May 3, 2010 - Ulta Salon (ULTA-NASDAQ) operates more than 340 stores in three dozen states. About a third of its locations are in Illinois, Texas, and California. Ulta stocks more than 21,000 prestige and mass-market products in various categories, which include cosmetics for the face, eyes, cheeks, lips, and nails; haircare, including shampoos, conditioners, styling products, and hair accessories; salon styling tools comprising hair dryers, curling irons, and flat irons; skincare, and bath and body, fragrances for men and women; private label consisting of Ulta branded cosmetics, skincare, bath and body products, and haircare; and other products, including candles, home fragrance products, and other health and beauty products.. Stores also offer hair salon services, as well as manicures, pedicures, massages, waxing, and other beauty treatments.

Sales grew noticably over the last 3 years, in spite of the economic downturn. In 2007 (the year the company went public) total revenues were $912.1 million, then went to $1.085 billion, followed by $1.223 billion. This year, 10 analysts see sales of $1.40 billion, then $1.60 billion next year.

Earnings haven't followed the same upward trajectory. There was one down year, 2008, when earnings slipped from 48 cents in 2007, to 43 cents. Last year, they rebounded to 66 cents. This year, 11 analysts see 91 cents a share, then $1.11 next year. The first quarter's numbers (fiscal year ends in January) should be out this month. Analysts' consensus is for 19 cents a share, more than double the 8 cents of last year's first. For the second quarter, they see 15 cents, well above the 11 cents of last year's same period.

ULTA has momentum. Fourth quarter sales were up 16%. Merchandise margin improved 60 basis points to 170 basis points. All of that combined to increase earnings per share 62% to 34 cents compared to the fourth quarter of 2008.

The chart of the stock's price gives one pause. Going public in late 2007, the stock was issued at $18 a share, ran quickly to $35.60, only to fall to $4.10 by early 2009. Since then it has recovered to a high of $25.76 reached on April 26. It took a breather from there and currently trades at $22.

More numbers: Market cap is $1.27 billion. Forward P/E is 20. Price to book is 4.35. Book value is $5.03. Operating margin for the last 12 months was 5.57% while Profit margin was 3.22%. Return on assets was 7.59%. There's $4.02 million in the bank for 7 cents a share in cash. There is no debt. Current ratio is 2.08. Beta is a high 1.82. There 58.29 million shares outstanding with a Float of 48.40 million. Insiders own 38.35% of the stock. Institutions have 46.10%. There is no dividend.

As ULTA grows, beware of quarterly comparisons. When a company boosts earnings dramatically, as ULTA did recently, it's more and more difficult to see that same percentage increase since getting larger requires more success to meaningfully move the bottom line higher. But with a robust expansion plan, better margins, and higher traffic, the company seems positioned to see better earnings for quite some time.

- Company Web site: www.ulta.com

- Ted Allrich