Ulta Beauty, Inc.
Q1 2021 Earnings Call Transcript

Published: 27 May 2021

[Operator:]

Good afternoon and welcome to the Ulta Beauty's Conference Call to discuss the Results for the First Quarter of Fiscal 2021. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kiley Rawlins, Vice President of Investor Relations. Ms. Rawlins, please proceed.

[Kiley Rawlins:]

Thank you, Shamoline ph. Good afternoon, everyone and thank you for joining us today. Hosting our call are Mary Dillon, Chief Executive Officer; Dave Kimbell, President; and Scott Settersten, Chief Financial Officer. Kecia Steelman, Chief Store Operations Officer will join us for the Q&A session.

[Mary Dillon:]

Thank you, Kiley, and good afternoon, everyone. This afternoon we reported record first quarter financial performance with sales and earnings exceeding both fiscal 2020 and fiscal 2019 levels. For the first quarter, net sales increased 65.2% to $1.9 billion. Operating margin was 15.8% of sales and GAAP diluted EPS was $4.10 per share, adjusted diluted EPS for the quarter was $4.07 per share. Fiscal 2021 is off to a fantastic start at Ulta Beauty. And I want to thank all our associates for their continued efforts to deliver great experiences and support our business in an environment that continues to be very dynamic. As you know, this will be the final time I speak with all of you as CEO, as I will transition to Executive Chair of Ulta Beauty next week after our annual shareholder meeting.

[Dave Kimbell:]

Thanks, Mary for your kind words, confidence and support. We've worked together for a long time, and I'm grateful for the opportunity I've had to learn from you and to lead with you. Under your leadership, Ulta Beauty has established a winning engaging culture, become the largest U.S beauty retailer, join the fortune 500 and tripled its market cap. And we have solidified the company as a preferred destination for beauty enthusiast, created an inclusive, well regarded workplace and to become a recognized leader in the business and retail community. I want to thank you personally for your leadership and mentorship, and I look forward to your ongoing support and counsel as I transition into my new role.

[Scott Settersten:]

Thanks, Dave, and good afternoon, everyone. Starting with the income statement. Q1 sales increased 65.2% as we anniversary the temporary closure of all of our stores last year in response to COVID-19. We opened 28 new stores during the quarter including our new Herald Square store in New York City and closed two stores. We also remodeled three stores and relocated one store. Total company comp increased 65.9% driven by an 8.8% growth in average ticket and a 52.5% increase in transactions. Compared to the first quarter of fiscal 2019, total sales increased 11.2% and comp store sales increased 7%. As Dave mentioned, we saw stronger-than-expected sales growth across channels with brick-and-mortar and e-commerce contributing to the strong comp performance. From a mix perspective, cosmetics was 45% of sales compared to 50% last year. Skin care increased 200 basis points to 19% of sales. The fragrance and bath category increased 400 basis points to 11% of sales and hair care products and styling tools increased 90 basis points to 19% of sales. As a percent of sales, the services category was down 40 basis points to about 3%. Note the nail category is now included in cosmetics, instead of other and we have updated 2020 results to reflect this change. Gross Profit margin increased to 38.9% of sales compared to 25.9% last year. The increase was primarily due to significant leverage of fixed costs resulting from higher sales. In addition, gross margin benefited from higher merchandise margin, lower salon expenses and a more favorable channel mix. While the higher sales delivered some benefit to merchandise margin. The improvement also reflects lower promotional activity in the quarter and ongoing benefits from our efficiencies for growth or ESG cost optimization program. Salon expenses were lower compared to last year reflecting the elimination of the salon manager role. As a reminder, we will anniversary this change in Q4. Comparing this year's performance to the first quarter of fiscal 2019, gross margin improved by 190 basis points. Higher merchandise margin, fixed cost leverage and lower salon expenses were partially offset by channel mix. As a percentage of sales, SG&A decreased to 22.9% compared to 32.5% last year, reflecting strong expense leverage on higher sales, compared to the first quarter of fiscal 2019, SG&A as a percent of sales was about 20 basis points favorable. As a percentage of sales, lower corporate overhead and store expenses were partially offset by higher advertising expense. Operating margin was 15.8% of sales compared to negative 8.7% in the first quarter of fiscal 2020 on a GAAP basis, and a negative 7% on an adjusted basis. Strong top line growth especially in brick and mortar, combined with the impact of our cost optimization efforts resulted in robust operating margin performance. The tax rate increased to 24.5% compared to 23.6% last year, primarily due to a decrease in state tax credits. Diluted GAAP earnings per share was $4.10 compared to a diluted loss per share of a $1.39 last year. Adjusted diluted earnings per share were $4.07 compared to a diluted loss per share of $1.13 a year ago. Moving on to the balance sheet and cash flow. Total inventory increased 1% compared to last year, reflecting the impact of 26 additional stores as well as the opening of our Jacksonville fast fulfillment center, partially offset by lower inventory levels due to higher-than-expected sales. Capital expenditures were $34.6 million for the quarter driven by our new store opening program, investments in IT systems and story models and relocations. The decrease in capital expenditures compared to the first quarter last year was primarily related to investments last year related to our planned Canadian expansion, which was suspended in the second half of fiscal 2020. Depreciation was $70.6 million compared to $76.6 million last year, primarily reflecting the impact of last year store impairments in the 19 stores which we permanently closed. We ended the quarter with $947.5 million in cash and cash equivalents. In the first quarter, we repurchased 1.2 million shares at a cost of $392.3 million. At the end of the quarter, we had 1.1 billion remaining under our current 1.6 billion repurchase authorization. We continue to expect to repurchase approximately 850 million of shares in fiscal 2021, but as always have the flexibility to modify the cadence of repurchases in response to market conditions. Turning now to our updated outlook for 2021. We are encouraged by our first quarter results and the trends we've experienced so far in the second quarter, but we are still early in the year. While the presence of vaccines and new CDC guidance gives us optimism for the recovery. Our visibility into the trajectory and sustainability of recent trends is limited, and the second half of the year remains difficult to forecast. We now expect net sales for the year will be between $7.7 million and $7.8 billion with comp sales plan in the 23% to 25% range. We continue to expect comp results will vary significantly between the front half and the back half of the year as we lap store closures that occurred in the first half of 2020. But we now anticipate comp growth will be in the high 40s to low 50s for the first half of 2021 and then moderate to high single digit growth for the second half. We continue to expect to open approximately 40 net new stores in fiscal 2021 and to now remodel or relocate 19 stores. We now expect operating margin for the year will be approximately 11% of sales. We continue to expect the largest driver of operating margin expansion will come from gross margin, driven by leverage of fixed costs, less headwind from Channel shift, improving merchandise margin and leverage a salon clause. Based on higher top line growth, we now expect modest SG&A leverage for the year as compared to fiscal 2020. These assumptions result in an expectation for diluted earnings per share in the range of $11.50 to $11.95 per share, including the impact of approximately 850 million in share repurchases. We plan to spend between $225 million and $250 million in CapEx in fiscal 2021, including approximately $115 million for new stores, remodels and merchandise fixtures, $90 million for supply chain and IT and about $33 million for store maintenance and other. As a reminder, our guidance for 2021 assumes that consistent federal tax rate and no material increases in the federal minimum wage, and does not include assumptions for any impact related to a resurgence of COVID-19. And now I'll turn the call back over to our operator to moderate the Q&A session.

[Operator:]

Our first question is from question is from Rupesh Parikh with Oppenheimer. Please proceed with your question.

[Rupesh Parikh:]

Good afternoon. Thanks for taking my questions. So first, Mary, wish you all the best and you're certainly going to be missed.

[Mary Dillon:]

Thank you, Rupesh.

[Rupesh Parikh:]

And then just for the team, just congrats on a really amazing quarter. So I guess my -- I guess the one question I have is, if you look at Q1, obviously operating margins are now well above where they were in Q1 '19. Are there any new learnings you can share in terms of maybe some new structural benefits you've seen operating margins going forward, just based on the performance we saw during the quarter?

[Mary Dillon:]

Yes, so we're very proud, Rupesh, of the results that we were able to post in the first quarter. And our teams did a great job collaborating with our brand partners to deliver a great experience to our guests and outstanding financial performance. Part of what was driving some of that over performance was obviously the very strong comp, right? In the sales generation versus what our initial expectations were, so nearly a 66% versus last year and about a 7% versus fiscal 2019. So a lot of good things going into that besides the great tailwinds we saw from stimulus payments and optimism about the economy and the COVID vaccine rollout across the nation. There was also structural changes we made in our business model, right. So we've talked about these over the course of the last couple of calls. So there's some good things that we did, some great self help things, but we also took advantage of a great sales environment. As we think about the 15.8 that we posted in the first quarter versus kind of the rest of the year and what our long-term expectations are. I would say that there was a bit of over leverage, maybe in the first quarter, right? So again, we didn't expect those sales levels, obviously as we got started in a year. And so that the spending, we were unable to kind of match spending with the sales generation. So, especially in the store environment, I mean, there were some longer lines at the checkout than maybe we would have preferred to see if we had that choice ahead of time. So as we're looking at out to the rest, the second half of the year, there's things around wages, store labor, some upward pressure in fuel and transportation costs. And then we're going to do some more advertising in the back half of the year than what we had initially planned. And make sure we take advantage of the environment and make sure we really maximize market share gain opportunities in this environment. So longer term very optimistic about operating margin expansion opportunities across the wide variety of elements in our business.

[Rupesh Parikh:]

Great. Thank you and best of luck for the balance of the year.

[Operator:]

Our next question is from Mark Altschwager with Baird. Please proceed with your question.

[Mark Altschwager:]

Good afternoon. Thanks for taking my question. I was hoping you could speak a little bit more to the trend you're seeing in the recovery in stores, perhaps relative to 2019. I think, comps up 7%. With some of the e-commerce growth you cited if my math is right at think it implies stores still down versus '19. But it sounds like traffic's recovering nicely. So just any insight there and it's just bigger picture, how those Q1 results have really informed your thinking on the trajectory of the store productivity recovery through the remainder of the year. Thank you.

[Scott Settersten:]

Hey, Mark, yes we are very encouraged by the performance of our storage channel. In fact, our entire omni-channel experience, even as our e-com performed above expectations, our stores strengthen so just reinforces for us the importance and the power of our model and the connections that we've built. Yes, stores did exceed our expectations through -- throughout the quarter. We saw, as our guest became more comfortable in shopping in-person. We certainly benefited from that and saw continued improvement throughout the quarter. Traffic was still down, meaningfully down for the quarter down in the 20% range. So the strength we saw in stores, we were pleased to see a lot of guests coming back in, but also strong -- saw strong ticket performance, which we think is driven by renewal -- reengagement in the category, trip consolidation, a lot of newness come in. But yes, so while we're encouraged by store, we know we still have, opportunity ahead to get all of our guests back comfortable shopping in store and we're continuing to see that trend. I will just say that the -- as I as I mentioned, the e-commerce business also exceeded our expectations, including strength in BOPIS. So it reinforces for us not just any individual strength across either stores or e-commerce or any element, but the connected strength that we're seeing, which is a strong indicator to us that our members are getting back involved in all aspects of Ulta and we're pleased with that and anticipate more to come As we look out over the rest of this year as it relates to store traffic, we would anticipate getting it continuing to improve traffic but there's still a lot of uncertainty about how the rest of the year will play out and exactly how that will translate into store behaviors, but we're encouraged by what we saw in Q1.

[Mark Altschwager:]

That's really helpful. Thank you. And maybe just as a quick follow-up to that just the strengthen in BOPIS is nice to hear. Could you just maybe address your e-commerce margins and how you're kind of closing the gap there relative to stores? I guess maybe that would be for Scott. Thanks.

[Scott Settersten:]

Yes. So I guess I would start with overall versus last year. The channel shift is going to work to our advantage, right. So that's going to be a nice tailwind as we talk about gross margin specifically, but operating margins overall. So, as you've heard us talk about before, Mark, many times, there's a lot of different levels we have at our disposal to help mitigate some of this, the margin headwinds that come with that part of the business. So again, that's just part of how consumers are going to shop. And we're focused on making sure we deliver the best shopping experience, regardless if it's in our stores, or an online digital kind of environment. So BOPIS is one piece of that. We saw a nice increase this quarter. We're working on other ways, we can motivate our guests to take advantage of that, because that is a margin help for us on a rate basis. Again, we do want to remind everyone that, as Dave mentioned, during the prepared remarks that our e-com business is largely an incremental piece. So it's driving a lot of incremental sales and the rate head we get from that is something we will take all things considered, but we've got lots of ways to help improve that over the longer term. BOPIS is a piece of it, supply chain, getting closer to the guest is piece of it and optimizing our promotional cadence overall is a big piece of it as well. So there's still a lot of ways for us to improve that as we look ahead.

[Mark Altschwager:]

That's great. Congrats to the team on a strong start and best of luck.

[Scott Settersten:]

Thank you.

[Operator:]

Our next question is from Oliver Chen with Cowen. Please proceed with your question.

[Oliver Chen:]

Hi. A quick . We will miss you a lot. Congrats on the next steps. The inventory position looks really tight in terms of it being somewhat low, or sales left on the table and what are your thoughts on inventory versus sales going forward in an environment where supply chains have been tougher, and just making sure you're as well-positioned as possible to realize the market share gains? Thank you.

[Dave Kimbell:]

Yes, thanks for your question, Oliver. We feel good about our inventory position. But it's certainly true that we've been working hard to ensure that we maintain a strong level of in-stocks. We've been working very closely with all of our brand partners to respond to this increased demand. Unfortunately, we're having good success with that. As we look forward over the year, we would anticipate inventory levels to be higher than 2020, but at a rate lower than our comp sales. So, as far as leaving sales on the table, we feel like we were able to deliver and meet the demand. There are pockets of brands that had just extraordinary growth that we are working hard to maintain in-stock levels. But I'd say, overall, our guests we are able to -- you'll find what they were looking for, and we felt like we met their expectation. And that's probably reflected in the strong baskets as we saw both in-store and online. So a lot of work going on to ensure this. I don't want brand partners or max -- really looking to maximize their production to meet this growing demand and we feel confident we'll be able to meet our guests demand going forward.

[Oliver Chen:]

Thank you. A follow-up related question for Kecia or David. Supply chain priorities, just would love your take on the major priorities on the roadmap ahead as there are many initiatives you're working on.

[Dave Kimbell:]

Yes, that's great. Why don’t -- Kecia, do you want to ?

[Kecia Steelman:]

Yes, we're continuing to look for efficiencies within our supply chain and our network as we build out to support the not only the store business, but also the e-com business. So we'll have more to share here in the future. But we're continuing to look for efficiencies and the ways to get the products to our stores and to our consumers in the quickest, most efficient way possible.

[Oliver Chen:]

Thank you. Best regards.

[Operator:]

And our next question is from Erinn Murphy with Piper Sandler. Please proceed with your question.

[Erinn Murphy:]

Great, thanks. Good afternoon. And Mary it's been an absolute pleasure working with you and Dave and Kecia congratulations. So my question is for Dave. On the cosmetics category, you mentioned it was still negative versus 2019. Could you just put a final point on quantifying that? And then as you've kind of monitored the pace of reopening, has there been any key regional differences between markets like Florida or Texas that has been a little bit more outspoken in terms of going out trend? And then what's implied in the guidance for cosmetics as you look at the back half of this year versus 2019 levels?

[Dave Kimbell:]

All right. Erinn, let me -- I'll tackle some of the -- your cosmetics questions. And as both what we're seeing as relates to the guidance and I will let Kecia to talk about our regional performance here. As far as makeup as we said, well, again, we're really pleased with the performance across all categories with strong growth versus top 2020. We will get extremely specific by category other than to say, that our makeup category was one major category where versus 2019 in total, we were still short of 2019 performance. Having said that, we're seeing lots of encouraging signs. Our mass business is particularly strong. We've always been -- we've been working on for many years, building a really differentiated mass assortment with many brands that are exclusive or unlimited distribution with us. Those partners have been leading innovation and driving new ways to connect with our guests and that strength is really show -- really showed up in Q4. We had strong positive growth on a number of our brands and brands across the assortment in our mass NYX, E.L.F, Kiss, Morphe, Maybelline really across the portfolio, really pleased with the business on that side of the business. Prestige makeup was not quite as strong. We've had but again, encouraging signs newness is kicking in and we see a lot more coming as we look into the balance of the year. The performance that we've had for a while, pre-pandemic on prestige, it's been challenging, but so many of our brand partners have reacted with strong innovation, strong product innovation, new marketing approaches connection through social media. And as customers come back in, as our guests come back in, we're anticipating that part of our business really strengthening over the balance of the year. A couple of highlights were yet again, newness, I talked about it in the script, but we're seeing some newness across different areas of the business. Anastasia and Brow benefit with mascara. New entry expanded performance in our luxury segment with Hourglass. Newer brands like KVD, Vegan and Jacqueline Cosmetics. Performance from some of our strongest largest brands, like Clinique and Tarte. So we're seeing some encouraging signs, not quite yet back to 2019. And some uncertainty how that will play out for the rest of the year. As your question about performance and how makeup performance is reflected in our guidance, we'd say, we're still watching it closely. We're not anticipating a massive turnaround. But we do see some encouraging signs. And if newness strengthens throughout the rest of the year, we'd anticipate it performing even better. So good signs in makeup, great signs happening in all categories outside of makeup and so the balance of our portfolio feels really healthy right now. Kecia, do you want to talk about some regional?

[Kecia Steelman:]

Yes, sure. We stayed really close to this as they were starting to list the mask mandates across the states. And we really didn't see the variances across the United States, like what we would have thought was strength across the whole U.S in regards to traffic. And I think it was more related around the confidence of the vaccine, the vaccine rollout and people getting more confident with coming back out into the stores and also getting ready for the reemergence of getting the mask off in the near future. So there were no real regional variances that we saw across the U.S. There was strength and traffic really from coast to coast.

[Erinn Murphy:]

That's great. And then just my quick follow-up. So $1.7 million gain and loyalty members this quarter, how did that break down between laps versus new consumers? Thanks.

[Dave Kimbell:]

Yes, we don't typically break that out that, that specifically, I'll just say we're really proud of our team in coming together to both reengage I talked in previous calls about the disruption in 2020 wasn't anything necessarily that they didn't like about all that. They just for all the obvious reasons, weren't engaged in 2020. And so the reengagement strategy across all aspects of our business in particular in our stores really paid off with a lot of lapse guests -- recently lapse guest coming back in, but equally encouraged by the number of new members in this environment that we attracted. And what's exciting about that is there's a lot of disruption and a lot of potential new members that are maybe reevaluating their the way they engage in beauty. And we think our model is perfect for that. So strength across both and we find it really a good sign for more to come and throughout the rest of this year.

[Erinn Murphy:]

Thank you.

[Operator:]

Our next question is from Mike Baker with D.A. Davidson. Please proceed with your question.

[Michael Baker:]

Okay, thanks. Sort of following up on something that they talked about earlier. But if I have -- if I look at your guidance right here, you still profits down, offering profit that is versus 2019. I think by about $50 million at the midpoint yet you were up in the first quarter by $70 million. So that implies down somewhere in the $110 million, $125 million for the next three quarters. So one of the reasons that the operating profits would be down over the 2-year basis versus being up in the first quarter.

[Scott Settersten:]

Yes, so there's a mix of things. Again, the element that play here, whether you're comparing to last year 2020 or 2019 and the drivers are largely the same. It's just the overall impact weight of those in any one particular period that you're looking at. So the primary reason is channel mix, right? When you're looking back to 2019, channel mix is a big influencer there. Again, we're doing a lot of things. Sales, increased sales back in a brick-and-mortar helps, offset some of that headwind when you're looking to 2020. But back to 2019, that's a much larger part of our business. And as we've talked about before, on a rate basis, it's definitely a pretty significant headwind for us. Again, a reminder, those are incremental sales. So it's helping the total, the total dollar performance and profit performance, but it hurts us on a rate basis. The other thing is, you still got COVID costs in there, right? In 2021, you had none in 2019, we still have social distancing, we mentioned salons, we're operating at 50% capacity, TBD, when all that's going to be able to open up and we -- when we'll be able to be in our full line of businesses as we want to be, there's things in our DCs where we still have to social distance. Again, you got to look beyond the headlines on a lot of these themes. And so we're operating at reduced capacities. We have to add weekend shifts to make sure we can get our pick bins filled and keep the product moving to support an accelerated brick-and-mortar bounce back as well as our continued strong e-commerce business here above what we expected this year. We also have wage pressure. Again, these are things most people are aware of have seen in the headlines, whether it be just recruiting people to come back and fill open roles in our stores, or pressure in the DC network, we see what others are doing out there to try to retain and find new employees. So, again, we're not -- we have to compete with those people the same way everyone else has to do. And then lastly, I'd say a big piece is incentive compensation, falling on the SG&A line. Again, when you think back to 2019, and our performance there and what the outcome was for, as far as incentive comp goes, versus the performance, the expected performance now for 2021. That's a big headwind as well. So those are kind of the major elements, Mike.

[Michael Baker:]

Okay. That's helpful in a lot of pressures there. But so as a follow-up, I think it's fair to say you got back to this 11%, you will get back to this 11% quicker than you expected. But with all those process you just articulated, can we think about ever getting back to the 12% to 13% level that you ran out from, I think, like 2012 to 2019 or to all those pressures make that not attainable.

[Scott Settersten:]

Yes. So we're not providing any long-term guidance today. We'll save that for November at our planned Investor Analyst Day. But obviously, the trends of the business are quite strong, right. First quarter way exceeded our expectations. The early read on second quarter is, it's going well. Again, you got to keep in mind what we're lapping, right. Last year in the first quarter, we were on a decelerating trend and then all those stores closed. Second quarter, we're starting to open stores last year in a kind of a wave action, but there was still a lot of requirements and limited capacity things we were dealing with. And so, that's phenomena. That explains the comp guidance 40 to 50 first half and much more moderated in the second half. So that's what's driving, the lower operating margin expectations versus last year. Longer term, we feel like there's a lot of levers. Again, we've talked about this often with investors, whether it be things around the e-commerce business with BOPIS and supply chain initiatives. Our EFG work in the real estate area and other parts of our business and a lot of other Kecia mentioned a lot of efficiency work that's underway right now under the EFG umbrella gives us a lot of optimism for longer term operating margin. improvements.

[Michael Baker:]

Fair enough. Appreciate all the color. Thank you.

[Operator:]

Your next question is from Anthony Chukumba with Loop Capital Markets. Please proceed with your question.

[Anthony Chukumba:]

Thank you so much for taking my question. Thank you so much for squeezing me in. Let me add my congratulations to Mary as well, though I’m sure all see you walking your daughters in the neighborhood. So .

[Mary Dillon:]

That’s right. Anthony, thank you.

[Anthony Chukumba:]

So my question, just a quick clarification, if I was looking at my notes from the last earnings call, and it said that you were going to -- you plan to open those first Target shop and shops in the fall. And now you're saying late summer. So I just want to make sure I heard that correctly. And if so, just any reason that you were sort of moving up the rollout date. To the extent that you actually are moving up the to the extent that you actually are moving up the update. Thank you.

[Dave Kimbell:]

Yes, I'd say we're just getting a little more specific. We've been kind of talking in general terms previously. And now a bit more specific in late summer, I'll say we're really excited about it. And I guess I'd ask Kecia to just give a quick update. Kecia, as I think was mentioned in the call was leading our target initiative, and we're very excited about the opportunity. So Kecia, do you want to give where we are on that?

[Kecia Steelman:]

Yes, absolutely. What -- what's been so exciting is that it's been highly collaborative with the Target team. And we've got a cross functional team that's hard at work to bring the Ulta Beauty at Target concept to life. We've crossed some critical milestones. We've built the joint project plan, fulfillment, plans are all completed, ran selections, and store selections for this first wave are all done. We're finalizing our IT requirements, training of our Target team members, and the joint marketing strategies. But we're on track to deliver and launch this at the end of late summer. And we're really looking forward to this coming to life and having our guests see what this is all going to bring to play for Target and Ulta together. So that 90 million loyalty members of Target and 32 million of ours, I just think that the ecosystem that this is going to deliver for the world of beauty is going to be second to none.

[Anthony Chukumba:]

That's very helpful. Thank you.

[Operator:]

We have reached the end of our question-and-answer session. I'll now turn the call over to Dave Kimbell for closing remarks.

[Dave Kimbell:]

Great. Thank you all for joining us today. Fiscal 2021 is off to a great start. And I want to close by thanking the entire Ulta Beauty team for their collective efforts to support the business and to meaningfully engage with our guests at every touchpoint. Our team is the secret to our success, and I'm great -- and I'm so grateful for their impact, particularly during these disruptive times. I also want to thank our brand partners for their continued support as we navigate the dynamic operating environment. We are encouraged by the momentum we're seeing in the business and excited about our opportunity as consumers gain confidence and engage in the new normal. While the sequence and sustainability of demand remains difficult to predict, our teams are prepared and actively engaged to capitalize on opportunities as they arise. We remain very excited about the opportunity for Ulta Beauty to continue leading the beauty category recovery. And we look forward to speaking with all of you again in August when we report our second quarter results. Thank you.

[Operator:]

This concludes today's conference and you may disconnect your line at this time. Thank you for your participation.