Chief Executive Officer at Ulta Beauty
Thank you, Kiley and good afternoon. We appreciate your continued interest in Ulta Beauty. The Ulta Beauty team delivered outstanding performance again this quarter. For the second quarter, net sales increased 16.8% to $2.3 billion. Operating profit increased to 17% of sales, and diluted EPS increased 25% to $5.70 per share. We continue to be very pleased with the broad based strength of our business. For the quarter, all major categories exceeded our expectations and we increased our market share in Prestige Beauty versus last year based on point-of-sale data from the NPD Group.
Sales in stores and digital channels also increased exceeded our expectations with both channels delivering solid comp growth in the quarter. And we saw a healthy sales gain from members across all income demographics. Consumer engagement with beauty remains strong reflecting a deep emotional connection with the category as well as the continued importance of self-care and wellness. This healthy engagement paired with solid operational execution from our teams fueled our results.
Before we talk about the results, I want to recognize and thank our Ulta Beauty associates. Their collaborative commitment to serving our guests, caring for each other and executing our plans with absolute excellence has enabled us to continue navigating a dynamic environment and deliver outstanding results. The strength in our business despite a turbulent environment reflects the power of our differentiated model and our ability to capitalize on the strength of the overall beauty category. Our unique enduring value proposition continues to drive our success and our strategic framework anchors our focus as we look forward.
This afternoon I want to share an update on our strategic progress. Our first strategic priority is to drive disruptive growth through an expanded definition of All Things Beauty. We engage and delight beauty enthusiasts with a curated differentiated assortment focused on inclusivity and leading trends. And this approach continues to deliver results. From a category perspective fragrance and bath, skincare, hair care and makeup all exceeded expectations, delivering double-digit comp growth against the second quarter last year. We are encouraged that the vast majority of our comparable sales growth was fueled by growth from both core and newness with a modest benefit from recently executed price increases.
As we have discussed on previous calls, we have received a large number of price increases from our brand partners in the first half of this year. Given ongoing cost pressures facing our brand partners, we expect to receive additional increases as we move throughout the rest of the year.
Turning to the performance of our core categories, starting with our largest category makeup. Compared to the second quarter of 2021, both prestige and mass makeup delivered double-digit comp growth, as consumers participated in more in-person activities, traveled and increasingly used makeup as a form of self-expression. Guests continue to engage with new brands like Fenty Beauty, r.e.m. Beauty and recently launched About-Face by Halsey. While new products from established brands like Clinique, NYX, e.l.f. and ColourPop [Phonetic] also contributed to the sales growth. In addition, the ongoing expansion of MAC and Chanel Beaute into more stores contributed to the strong prestige performance.
Hair care, our second largest category delivered another quarter of double-digit growth driven by newness and strong engagement in our semi-annual gorgeous hair event, a strategic event designed to acquire new guest, increase existing member spend and drive salon penetration. New brands like OLAPLEX as well as new product launches from Way and Living Proof contributed to the category growth in the quarter. And the initial launch of Dyson's latest Airwrap styling tool with new features and attachment sold out quickly. Guests continue to engage with core professional brands like Redken and Pureology and our salon back bar takeovers drove strong growth with Joy Co and recently launched Andrew Fitzsimons.
Skincare was one of our best performing categories this quarter with both prestige and mass, delivering double-digit comp growth driven by new brands and product innovation. Newness continued to appeal the guests with newer brands such as Drunk Elephant, Fresh, Super Goop and recently launched Vacation, as well as new products from Peach & Lily, [Indecipherable] and Hero Cosmetics contributing to category growth during the quarter. And Skinfatuation our monthly skincare program which works to demystify skincare with educational content and focused themes delivered nice growth for established brands like TULA, Sun Balm [Phonetic] cooler and Good Molecules.
The fragrance category again delivered strong double-digit comp growth on top of extraordinary growth last year compelling newness and strong engagement with our Mother's Day and Father's Day events contributed to this performance. Recently launched Ulta Beauty exclusive Billie Eilish and Charli D'Amelio Born Dreamer, as well as new sense from Gucci, YSL and Dior drove meaningful sales growth, while our monthly fragrance crush program drove greater engagement with established brands like Valentino and [Indecipherable].
In addition to driving core category growth, we are investing in three cross category platforms to increase guest engagement and expand our market share. We know consumers seek beauty brands that are good for the world and align with their values. And Conscious Beauty at Ulta Beauty continues to resonate with guest, as it addresses these interests. At the end of the second quarter, 290 brands offered certified products in at least one Conscious Beauty pillar, including newly certified brands, Born Dreamer, About-Face, SC [Phonetic] and Good Light.
To increase the visibility of Conscious Beauty and to make it easier for guests to identify products that align with what is important to them. This quarter, we refreshed the landing page on ulta.com and added digital badging to all product pages. Now guests can quickly identify certified brands and products across our Conscious Beauty pillars where they're shopping in stores or on our digital channels.
Moving to our efforts to expand and support our assortment of bipack brands. We are committed to diversifying our assortment, so all guests can see themselves reflected at Ulta Beauty. In addition to continuing to expand our portfolio of bipack brands and enhance our marketing support for these brands, we are focused on driving structural change within the beauty industry. As the leader in beauty, we believe we have a responsibility to take tangible steps to create foundational industry change through the investment of capital and resources. As such, next month we will officially launch our MUSE Accelerator program focused on early stage bipack brands. Through this program, we will provide eight diverse leaders, founders and entrepreneurs with resources, mentorship and support to prepare them for retail readiness. I look forward to sharing more about our inaugural class on future calls.
Finally, we continue to enhance our Wellness Shop to support guests as they prioritize self-care. This quarter, we expanded the shop to additional stores and now roughly 750 stores offer guests and elevated cohesive presentation of wellness products to help them easily navigate their personal journey. Today, we offer a curated Omnia assortment of more than 140 brands including newly launched brands, Womeness & Ali [Phonetic], and more than 700 SKUs to help our guest feel their best inside and out.
Moving now to our ongoing efforts to evolve the omnichannel experience through a connected physical and digital ecosystem, all in your world. Store traffic trends were strong again this quarter as guests return to in-store shopping and services. While store traffic remained slightly below pre-pandemic levels the trend continues to improve. Our services business delivered another quarter of double-digit comp growth, primarily due to increased capacity and new service offerings. In addition, we implemented modest price increases for core services in May.
Notably, member engagement with services accelerated from the first quarter, reflecting our ongoing efforts to amplify our salon services and encourage first time trial through our Member Love offers. As guests return to stores, they are also engaging in our digital channels. After lapping the tremendous digital acceleration prompted by COVID, our e-commerce channel returned to more normalized growth delivering mid-single digit comp growth for the quarter. We continue to incentivize guests to try alternative delivery options for e-commerce orders, while also investing to improve the guest experience.
During the quarter BOPIS increased 32% to 25% of e-commerce sales compared to 20% last year. Importantly, we saw a significant improvement in guest satisfaction with the BOPIS experience reflecting the engagement and focus of our store associates. While limited to 12 markets, guests are also increasing their use of our same-day delivery options and we continue to be pleased with the AOV profitability metrics of this fulfillment capability. Between BOPIS, same-day delivery and ship from store, more than a third of our digital orders were fulfilled by stores.
We continue to expand and enhance our guest experience across all channels. In our digital channels, our teams continue to deliver a more seamless experience through what we call our digital store of the future. This quarter we introduced new more engaging product pages on both ulta.com and our mobile app. We are also improving our physical store experience. Next month, we plan to introduce a new Front of Store presentation that will allow us to enhance our ability to support more editorial storytelling around newness, events and trends. And later this fall, we will introduce a new layout in select stores to elevate key growth categories, unify the presentation of skincare and makeup and enhance the store -- the services experience.
Longer term, we are exploring innovative ways to connect our digital and physical stores and deliver forward thinking guest experiences. This quarter, we officially launched Prisma Ventures, a $20 million fund focused on investing in early stage startups and emerging tech entrepreneurs who will shape the future of retail and beauty. To date the fund has partnered and invested in a variety of start-ups to enable greater personalization, including Haut.ai, Adeptmind, Revea, and ReStyle. And we recently announced an investment in LUUM, a start-up that provides robotic lash extensions, opening new intersections between beauty and robotics.
Finally, we continue to enhance and expand our partnership with Target. During the second quarter, we opened 59 Ulta Beauty at Target shops, ending the quarter with 186 locations. During the quarter, we refreshed the assortment, expanding the fragrance offering launched two black-owned brands, Sunday to Sunday and melon and hair care and introduce newness from existing brand partners, including Benefit, Morphe and TULA. As we anniversary the initial launch of this innovative partnership and reflect on the progress made, we continue to be pleased with overall guest engagement. And we are encouraged by the behavior of new members who enter our ecosystem through this new channel. The foundation of our partnership is strong and we are focused on driving further loyalty conversion to unlock even greater value as we scale.
Now, let me give you an update on some of the steps we're taking to drive love, loyalty and emotional connection with Ulta Beauty. We have been on a multi-year journey to create a stronger more emotional connection with our guest and bring our brand purpose to life. Beauty is inherently inclusive. Every individual is unique and beauty can help celebrate this uniqueness. As the leader in the category, we want to move beauty forward, making it a force for good for all and inspiring everyone to discover their own possibilities through the power of beauty.
Building on our previous brand equity work, we are launching a new brand equity campaign, Beauty And [Phonetic] to celebrate the expansive nature of beauty and empower people to embrace their endless possibilities. The campaign will launch with content across paid, owned and earned media with unique elements that we believe will prompt new culturally relevant conversations about beauty and inspire greater inclusivity and positivity in our industry and the world. This campaign has performed extraordinarily well in consumer testing and I'm proud of the efforts Ulta Beauty is making to change the way the world sees beauty.
Turning to our loyalty program. We ended the quarter with 38.2 million active members in our Ultimate Rewards loyalty program, 10% above the second quarter last year. In addition to converting new members and re-engaging lapsed members, we are maintaining healthy retention rates especially among our diamond and platinum members. Overall spend per member increased again this quarter, driven by both increased trip frequency and higher average ticket. And our channel metrics remained steady with in-store only members totaling 76% of members and omnichannel only members totaling 17%.
Over the last several years, we've expanded our CRM capabilities and develop stronger lifecycle marketing strategies that will help us to drive loyal shopping behaviors more precisely through promotional activity. Today, we are leveraging predictive decisioning to target strategic member segments with personalized communications and offers to increase frequency and drive higher lifetime value. We are seeing encouraging engagement in these offers resulting in increases in spend per member.
As promotional intensity increases in beauty and across retail these capabilities enable us to rely less on mass market promotions and leverage more targeted and profitable offers. In May, we launched UB Media, our new retail media network and the response from brand partners has been tremendous. Our brand partners are excited about the opportunity to leverage the power of our exclusive first-party data to transform the ways they connect with beauty enthusiasts. Our team is ramping up well, and we remain excited about the opportunity to unlock a new income stream and drive sales as we enable our brand partners to engage consumers more effectively.
In closing, I am incredibly pleased with the strength we have seen across our business so far this year. Our operational and financial performance is a testament to the power of our values based culture, our business model and the important role beauty plays in our customers' lives. We recognize beauty is not immune to macroeconomic challenges, but the categories deep emotional connection has historically resulted in stronger resilience compared to other discretionary categories. And as our results illustrate, we believe this is even more true today given the importance of self-care and wellness.
As we look to the future, we know there will be challenges, particularly with the wide-ranging impact of rising inflation, both on our business and our guests. But we remain confident in the resilience of the beauty category and our ability to lead the beauty category and drive long-term profitable growth.
And now I will turn the call over to Scott for a discussion of the financial results. Scott?