Ulta Salon Cosmetics & Fragrances Earnings Call Insights: Omni-Channel and Customer Behaviors

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Ulta Salon Cosmetics & Fragrances, Inc. (NASDAQ:ULTA) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Omni-Channel

Gary Balter – Credit Suisse: You talked — I was going to ask you about what you found in your first few months, but you did a really good job of walking us through that. But one of the comments, you talked about opportunities and supply chain and omni-channel. Could you go into a bit more detail about what the opportunities are or what you see is kind of the weakness is now from where you kind of see that?

Mary Dillon – CEO: Sure. Absolutely. Let me – I will start with omni-channel and then Scott you can jump in on supply chain, we would do that second. I would just say, obviously omni-channel is something that’s important to everybody in retail right now and I think the way I would look at it, it’s about being where the guest wants to learn, wants to explore and of course where they want to shop. It’s about making it easy for the customer as well as really being in the conservations, in social media, as they are discovering brands. So I think about omni-channel through many different lenses. I would say that for us we will always have what I would say is a very unique asset which is our store base, which has the combination of product and service. It’s a great part of our model, but also being everywhere else our guest wants to shop is important as well. I’d say the investments that we are making this year and Jeff talked about some of these in his section are a great step forward as it relates to e-commerce, so being easier to shop in terms of web, tablet and mobile. We are pleased with what that is going to do for our business and our guest experience as well. Now we also have some other projects (in slate) from a systems perspective to help to continue to enhance the guest experience. So whether it’s selling capabilities in store, it were discovery as well as associate selling tools, so all of those are either in process or I think we have made good progress on already. Lastly I would just add that certainly as we think about our longer term supply chain solutions, we are thinking through the evolving guest expectations and how we economically meet those.

Scott Settersten – CFO and Assistant Secretary: I will pick up on the supply chain. Again we are in the midst really of a significant project designing what the future state supply chain looks like for Ulta. I think our honest assessment is we are probably a little bit behind as far as supply chain processes, investment class things are concerned. We’ve sold down the project here just a little bit in recent months and that’s what you’ll see some of the flip in expense going from Q2 to Q3, that’s really one of the primary drivers. As you know, Gary, these are big decisions with far-ranging financial and operational impacts on a business over a long period of time. So we are carefully looking at what we can do to expand current capacity and also taking into consideration what we think guest expectations are going to be in the future. So, we’re still a little away from the finish line, but as we – those particulars are finalized, we’ll be sharing more details with you…

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