Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands |
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Consolidated Balance Sheets | |||
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 400,000 | 400,000 | 400,000 |
Common stock, shares issued | 57,959 | 59,232 | 60,108 |
Common stock, shares outstanding | 57,283 | 58,584 | 59,461 |
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
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Consolidated Statements of Income | ||||
Net sales | $ 1,682,514 | $ 1,560,011 | $ 5,092,150 | $ 4,591,899 |
Cost of sales | 1,059,081 | 987,733 | 3,217,971 | 2,923,447 |
Gross profit | 623,433 | 572,278 | 1,874,179 | 1,668,452 |
Selling, general and administrative expenses | 449,198 | 395,453 | 1,245,174 | 1,078,219 |
Pre-opening expenses | 6,455 | 7,612 | 15,667 | 17,363 |
Operating income | 167,780 | 169,213 | 613,338 | 572,870 |
Interest income, net | (900) | (1,318) | (4,617) | (3,786) |
Income before income taxes | 168,680 | 170,531 | 617,955 | 576,656 |
Income tax expense | 38,933 | 39,365 | 134,729 | 132,771 |
Net income | $ 129,747 | $ 131,166 | $ 483,226 | $ 443,885 |
Net income per common share: | ||||
Basic | $ 2.25 | $ 2.20 | $ 8.31 | $ 7.38 |
Diluted | $ 2.25 | $ 2.18 | $ 8.27 | $ 7.35 |
Weighted average common shares outstanding: | ||||
Basic | 57,568 | 59,724 | 58,123 | 60,135 |
Diluted | 57,763 | 60,062 | 58,396 | 60,432 |
Business and basis of presentation |
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Business and basis of presentation | 1.Business and basis of presentation On January 29, 2017, Ulta Salon, Cosmetics & Fragrance, Inc. implemented a holding company reorganization. Pursuant to the reorganization, Ulta Beauty, Inc., which was incorporated as a Delaware corporation in December 2016, became the successor to Ulta Salon, Cosmetics & Fragrance, Inc., the former publicly-traded company and now a wholly owned subsidiary of Ulta Beauty, Inc. As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc. and its consolidated subsidiaries. The Company was originally founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services. The stores also feature full-service salons. As of November 2, 2019, the Company operated 1,241 stores across 50 states, as shown in the table below.
The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X. These financial statements were prepared on a consolidated basis to include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions, and unrealized profit were eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to fairly state the financial position and results of operations and cash flows for the interim periods presented. The Company’s business is subject to seasonal fluctuation. Significant portions of the Company’s net sales and net income are realized during the fourth quarter of the fiscal year due to the holiday selling season. The results for the 13 and 39 weeks ended November 2, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending February 1, 2020, or for any other future interim period or for any future year. These interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended February 2, 2019. All amounts are stated in thousands, with the exception of per share amounts and number of stores. |
Summary of significant accounting policies |
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Summary of significant accounting policies | 2.Summary of significant accounting policies Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended February 2, 2019. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Consolidated Financial Statements” in the Annual Report. Fiscal quarter The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s third quarter in fiscal 2019 and 2018 ended on November 2, 2019 and November 3, 2018, respectively. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. Recent accounting pronouncements not yet adopted Intangibles – Goodwill and Other-Internal-Use Software In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The adoption of ASU 2018-15 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. Recently adopted accounting pronouncements Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 and subsequently issued amendments requires lessees to capitalize virtually all leases with terms of more than twelve months on the balance sheet as a right-of-use asset and recognize an associated lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing or operating leases and their classification impacts the recognition of expense in the income statement. Entities are allowed to apply the modified retrospective approach (1) retrospectively to each comparative period presented or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. The Company adopted the new standard on February 3, 2019 using the modified retrospective approach by recognizing and measuring leases without revising comparative period information or disclosures. The Company elected the transition package of three practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classifications. In addition, the Company elected to apply the practical expedient that allows for the combination of lease and non-lease components for all asset classes. The Company made an accounting policy election to keep leases with terms of twelve months or less off the balance sheet and recognize those lease payments on a straight-line basis over the lease term. The adoption of ASU 2016-02 resulted in the recording of operating lease assets and liabilities of $1,460,866 and $1,839,970 within the consolidated balance sheet, respectively, as of February 3, 2019. As part of the adoption, the Company recorded an adjustment to retained earnings of $2,375. The standard did not materially impact the Company’s consolidated results of operations and had no impact on cash flows. See Note 6, “Leases,” for further details. The impact to the Company’s opening consolidated balance sheet as of February 3, 2019 was as follows:
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Acquisitions |
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Acquisitions | |
Acquisitions | 3.Acquisitions The Company continues to make investments to evolve the customer experience, with a strong emphasis on integrating technology across the business. To support these efforts, the Company paid $13,606 to acquire two technology companies in fiscal 2018. On September 10, 2018, the Company acquired QM Scientific, an artificial intelligence technology company. The acquisition was not material to the Company’s consolidated financial statements. On October 29, 2018, the Company acquired GlamST, an augmented reality technology company. The acquisition was not material to the Company’s consolidated financial statements. |
Revenue |
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Revenue | 4.Revenue The Company’s net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue. Other revenue sources include the private label credit card and co-branded credit card programs, as well as deferred revenue related to the loyalty program and gift card breakage. Disaggregated revenue The following table sets forth the approximate percentage of net sales by primary category:
Deferred revenue Deferred revenue primarily represents contract liabilities for the Company’s obligation to transfer additional goods or services to a guest for which the Company has received consideration, such as unredeemed Ultamate Rewards loyalty points and unredeemed Ulta Beauty gift cards. In addition, the Company recognizes breakage on gift cards proportionately as redemption occurs. The following table provides a summary of the changes included in deferred revenue:
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Goodwill and Other Intangible Assets |
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Goodwill and Other Intangible Assets | 5.Goodwill and other intangible assets Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $10,870 at November 2, 2019 and February 2, 2019 and $9,084 at November 3, 2018. No additional goodwill was recognized during the 13 and 39 weeks ended November 2, 2019. The Company reviews the recoverability of goodwill annually during the fourth quarter or more frequently if an event occurs or circumstances change that would indicate that impairment may exist. Other intangible assets with finite useful lives are amortized over their useful lives. The Company reviews the recoverability of long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. |
Leases |
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Leases | 6.Leases The Company determines whether an arrangement is or contains a lease at contract inception. The Company leases retail stores, distribution centers, and corporate offices under non-cancellable operating leases with various expiration dates through 2032. Leases generally have an initial lease term of 10 years and include renewal options under substantially the same terms and conditions as the original leases. Leases do not contain any material residual value guarantees or material restrictive covenants. The lease classification evaluation begins at the lease commencement date. The lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All retail store, distribution center, and corporate office leases are classified as operating leases. The Company does not have any finance leases. Total rent payable is recorded during the lease term, including rent escalations in which the amount of future rent is fixed on the straight-line basis over the term of the lease (including the rent holiday period beginning upon control of the premises and any fixed payments stated in the lease). For leases with an initial term greater than 12 months, a related lease liability is recorded on the balance sheet at the present value of future payments discounted at the estimated fully collateralized incremental borrowing rate (discount rate) corresponding with the lease term. In addition, a right-of-use asset is recorded as the initial amount of the lease liability, plus any lease payments made to the lessor before or at the lease commencement date and any initial direct costs incurred, less any tenant improvement allowance incentives received. Tenant incentives are amortized through the right-of-use asset as reduction of rent expense over the lease term. The difference between the minimum rents paid and the straight-line rent (deferred rent) is reflected within the associated right-of-use asset. Operating lease expense is recognized on a straight-line basis over the lease term. Certain leases contain provisions that require additional rent payments based upon sales volume (“variable lease cost”). Contingent rent is accrued each period as the liabilities are incurred, in addition to the straight-line rent expense. This results in some variability in lease expense as a percentage of revenues over the term of the lease in stores where contingent rent is paid. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet. Short-term lease expense is recognized on a straight-line basis over the lease term. The Company subleases certain real estate to third parties for stores with excess square footage space. The Company does not separate lease and non-lease components (e.g., common area maintenance). As the interest rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate corresponding with the lease term. As there are no outstanding borrowings under the Company’s credit facility, this rate is estimated based on prevailing market conditions, comparable company and credit analysis, and judgment. The incremental borrowing rate is reassessed if there is a change to the lease term or if a modification occurs and it is not accounted for as a separate contract. The following table presents supplemental balance sheet information, the weighted-average remaining lease term, and discount rate for operating leases as of November 2, 2019:
Lease cost The following table presents the components of lease cost for operating leases:
(1) The majority of operating lease cost relates to retail stores and distribution centers and is classified within cost of sales. Operating lease cost for corporate offices is classified within selling, general and administrative expenses. Operating lease cost from the control date through store opening date is classified within pre-opening expenses. Other information The following table presents supplemental disclosures of cash flow information related to operating leases:
Maturity of lease liabilities The following table presents maturities of operating lease liabilities as of November 2, 2019:
Operating lease payments exclude $186,632 of legally binding minimum lease payments for leases signed but not yet commenced. |
Commitments and contingencies |
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Commitments and contingencies | 7.Commitments and contingencies The Company is involved in various legal proceedings that are incidental to the conduct of the business including both class action and single plaintiff litigation. In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. |
Notes payable |
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Notes payable | |
Notes payable | 8.Notes payable On August 23, 2017, the Company entered into a Second Amended and Restated Loan Agreement (the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder; Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A., as Lead Arrangers and Bookrunners; JPMorgan Chase Bank, N.A., as Syndication Agent and a Lender; PNC Bank, National Association, as Documentation Agent and a Lender; and the other lenders party thereto. The Loan Agreement matures on August 23, 2022, provides maximum revolving loans equal to the lesser of $400,000 or a percentage of eligible owned inventory (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of eligible owned receivables and qualified cash), contains a $20,000 subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $50,000, subject to the consent by each lender and other conditions. The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold. Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement. Outstanding borrowings bear interest at either a base rate or the London Interbank Offered Rate plus 1.25%, and the unused line fee is 0.20% per annum. As of November 2, 2019, February 2, 2019, and November 3, 2018, the Company had no borrowings outstanding under the credit facility and the Company was in compliance with all terms and covenants of the Loan Agreement.
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Fair value measurements |
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Fair value measurements | 9.Fair value measurements The carrying value of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximates their estimated fair values due to the short maturities of these instruments. Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows:
As of November 2, 2019, February 2, 2019 and November 3, 2018, the Company held financial liabilities included in other long-term liabilities on the consolidated balance sheets of $27,417, $19,615, and $22,128, respectively, related to its non-qualified deferred compensation plan. The liabilities have been categorized as Level 2 as they are based on third-party reported values, which are based primarily on quoted market prices of underlying assets of the funds within the plan. |
Investments |
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Investments | |
Investments | 10. Investments Short-term investments typically consist of certificates of deposit and are carried at cost, which approximates fair value and are recorded in the consolidated balance sheets in short-term investments. As of November 2, 2019, February 2, 2019, and November 3, 2018, the Company did not have any short-term investments. The Company’s investments in renewable energy projects are accounted for under the equity method of accounting. The balance of these investments is included in other long-term assets on the consolidated balance sheet. The Company contributed capital of $43,757 and received distributions including $31,554 of investment tax credits during the 39 weeks ended November 2, 2019. |
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Stock-based compensation | 11.Stock-based compensation The Company measures stock-based compensation expense on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite service period for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model using the following weighted-average assumptions for the periods indicated:
The Company granted 97 and 163 stock options during the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. The stock-based compensation expense charged against operating income for stock options was $2,204 and $2,134 for the 13 weeks ended November 2, 2019 and November 3, 2018, respectively. The stock-based compensation expense charged against operating income for stock options was $6,523 and $6,557 for the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. The weighted-average grant date fair value of these stock options was $89.91 and $50.10 for the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. At November 2, 2019, there was approximately $18,105 of unrecognized stock-based compensation expense related to unvested stock options. The Company issued 52 and 95 restricted stock units during the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. The stock-based compensation expense charged against operating income for restricted stock units was $3,429 and $3,449 for the 13 weeks ended November 2, 2019 and November 3, 2018, respectively. The stock-based compensation expense charged against operating income for restricted stock units was $9,672 and $9,244 for the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. At November 2, 2019, there was approximately $24,383 of unrecognized stock-based compensation expense related to restricted stock units. The Company issued 21 and 33 performance-based restricted stock units during the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. The stock-based compensation benefit included in operating income for performance-based restricted stock units was $122 for the 13 weeks ended November 2, 2019. The stock-based compensation expense charged against operating income for performance-based restricted stock units was $1,904 for the 13 weeks ended November 3, 2018. The stock-based compensation expense charged against operating income for performance-based restricted stock units was $2,979 and $5,083 for the 39 weeks ended November 2, 2019 and November 3, 2018, respectively. At November 2, 2019, there was approximately $7,793 of unrecognized stock-based compensation expense related to performance-based restricted stock units. |
Income Taxes |
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Income Taxes | |
Income Taxes | 12.Income taxes Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which the Company operates stores. Income tax expense of $38,933 for the 13 weeks ended November 2, 2019 represents an effective tax rate of 23.1%, compared to $39,365 of tax expense representing an effective tax rate of 23.1% for the 13 weeks ended November 3, 2018. Income tax expense of $134,729 for the 39 weeks ended November 2, 2019 represents an effective tax rate of 21.8%, compared to $132,771 of tax expense representing an effective tax rate of 23.0% for the 39 weeks ended November 3, 2018. The lower effective tax rate is primarily due to income tax accounting for share-based compensation and federal income tax credits. |
Net income per common share |
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Net income per common share | 13.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:
The denominator for diluted net income per common share for the 13 weeks ended November 2, 2019 and November 3, 2018 excludes 219 and 106 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects. The denominator for diluted net income per common share for the 39 weeks ended November 2, 2019 and November 3, 2018 excludes 217 and 298 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects. Outstanding performance-based restricted stock units are included in the computation of dilutive shares only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be considered satisfied if the end of the reporting period were the end of the related contingency period and the results would be dilutive under the treasury stock method. |
Share repurchase program |
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Share repurchase program | |
Share repurchase program | 14.Share repurchase program On March 9, 2017, the Company announced that the Board of Directors authorized a share repurchase program (the 2017 Share Repurchase Program) pursuant to which the Company could repurchase up to $425,000 of the Company’s common stock. The 2017 Share Repurchase Program authorization revoked the previously authorized but unused amount of $79,863 from the earlier share repurchase program. The 2017 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time. On March 15, 2018, the Company announced that the Board of Directors authorized a share repurchase program (the 2018 Share Repurchase Program) pursuant to which the Company could repurchase up to $625,000 of the Company’s common stock. The 2018 Share Repurchase Program authorization revoked the previously authorized but unused amount of $41,317 from the 2017 Share Repurchase Program. The 2018 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time. On March 14, 2019, the Company announced that the Board of Directors authorized a new share repurchase program (the 2019 Share Repurchase Program) pursuant to which the Company may repurchase up to $875,000 of the Company’s common stock. The 2019 Share Repurchase Program authorization revoked the previously authorized but unused amount of $25,435 from the 2018 Share Repurchase Program. The 2019 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time. During the 39 weeks ended November 2, 2019, the Company purchased 1,639 shares of common stock for $506,868. During the 39 weeks ended November 3, 2018, the Company purchased 1,582 shares of common stock for $379,423. |
Summary of significant accounting policies (Policies) |
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Summary of significant accounting policies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fiscal quarter | Fiscal quarter The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31. The Company’s third quarter in fiscal 2019 and 2018 ended on November 2, 2019 and November 3, 2018, respectively. |
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Reclassifications | Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. |
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Recent accounting pronouncements not yet adopted and Recently adopted accounting pronouncements | Recent accounting pronouncements not yet adopted Intangibles – Goodwill and Other-Internal-Use Software In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which clarifies and aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. The adoption of ASU 2018-15 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. Recently adopted accounting pronouncements Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 and subsequently issued amendments requires lessees to capitalize virtually all leases with terms of more than twelve months on the balance sheet as a right-of-use asset and recognize an associated lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing or operating leases and their classification impacts the recognition of expense in the income statement. Entities are allowed to apply the modified retrospective approach (1) retrospectively to each comparative period presented or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. The Company adopted the new standard on February 3, 2019 using the modified retrospective approach by recognizing and measuring leases without revising comparative period information or disclosures. The Company elected the transition package of three practical expedients permitted within the standard, which among other things, allows for the carryforward of historical lease classifications. In addition, the Company elected to apply the practical expedient that allows for the combination of lease and non-lease components for all asset classes. The Company made an accounting policy election to keep leases with terms of twelve months or less off the balance sheet and recognize those lease payments on a straight-line basis over the lease term. The adoption of ASU 2016-02 resulted in the recording of operating lease assets and liabilities of $1,460,866 and $1,839,970 within the consolidated balance sheet, respectively, as of February 3, 2019. As part of the adoption, the Company recorded an adjustment to retained earnings of $2,375. The standard did not materially impact the Company’s consolidated results of operations and had no impact on cash flows. See Note 6, “Leases,” for further details. The impact to the Company’s opening consolidated balance sheet as of February 3, 2019 was as follows:
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Business and basis of presentation (Tables) |
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Schedule of stores operated by geographic area |
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Summary of significant accounting policies (Tables) |
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Schedule of the impact to the Company's opening consolidated balance sheet | The impact to the Company’s opening consolidated balance sheet as of February 3, 2019 was as follows:
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Revenue (Tables) |
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Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of approximate percentage of net sales by primary category | The following table sets forth the approximate percentage of net sales by primary category:
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Summary of changes in deferred revenue |
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Leases (Tables) |
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Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of weighted-average remaining lease term and discount rate for operating leases | The following table presents supplemental balance sheet information, the weighted-average remaining lease term, and discount rate for operating leases as of November 2, 2019:
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Summary of information related to lease costs for operating leases | The following table presents the components of lease cost for operating leases:
(1) The majority of operating lease cost relates to retail stores and distribution centers and is classified within cost of sales. Operating lease cost for corporate offices is classified within selling, general and administrative expenses. Operating lease cost from the control date through store opening date is classified within pre-opening expenses. |
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Schedule of cash flow information and non-cash activity related to operating leases | The following table presents supplemental disclosures of cash flow information related to operating leases:
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Schedule of maturities of non-cancellable operating lease liabilities | The following table presents maturities of operating lease liabilities as of November 2, 2019:
Operating lease payments exclude $186,632 of legally binding minimum lease payments for leases signed but not yet commenced. |
Stock-based compensation (Tables) |
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Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||
Schedule of weighted average assumptions to determine grant date fair value of employee stock options |
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Net income per common share (Tables) |
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Schedule of reconciliation of net income and number of shares of common stock used in computation of net income per basic and diluted share |
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Summary of significant accounting policies - Fiscal Quarter (Details) |
9 Months Ended | |
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Nov. 02, 2019 |
Nov. 03, 2018 |
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Summary of significant accounting policies | ||
Fiscal period | 91 days | 91 days |
Acquisitions (Details) - Acquisition of technology companies $ in Thousands |
12 Months Ended |
---|---|
Feb. 02, 2019
USD ($)
company
| |
Acquisitions | |
Payments to acquire companies | $ | $ 13,606 |
Number of companies acquired | company | 2 |
Revenue - Disaggregated revenue (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 02, 2019 |
Nov. 03, 2018 |
Nov. 02, 2019 |
Nov. 03, 2018 |
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Disaggregated revenue | ||||
Concentration (as a percent) | 100.00% | 100.00% | 100.00% | 100.00% |
Cosmetics | ||||
Disaggregated revenue | ||||
Concentration (as a percent) | 51.00% | 53.00% | 50.00% | 52.00% |
Skincare, Bath and Fragrance | ||||
Disaggregated revenue | ||||
Concentration (as a percent) | 21.00% | 19.00% | 21.00% | 20.00% |
Haircare Products and Styling Tools | ||||
Disaggregated revenue | ||||
Concentration (as a percent) | 18.00% | 19.00% | 19.00% | 19.00% |
Services | ||||
Disaggregated revenue | ||||
Concentration (as a percent) | 6.00% | 6.00% | 6.00% | 6.00% |
Other (nail products, accessories, and other) | ||||
Disaggregated revenue | ||||
Concentration (as a percent) | 4.00% | 3.00% | 4.00% | 3.00% |
Revenue - Deferred revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Nov. 02, 2019 |
Nov. 03, 2018 |
Nov. 02, 2019 |
Nov. 03, 2018 |
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Summary of changes in deferred revenue | ||||
Balance at beginning of period | $ 171,953 | $ 130,616 | $ 193,585 | $ 110,103 |
Adoption of ASC 606 | 38,773 | |||
Additions to contract liabilities | 66,167 | 55,032 | 145,728 | 78,339 |
Deductions to contract liabilities | (62,816) | (50,052) | (164,009) | (91,619) |
Balance at end of period | $ 175,304 | $ 135,596 | $ 175,304 | $ 135,596 |
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Nov. 02, 2019 |
Nov. 02, 2019 |
Feb. 02, 2019 |
Nov. 03, 2018 |
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Goodwill and Other Intangible Assets | ||||
Goodwill | $ 10,870 | $ 10,870 | $ 10,870 | $ 9,084 |
Additional goodwill recognized | $ 0 | $ 0 |
Leases - Weighted- average remaining lease term and discount rate (Details) $ in Thousands |
Nov. 02, 2019
USD ($)
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Leases | |
Initial lease term | 10 years |
Operating lease assets | $ 1,529,524 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Operating lease assets |
Current operating lease liabilities | $ 222,627 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Current operating lease liabilities |
Non-current operating lease liabilities | $ 1,706,806 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Non-current operating lease liabilities |
Total lease liabilities | $ 1,929,433 |
Weighted-average remaining lease term | 6 years 9 months 18 days |
Weighted-average discount rate | 4.10% |
Minimum | |
Leases | |
Initial lease term | 12 months |
Maximum | |
Leases | |
Initial lease term | 12 months |
Leases - Lease costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
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Nov. 02, 2019 |
Nov. 02, 2019 |
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Lease Costs | ||
Total lease cost | $ 70,607 | $ 210,052 |
Cost of sales | ||
Lease Costs | ||
Operating lease cost | 72,467 | 215,388 |
Variable lease cost | (1,834) | (5,158) |
Selling, general and administrative expenses | ||
Lease Costs | ||
Short-term lease cost | 109 | 247 |
Net sales | ||
Lease Costs | ||
Sublease income | $ (135) | $ (425) |
Leases - Cash flow information and non-cash activity (Details) $ in Thousands |
9 Months Ended |
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Nov. 02, 2019
USD ($)
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Leases | |
Cash paid for operating lease liabilities | $ 251,468 |
Operating lease assets obtained in exchange for operating lease liabilities (non-cash) | 287,645 |
Excluded cash received for tenant incentives | $ 57,160 |
Leases - Maturity of lease liabilities (Details) $ in Thousands |
Nov. 02, 2019
USD ($)
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Maturities of non-cancellable operating lease liabilities: | |
2019 | $ 35,555 |
2020 | 348,826 |
2021 | 337,449 |
2022 | 319,252 |
2023 | 283,484 |
2024 and thereafter | 919,024 |
Total lease payments | 2,243,590 |
Less: Imputed interest | (314,157) |
Present value of operating lease liabilities | 1,929,433 |
Minimum lease payments for leases signed but not yet commenced | $ 186,632 |
Notes payable (Details) |
9 Months Ended | ||
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Nov. 02, 2019
USD ($)
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Feb. 02, 2019
USD ($)
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Nov. 03, 2018
USD ($)
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Notes payable | |||
Outstanding borrowings under credit facility | $ 0 | $ 0 | $ 0 |
Second Amended and Restated Loan Agreement | |||
Notes payable | |||
Unused line fee (as a percent) | 0.20% | ||
Second Amended and Restated Loan Agreement | Minimum | |||
Notes payable | |||
Fixed charge coverage ratio covenant | 1.0 | ||
Second Amended and Restated Loan Agreement | London Interbank Offered Rate | |||
Notes payable | |||
Interest rate margin (as a percent) | 1.25% | ||
Second Amended and Restated Loan Agreement | Revolving loans | |||
Notes payable | |||
Maximum borrowing capacity | $ 400,000,000 | ||
Contingent increase to revolving facility | 50,000,000 | ||
Second Amended and Restated Loan Agreement | Letters of credit | |||
Notes payable | |||
Maximum borrowing capacity | $ 20,000,000 |
Fair value measurements (Details) - USD ($) $ in Thousands |
Nov. 02, 2019 |
Feb. 02, 2019 |
Nov. 03, 2018 |
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Level 2 | Non-qualified deferred compensation plan | |||
Fair value measurements | |||
Fair value of financial liabilities | $ 27,417 | $ 19,615 | $ 22,128 |
Investments (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
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Nov. 02, 2019 |
Feb. 02, 2019 |
Nov. 03, 2018 |
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Investments | |||
Short-term investments | $ 0 | $ 0 | $ 0 |
Contributions to equity method investments | 43,757 | ||
Investment tax credits | $ 31,554 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 02, 2019 |
Nov. 03, 2018 |
Nov. 02, 2019 |
Nov. 03, 2018 |
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Income Taxes | ||||
Income tax expense | $ 38,933 | $ 39,365 | $ 134,729 | $ 132,771 |
Effective tax rate (as a percent) | 23.10% | 23.10% | 21.80% | 23.00% |
Net income per common share - Reconciliation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 02, 2019 |
Nov. 03, 2018 |
Nov. 02, 2019 |
Nov. 03, 2018 |
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Net income per common share | ||||
Numerator for diluted net income per share - net income | $ 129,747 | $ 131,166 | $ 483,226 | $ 443,885 |
Denominator for basic net income per share - weighted-average common shares | 57,568 | 59,724 | 58,123 | 60,135 |
Dilutive effect of stock options and non-vested stock | 195 | 338 | 273 | 297 |
Denominator for diluted net income per share | 57,763 | 60,062 | 58,396 | 60,432 |
Net income per common share: | ||||
Basic | $ 2.25 | $ 2.20 | $ 8.31 | $ 7.38 |
Diluted | $ 2.25 | $ 2.18 | $ 8.27 | $ 7.35 |
Net income per common share - Anti-dilutive Shares (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 02, 2019 |
Nov. 03, 2018 |
Nov. 02, 2019 |
Nov. 03, 2018 |
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Net income per common share | ||||
Employee stock options and restricted stock units excluded from the computation of net income per common share | 219 | 106 | 217 | 298 |