Ulta Beauty Inc (NASDAQ:ULTA) Q2 2020 Earnings Conference Call - Final Transcript

Aug 27, 2020 • 05:00 pm ET

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Ulta Beauty Inc (NASDAQ:ULTA) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Mary Dillon

stores for retail, expanded curbside capabilities to nearly all stores and began with launching select services, all with a thoughtful consideration for the safety of our Associates and guests balanced with our desire to reopen quickly. By the end of June more than 90% of our stores were open for retail and by mid-July our reopening process was complete. Reflecting local regulations and guidance, the resumption of our service offerings has been on a more measured pace. Today, salon services are available in about 88% of stores and brow services are offered in about 85% of the fleet. We've not resumed skin or makeup services but we're working closely with medical experts to ensure we have strong safety protocols in place when it is appropriate to resume these services.

In this new normal we're operating Ulta Beauty stores with new Shop Safe standards, limited physical capacity to accommodate social distancing and reduced operating hours. To-date, we have reactivated approximately 17,000 of our furloughed associates who are able to return to work. We're committed to maintaining a safe experience for associates and our guests. As different markets manage fluctuating COVID-19 cases, we will continue to monitor guidance from government and health authorities as well as local transmission levels to determine if we need to modify our shopping options or revert to closures in the near-term. Now, turning to our second quarter results; for the second quarter total net sales were $1.2 billion, comp sales declined 26.7% and GAAP diluted EPS was $0.14 per share.

Excluding the impact of impairment charges and costs associated with the previously announced store closures, adjusted diluted EPS was $0.73 per share. Comp sales improved significantly throughout the quarter from down 37% in early May as we began reopening stores to down only 10% in July after most of the stores have reopened. Sales trends have continued to improve with comps down in mid single-digit range for the first three weeks of August. We're excited about the positive signals we're seeing from guests. However, we believe it will take some time to fully return to pre-COVID levels and expect demand will continue to be suppressed for the rest of the year given the likely ongoing disruptions we'll see as we continue to live with the realities of COVID-19 whether the continuation of working from home, managing the complexities of educating our children, the ongoing need for social distancing, mask wearing and need to avoid large gatherings or coping with near-term employment and economic uncertainties.

Longer term, we're confident beauty will recover and thrive given the strong emotional connection consumers have with the category. We know beauty enthusiasts remain passionate about beauty and Ulta Beauty. We see it through the engagement in our social channels and while the connection with beauty has not diminished how consumers engage with the category is changing. Health and safety concerns have led to fewer physical shopping trips but higher average ticket and while we've seen greater adoption of online shopping, we're really