For its third quarter, Ulta Beauty reported that sales grew 20.5% to $745.7 million, with total company comp sales increasing 9.5%. Retail comps, including salon, were up 8.2%.

 
Gross profit dollars were up 21.6% to $281.8 million, and gross profit margin increased 40 basis points to 37.8% from 37.4% last year. The primary drivers of this improvement were leveraged on fixed store costs and a strong comp and higher product margins, offset by incremental supply chain costs due to its expanding e-commerce business.

 
Net income increased 30.1% to $59.1 million or $0.91 per diluted share, versus $45.4 million or $0.70 per diluted share last year, or $0.72 per share excluding the severance charge last year.

 
Key drivers in the third quarter were continued strength in prestige and mass color cosmetics, the successful introduction of new products and brands, a more effective marketing strategy, double-digit comps in the salon business and rapid growth in e-commerce. Ulta.com saw 46.7% comp sales growth.

 
Ulta Beauty CEO Mary Dillon commented on how each of the retailers’ six strategic imperatives helped drive growth during the quarter.

 
   1. The first imperative, to acquire new guests and deepen loyalty with existing guests, saw Ulta sharpen its brand positioning and measure the impact of TV, print, radio and digital advertising in six representative markets around the country. Preliminary indications are positive, and results will influence marketing strategy for 2015.

 
   2. A second strategic imperative, to differentiate by delivering a distinctive and personalized guest experience across all channels, saw Ulta assess higher staffing levels to determine the impact on sales and the guest experience.  During the third quarter different labor models with increased customer-facing hours in 60 stores were tested across the country. Similar to the advertising tests, analysis and results will assess how Ulta incorporates a more effective labor model going forward.

 
   3. A third strategic imperative, to offer relevant, innovative and often exclusive products, saw Ulta roll out across the chain a specialized fixture to house an exclusive collection of makeup brushes in partnership with It Cosmetics. Ulta also launched premium skin care brand Algenist, hair care brand Keranique, as well as new fragrances from Michael Kors. During the quarter Ulta rolled out color cosmetics brand Becca to 282 stores, as well. Ulta recently introduced a bath collection for the Ulta brand, with new fragrances and packaging.

 
   4. Ulta’s fourth strategic imperative, delivering exceptional services, has Ulta focus on three core areas: hair, skin health and brows. For the quarter, the salon business grew 20.5%; the strongest comping categories were hair color, blowouts, skin services and makeup services. Skin services had their best comp all year, due in large part to the launch of a new peel service that builds repeat business. Turning to brow services, Ulta now has about 600 Benefit brow bars and are performing brow tinting services in almost 400 of these.

 
   5. The fifth strategic imperative, to grow stores and e-commerce to reach and serve more guests, saw Ulta open 50 stores during the quarter, ending the third quarter with 765 stores. Looking ahead to 2015, Ulta expects to open 100 full-size stores. In terms of Ulta’s small store tests, Ulta opened two 5,000 square-foot stores in September, one in Vernal, Utah and one in Morganton, North Carolina. These stores feature a curated assortment with every major category represented, lower fixture heights for increased visibility, and a full guest experience with a three-chair salon, dermalogic skin services and a Benefit brow bar. The two stores piloted a new capability for guests to order in-store on an iPad and have the product shipped for free, in order to give them access to Ulta’s full assortment.

 
   6. Ulta’s sixth strategic imperative, investing in infrastructure to support guest experience, growth and to capture scale efficiencies, has Ulta updating several of its DC buildings, which will have all new systems and operating models in 2016.