclusive of incentives from vendors and start-up advertising expense, amounted to $157,847, $140,774 and $118,365 for fiscal 2014, 2013 and 2012, respectively. Advertising expense as a percentage of sales was 4.9%, 5.3% and 5.3% for fiscal 2014, 2013 and 2012, respectively Prepaid advertising costs included in prepaid expenses and other current assets were $8,899 and $6,891 as of January 31, 2015 and February 1, 2014, respectively.

Pre-opening expenses

Non-capital expenditures incurred prior to the grand opening of a new, remodeled or relocated store are charged against earnings as incurred.

Cost of sales

Cost of sales includes the cost of merchandise sold including a majority of vendor allowances, which are treated as a reduction of merchandise costs; warehousing and distribution costs including labor and related benefits, freight, rent, depreciation and amortization, real estate taxes, utilities, and insurance; shipping and handling costs; store occupancy costs including rent, depreciation and amortization, real estate taxes, utilities, repairs and maintenance, insurance, licenses, and cleaning expenses; salon payroll and benefits; customer loyalty program expense; and shrink and inventory valuation reserves.

Selling, general and administrative expenses

Selling, general and administrative expenses includes payroll, bonus, and benefit costs for retail and corporate employees; advertising and marketing costs; occupancy costs related to our corporate office facilities; public company expense including Sarbanes-Oxley compliance expenses; stock-based compensation expense; depreciation and amortization for all assets except those related to our retail and warehouse operations which are included in cost of sales; and legal, finance, information systems and other corporate overhead costs.

Income taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. The amounts reported were derived using the enacted tax rates in effect for the year the differences are expected to reverse.

Income tax benefits related to uncertain tax positions are recognized only when it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Penalties and interest related to unrecognized tax positions are recorded in income tax expense.

Share-based compensation

Share-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized on a straight-line method over the requisite service period for awards expected to vest. The Company recorded stock compensation expense of $14,923, $16,003 and $13,375 for fiscal 2014, 2013 and 2012, respectively (see Note 10, “Share-based awards”).

Insurance expense

The Company has insurance programs with third party insurers for employee health, workers compensation and general liability, among others, to limit the Company’s liability exposure. The insurance programs are premium based and include retentions, deductibles and stop loss coverage. Current stop loss coverage per claim is $150 for employee health claims, $100 for general liability claims and $250 for workers compensation claims. The Company makes collateral and premium payments during the plan year and accrues expenses in the event additional premium is due from the Company based on actual claim results.

Net income per common share

Basic net income per common share is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share includes dilutive common stock equivalents, using the treasury stock method (see Note 11, “Net income per common share”).

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, issued as a new Topic, Accounting Standards Codification Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that the Company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. This standard is effective beginning in fiscal year 2017 and allows for either full retrospective or modified retrospective adoption. The Company is currently evaluating the application method and the impact of this new standard on its consolidated financial position, results of operations and cash flows.

Summary of significant accounting policies (Tables)
Summary of Estimated Useful Lives or Expected Lease Term

The Company’s assets are depreciated or amortized using the straight-line method, over the shorter of their estimated useful lives or the expected lease term as follows:

 

Equipment and fixtures

  3 to 10 years   

Leasehold improvements

  10 years   

Electronic equipment and software

  3 to 5 years   
Property and equipment (Tables)
Components of Property and Equipment

Property and equipment consist of the following:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Equipment and fixtures

   $ 447,782       $ 390,650   

Leasehold improvements

     431,999         376,796   

Electronic equipment and software

     272,937         218,979   

Construction-in-progress

     90,531         36,231   
  

 

 

    

 

 

 
  1,243,249      1,022,656   

Less accumulated depreciation and amortization

  (526,090   (426,920
  

 

 

    

 

 

 

Property and equipment, net

$ 717,159    $ 595,736   
  

 

 

    

 

 

 
Commitments and contingencies (Tables)
Schedule of Future Minimum Lease Payments Under Operating Leases
Future minimum lease payments under operating leases as of January 31, 2015, are as follows:

 

Fiscal year

   Operating
Leases
(in thousands)
 

2015

   $ 214,479   

2016

     218,879   

2017

     207,223   

2018

     189,683   

2019

     173,111   

2020 and thereafter

     599,542   
  

 

 

 

Total minimum lease payments

   $ 1,602,917   
  

 

 

Accrued liabilities (Tables)
Schedule of Accrued Liabilities

Accrued liabilities consist of the following:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Accrued vendor liabilities (including accrued property and equipment costs)

   $ 24,705       $ 15,631   

Accrued customer liabilities

     39,593         25,507   

Accrued payroll, bonus and employee benefits

     50,931         33,642   

Accrued taxes, other

     17,824         12,788   

Other accrued liabilities

     16,359         15,612   
  

 

 

    

 

 

 

Accrued liabilities

$ 149,412    $ 103,180   
  

 

 

    

 

 

 
Income taxes (Tables)

The provision for income taxes consists of the following:

 

(In thousands)

   Fiscal
2014
     Fiscal
2013
     Fiscal
2012
 

Current:

        

Federal

   $ 128,159       $ 105,731       $ 83,606   

State

     16,909         15,310         14,832   
  

 

 

    

 

 

    

 

 

 

Total current

  145,068      121,041      98,438   

Deferred:

Federal

  8,392      3,891      8,950   

State

  714      (75   (144
  

 

 

    

 

 

    

 

 

 

Total deferred

  9,106      3,816      8,806   
  

 

 

    

 

 

    

 

 

 

Provision for income taxes

$ 154,174    $ 124,857    $ 107,244   
  

 

 

    

 

 

    

 

 

 

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:

 

     Fiscal
2014
    Fiscal
2013
    Fiscal
2012
 

Federal statutory rate

     35.0     35.0     35.0

State effective rate, net of federal tax benefit

     2.8     3.0     3.4

Other

     (0.3 %)      0.1     (0.1 %) 
  

 

 

   

 

 

   

 

 

 

Effective tax rate

  37.5   38.1   38.3
  

 

 

   

 

 

   

 

 

 

Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Deferred tax assets:

     

Reserves not currently deductible

   $ 22,380       $ 24,721   

Employee benefits

     8,782         6,290   

Credit carryforwards

     338         402   

Accrued liabilities

     8,231         3,927   

Inventory valuation

     617         1,708   
  

 

 

    

 

 

 

Total deferred tax assets

  40,348      37,048   

Deferred tax liabilities:

Property and equipment

  44,882      44,288   

Deferred rent obligation

  38,409      28,529   

Prepaid expenses

  10,775      8,703   
  

 

 

    

 

 

 

Total deferred tax liabilities

  94,066      81,520   
  

 

 

    

 

 

 

Net deferred tax liability

$ (53,718 $ (44,472
  

 

 

    

 

 

 

A reconciliation of the Company’s unrecognized tax benefits, excluding interest and penalties, is as follows:

 

(In thousands)

   January 31,
2015
     February 1,
2014
 

Balance at beginning of the period

   $ 795       $ —     

Increase due to a current year position

     670         795   

Decrease due to a prior period position

     (51      —     
  

 

 

    

 

 

 

Balance at the end of the period

$ 1,414    $ 795   
  

 

 

    

 

 

 
Share-based awards (Tables)

The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model using the following weighted-average assumptions:

 

     Fiscal
2014
    Fiscal
2013
    Fiscal
2012
 

Volatility rate

     40.7     49.2     53.5

Average risk-free interest rate

     1.4     0.9     1.2

Average expected life (in years)

     3.8        4.4        6.3   

Dividend yield

     None        None        None   

The following table presents information related to options outstanding and options exercisable at January 31, 2015, under the Company’s stock option plans based on ranges of exercise prices (shares in thousands):

 

     Options outstanding      Options exercisable  

Options outstanding

   Number of
options
     Weighted-
average
remaining
contractual life
(years)
     Weighted-
average
exercise price
     Number
of options
     Weighted-
average
remaining
contractual life
(years)
     Weighted-
average
exercise price
 

$1.11 - 15.81

     132         4       $ 12.20         132         4       $ 12.20   

22.86 - 37.85

     128         6         28.17         128         6         28.17   

47.19 - 69.96

     184         7         66.74         97         7         67.96   

74.91 - 89.79

     181         8         80.97         44         8         82.29   

91.12 - 99.66

     373         9         97.54         30         8         96.52   

101.35 - 127.15

     75         9         118.08         9         9         116.98   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

End of year

     1,073         7       $ 72.12         440         6       $ 43.98   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

A summary of the status of the Company’s stock option activity is presented in the following table (shares in thousands):

 

     Fiscal 2014      Fiscal 2013      Fiscal 2012  
     Shares     Weighted-
average
exercise price
     Shares     Weighted-
average
exercise price
     Shares     Weighted-
average
exercise price
 

Common stock options outstanding

              

Beginning of year

     1,090      $ 56.94         1,807      $ 41.60         3,559      $ 26.46   

Granted

     371        99.40         302        84.50         241        89.99   

Exercised

     (238     44.79         (705     31.07         (1,795     17.57   

Forfeited

     (150     72.57         (314     53.15         (198     46.28   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

End of year

     1,073      $ 72.12         1,090      $ 56.94         1,807      $ 41.60   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Exercisable at end of year

     440      $ 43.98         363      $ 34.37         563      $ 24.85   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Vested and Expected to vest

     1,028      $ 71.28         1,046      $ 56.47         1,807      $ 41.60   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

A summary of the status of the Company’s restricted stock activity is presented in the following table (shares in thousands):

 

     Fiscal 2014      Fiscal 2013      Fiscal 2012  
     Shares     Weighted-
average
grant date
fair value
     Shares     Weighted-
average
grant date
fair value
     Shares     Weighted-
average
grant date
fair value
 

Restricted stock outstanding

              

Beginning of year

     162      $ 87.54         62      $ 81.81         22      $ 55.72   

Granted

     71        97.73         141        86.07         65        90.18   

Vested

     (52     91.91         (25     81.41         (5     66.88   

Forfeited

     (30     82.91         (16     75.39         (20     75.30   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

End of year

     151      $ 91.74         162      $ 87.54         62      $ 81.81   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Expected to vest

     140      $ 91.74         152      $ 87.54         62      $ 81.81   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

Net income per common share (Tables)
Net Income Per Basic and Diluted 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:

 

     Fiscal year ended  

(In thousands, except per share data)

   January 31,
2015
     February 1,
2014
     February 2,
2013
 

Numerator for diluted net income per share — net income

   $ 257,135       $ 202,849       $ 172,549   

Denominator for basic net income per share — weighted-average common shares

     64,335         63,992         63,250   

Dilutive effect of stock options and non-vested stock

     316         469         1,146   
  

 

 

    

 

 

    

 

 

 

Denominator for diluted net income per share

     64,651         64,461         64,396   

Net income per common share:

        

Basic

   $ 4.00       $ 3.17       $ 2.73   

Diluted

   $ 3.98       $ 3.15       $ 2.68   
Valuation and qualifying accounts (Tables)
Valuation and Qualifying Accounts

 

Description

   Balance at
beginning
of period
    Charged to
costs and
expenses
     Deductions     Balance at
end

of period
 
     (In thousands)  

Fiscal 2014

         

Allowance for doubtful accounts

   $ 915      $ 874       $ (443 )(a)    $ 1,346   

Shrink reserve

     9,358        22,374         (20,134     11,598   

Inventory — lower of cost or market reserve

     4,861        4,368         (3,976     5,253   

Insurance:

         

Workers Comp / General Liability Prepaid Asset

     (1,817 )(b)      6,899         (6,871     (1,789

Employee Health Care Accrued Liability

     2,606        41,335         (41,506     2,435   

Fiscal 2013

         

Allowance for doubtful accounts

   $ 973      $ 300       $ (358 )(a)    $ 915   

Shrink reserve

     4,020        16,298         (10,960     9,358   

Inventory — lower of cost or market reserve

     2,364        4,522         (2,025     4,861   

Insurance:

         

Workers Comp / General Liability Prepaid Asset

     (2,400 )(b)      7,060         (6,477     (1,817

Employee Health Care Accrued Liability

     2,232        34,422         (34,048     2,606   

Fiscal 2012

         

Allowance for doubtful accounts

   $ 556      $ 419       $ (2 )(a)    $ 973   

Shrink reserve

     2,445        8,077         (6,502     4,020   

Inventory — lower of cost or market reserve

     2,070        1,099         (805     2,364   

Insurance:

         

Workers Comp / General Liability Prepaid Asset

     (2,084 )(b)      4,864         (5,180     (2,400

Employee Health Care Accrued Liability

     1,929        26,584         (26,281     2,232   

 

 

(a) Represents write-off of uncollectible accounts

 

(b) Represents prepaid insurance
Selected quarterly financial data (unaudited) (Tables)
Quarterly Financial Information

 

    2014     2013  
    First     Second     Third     Fourth     First     Second     Third     Fourth  
(In thousands, except per
share data)
                                               

Net sales

  $ 713,770      $ 734,236      $ 745,722      $ 1,047,641      $ 582,712      $ 600,998      $ 618,781      $ 868,082   

Cost of sales

    467,817        474,894        463,967        697,904        378,763        388,921        387,120        574,521   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    245,953        259,342        281,755        349,737        203,949        212,077        231,661        293,561   

Selling, general and administrative expenses

    162,443        157,768        181,093        210,702        133,048        134,400        151,306        177,636   

Pre-opening expenses

    2,629        3,595        6,574        1,568        3,206        4,809        7,468        1,787   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    80,881        97,979        94,088        137,467        67,695        72,868        72,887        114,138   

Interest income, net

    (200     (209     (254     (231     (24     (18     (7     (69
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    81,081        98,188        94,342        137,698        67,719        72,886        72,894        114,207   

Income tax expense

    31,128        37,394        35,218        50,434        25,893        27,975        27,464        43,525   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 49,953      $ 60,794      $ 59,124      $ 87,264      $ 41,826      $ 44,911      $ 45,430      $ 70,682   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

               

Basic

  $ 0.78      $ 0.94      $ 0.92      $ 1.36      $ 0.66      $ 0.70      $ 0.71      $ 1.10   

Diluted

  $ 0.77      $ 0.94      $ 0.91      $ 1.35      $ 0.65      $ 0.70      $ 0.70      $ 1.09   

Business and Basis of Presentation - Additional Information (Detail)
12 Months Ended
Jan. 31, 2015
Segment
Store
State
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Number of stores
774 
Number of states in which entity operates
47 
Number of operating segments
Number of reportable segments
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Product Information [Line Items]
 
 
 
Allowance for doubtful receivable
$ 1,346 
$ 915 
 
Outstanding debt
 
Impairment charges
Accrued liability loyalty programs
15,032 
7,740 
 
Cost of loyalty programs
42,096 
27,588 
22,044 
Duration of refund for sales return
60 days 
 
 
Deferred gift card revenue
22,681 
16,439 
 
Gift card breakage
2,720 
2,181 
 
Total advertising costs
157,847 
140,774 
118,365 
Prepaid advertising costs
8,899 
6,891 
 
Stock compensation expense
14,923 
16,003 
13,375 
Stop loss coverage of employee health claims
150 
 
 
Stop loss coverage of general liability claims
100 
 
 
Stop loss coverage of workers compensation claims
250 
 
 
Sales [Member]
 
 
 
Product Information [Line Items]
 
 
 
Percentage of advertisement expense to sales
4.90% 
5.30% 
5.30% 
Leasehold Improvements [Member]
 
 
 
Product Information [Line Items]
 
 
 
Estimated useful lives or the expected lease term
10 years 
 
 
Salon Service [Member]
 
 
 
Product Information [Line Items]
 
 
 
Revenue from Salon service
175,533 
145,815 
121,357 
E-commerce [Member]
 
 
 
Product Information [Line Items]
 
 
 
Revenue from E-Commerce
149,857 
95,809 
55,086 
Vendor Allowances [Member]
 
 
 
Product Information [Line Items]
 
 
 
Allowances receivable
39,629 
30,591 
 
Landlord Allowances [Member]
 
 
 
Product Information [Line Items]
 
 
 
Allowances receivable
$ 8,357 
$ 14,128 
 
Summary of Significant Accounting Policies - Summary of Estimated Useful Lives or Expected Lease Term (Detail)
12 Months Ended
Jan. 31, 2015
Equipment and Fixtures [Member] |
Minimum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives or the expected lease term
3 years 
Equipment and Fixtures [Member] |
Maximum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives or the expected lease term
10 years 
Leasehold Improvements [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives or the expected lease term
10 years 
Leasehold Improvements [Member] |
Average [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives or the expected lease term
10 years 
Electronic Equipment and Software [Member] |
Minimum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives or the expected lease term
3 years 
Electronic Equipment and Software [Member] |
Maximum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives or the expected lease term
5 years 
Property and Equipment - Components of Property and Equipment (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Feb. 1, 2014
Property, Plant and Equipment [Line Items]
 
 
Property plant and equipment, gross
$ 1,243,249 
$ 1,022,656 
Less accumulated depreciation and amortization
(526,090)
(426,920)
Property and equipment, net
717,159 
595,736 
Equipment and Fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property plant and equipment, gross
447,782 
390,650 
Leasehold Improvements [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property plant and equipment, gross
431,999 
376,796 
Electronic Equipment and Software [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property plant and equipment, gross
272,937 
218,979 
Construction-in-progress [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property plant and equipment, gross
$ 90,531 
$ 36,231 
Property and Equipment - Additional Information (Detail) (USD $)
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Property, Plant and Equipment [Abstract]
 
 
Capitalized interest
$ 0 
$ 0 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Feb. 1, 2014
Multi-Year Supply Chain [Member]
Feb. 2, 2013
Multi-Year Supply Chain [Member]
Jan. 31, 2015
Retail Stores [Member]
Long-term Purchase Commitment [Line Items]
 
 
 
 
 
 
Non-cancelable operating lease terms, minimum
3 years 
 
 
 
 
 
Non-cancelable operating lease terms, maximum
10 years 
 
 
 
 
 
Total rent expense under operating leases
$ 159,245 
$ 138,086 
$ 115,755 
 
 
 
Minimum lease payments for stores to be opened in next fiscal year
 
 
 
 
 
184,376 
Contractual obligations related to commitments
34,521 
 
 
 
 
 
Contractual obligations related to commitments
 
 
 
$ 38,212 
$ 6,222 
 
Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Operating Leases (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
2015
$ 214,479 
2016
218,879 
2017
207,223 
2018
189,683 
2019
173,111 
2020 and thereafter
599,542 
Total minimum lease payments
$ 1,602,917 
Accrued Liabilities - Schedule of Accrued Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Feb. 1, 2014
Schedule Of Accrued Liabilities [Abstract]
 
 
Accrued vendor liabilities (including accrued property and equipment costs)
$ 24,705 
$ 15,631 
Accrued customer liabilities
39,593 
25,507 
Accrued payroll, bonus and employee benefits
50,931 
33,642 
Accrued taxes, other
17,824 
12,788 
Other accrued liabilities
16,359 
15,612 
Accrued liabilities
$ 149,412 
$ 103,180 
Income Taxes - Schedule of Provision for Income Taxes (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 31, 2015
Nov. 1, 2014
Aug. 2, 2014
May 3, 2014
Feb. 1, 2014
Nov. 2, 2013
Aug. 3, 2013
May 4, 2013
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Current:
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
$ 128,159 
$ 105,731 
$ 83,606 
State
 
 
 
 
 
 
 
 
16,909 
15,310 
14,832 
Total current
 
 
 
 
 
 
 
 
145,068 
121,041 
98,438 
Deferred:
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
 
 
 
 
 
 
8,392 
3,891 
8,950 
State
 
 
 
 
 
 
 
 
714 
(75)
(144)
Total deferred
 
 
 
 
 
 
 
 
9,106 
3,816 
8,806 
Provision for income taxes
$ 50,434 
$ 35,218 
$ 37,394 
$ 31,128 
$ 43,525 
$ 27,464 
$ 27,975 
$ 25,893 
$ 154,174 
$ 124,857 
$ 107,244 
Income Taxes - Schedule of Reconciliation of Federal Statutory Rate to Effective Tax Rate (Detail)
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Effective Income Tax Rate Reconciliation, Percent [Abstract]
 
 
 
Federal statutory rate
35.00% 
35.00% 
35.00% 
State effective rate, net of federal tax benefit
2.80% 
3.00% 
3.40% 
Other
(0.30%)
0.10% 
(0.10%)
Effective tax rate
37.50% 
38.10% 
38.30% 
Income Taxes - Components of Deferred Tax Assets and Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Feb. 1, 2014
Deferred tax assets:
 
 
Reserves not currently deductible
$ 22,380 
$ 24,721 
Employee benefits
8,782 
6,290 
Credit carryforwards
338 
402 
Accrued liabilities
8,231 
3,927 
Inventory valuation
617 
1,708 
Total deferred tax assets
40,348 
37,048 
Deferred tax liabilities:
 
 
Property and equipment
44,882 
44,288 
Deferred rent obligation
38,409 
28,529 
Prepaid expenses
10,775 
8,703 
Total deferred tax liabilities
94,066 
81,520 
Net deferred tax liability
$ (53,718)
$ (44,472)
Income Taxes - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Feb. 1, 2014
Income Tax Disclosure [Abstract]
 
 
Credit carryforwards for state income tax
$ 338 
 
Reserve for uncertain tax positions
$ 1,414 
$ 795 
Income Taxes - Reconciliation of Company's Unrecognized Tax Benefits, Excluding Interest and Penalties (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract]
 
 
Balance at beginning of the period
$ 795 
 
Increase due to a current year position
670 
795 
Decrease due to a prior period position
(51)
 
Balance at the end of the period
$ 1,414 
$ 795 
Notes Payable - Additional Information (Detail) (USD $)
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Line of Credit Facility [Line Items]
 
 
Letters of credit, maximum borrowing capacity
$ 200,000,000 
 
Additional credit available under the revolving facility with consent by each lender and other conditions
50,000,000 
 
Interest rate on outstanding borrowing under facility
LIBOR plus 1.50% 
 
Percentage of unused Line of Credit Facility Fee
0.20% 
 
Outstanding debt under credit facility
Subfacility for Standby Letters of Credit [Member]
 
 
Line of Credit Facility [Line Items]
 
 
Letters of credit, maximum borrowing capacity
$ 10,000,000 
 
Fair Value Measurements - Additional Information (Detail) (Fair Value, Inputs, Level 2 [Member], USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Fair Value, Inputs, Level 2 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Deferred compensation plan liability
$ 5,574 
Investments - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Investments Schedule [Abstract]
 
Certificates of deposit
$ 150,209 
Share-based Awards - Additional Information (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Stock Based Awards [Line Items]
 
 
 
Share-based Compensation
$ 14,923 
$ 16,003 
$ 13,375 
Cash from stock option exercises
10,639 
21,890 
31,530 
Employee Stock Option [Member]
 
 
 
Stock Based Awards [Line Items]
 
 
 
Number of shares granted
371 
302 
241 
Aggregate intrinsic value of outstanding options
64,167 
 
 
Sale price of our common stock on the NASDAQ Global Select Market
$ 131.94 
 
 
Restricted Stock Award [Member]
 
 
 
Stock Based Awards [Line Items]
 
 
 
Vesting period
3 years 
 
 
Unrecognized compensation cost
7,770 
 
 
Unrecognized compensation expense weighted-average recognition period
2 years 
 
 
Director restricted stock, vesting period
1 year 
 
 
Compensation expense
5,845 
5,789 
1,408 
2011 Incentive Award Plan [Member]
 
 
 
Stock Based Awards [Line Items]
 
 
 
Issuance upon grant or exercise of awards
4,409 
 
 
Share-based Compensation
14,923 
16,003 
13,375 
Cash from stock option exercises
10,639 
21,890 
31,530 
Total income tax benefit recognized in the income statement for the share-based compensation arrangements
3,526 
4,812 
5,364 
Actual tax benefit realized for the tax deductions from option exercise and restricted stock vesting
6,892 
18,169 
51,886 
2011 Incentive Award Plan [Member] |
Employee Stock Option [Member]
 
 
 
Stock Based Awards [Line Items]
 
 
 
Employee stock options, expiration period
10 years 
 
 
Vesting period
4 years 
 
 
Employee stock options, vesting rate
25.00% 
 
 
Compensation cost
9,078 
10,214 
11,967 
Weighted-average fair value of stock options granted
$ 32.38 
$ 34.31 
$ 46.29 
Total fair value stock options issued and vested
8,799 
10,544 
12,089 
Unrecognized compensation cost
16,628 
 
 
Unrecognized compensation expense weighted-average recognition period
2 years 
 
 
Total intrinsic value of options exercised
15,032 
49,404 
138,291 
Number of shares granted
371 
 
 
Aggregate intrinsic value of exercisable options
$ 38,669 
 
 
Share-based Awards - Black-Scholes Valuation Model Weighted-Average Assumptions (Detail)
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
 
 
 
Volatility rate
40.70% 
49.20% 
53.50% 
Average risk-free interest rate
1.40% 
0.90% 
1.20% 
Average expected life (in years)
3 years 9 months 18 days 
4 years 4 months 24 days 
6 years 3 months 18 days 
Dividend yield
   
   
   
Share-based Awards - Stock Option Activity (Detail) (Employee Stock Option [Member], USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Feb. 1, 2014
Feb. 2, 2013
Employee Stock Option [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Common stock options outstanding shares, Beginning of year
1,090 
1,807 
3,559 
Common stock options outstanding shares, Granted
371 
302 
241 
Common stock options outstanding shares, Exercised
(238)
(705)