Ulta Beauty, Inc. (ULTA) Q4 2020 Earnings Report, Transcript and Summary

Greetings, and welcome to the Ulta Beauty Fourth Quarter 2020 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Kiley Rawlins, Vice President, Investor Relations. Please proceed.

Thank you, Laura, and good afternoon, everyone. Joining me on the call today are Mary Dillon, Chief Executive Officer; Scott Settersten, Chief Financial Officer; and Dave Kimbell, President. Before we begin, I'd like to remind you that statements on this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC. We caution you not to place undue reliance on these forward-looking statements, which speak only as of today, March 11, 2021. We have no obligation to update or revise our forward-looking statements, except as required by law, and you should not expect us to do so. In today's comments, we will discuss certain non-GAAP financial measures, including adjusted operating income, adjusted net income and adjusted diluted EPS, which have been presented to reflect our view of our ongoing operations by adjusting fiscal 2020 results for store impairment charges, costs associated with the permanent closure of 19 stores and the decision to suspend our expansion into Canada as well as other restructuring costs, and adjusting both 2020 and 2019 for stock compensation and other tax credits. A reconciliation of these measures to the corresponding GAAP measures can be found in our earnings release, which is available on -- in the Investor Relations section of our website at www.ulta.com. Following prepared remarks from our leadership team, we will open the call for questions. As our prepared remarks will be longer than usual, we plan to end our call today at 5:15 Central Time. [Operator Instructions] As always, the IR team will be available for any follow-up questions you have after the call. Now I'd like to turn the call over to Mary. Mary?

Thank you, Kiley, and good afternoon, everyone. I'll start today with comments about our leadership transition plans and then share highlights from our fourth quarter and full year results. Then Dave will discuss our priorities for 2021, and Scott will review the financial results and our outlook. Starting with the succession plans we announced this afternoon. I am very excited to announce that in June, Dave Kimbell will become CEO of Ulta Beauty, and I will transition to Executive Chair of the Board. In addition, Kecia Steelman will be elevated to Chief Operating Officer in June. In conjunction with these changes, Bob DiRomualdo will retire from his role as Chair of the Board as planned, and Lorna Nagler will assume the role of Lead Independent Director. These changes reflect a thorough and thoughtful succession planning process I have engaged in with our Board of Directors over multiple years and are designed to ensure strategic and leadership continuity as Ulta Beauty moves into its next chapter of growth. I personally want to thank our Board for their care, consideration and oversight of this important process. After serving as CEO for nearly 8 years, I believe the time is right for me and for Ulta Beauty to make this change. We have a differentiated business model that has proven its strength over and over again throughout our 30-plus year history and position Ulta Beauty as a leader in the beauty industry. We've developed and sustained a world-class, guest-centric, values-based, high-performance culture. We're emerging from the 2020 pandemic with a strong foundation and good operational momentum, and we have a talented, diverse and experienced team of leaders to drive our next phase of growth. While I'm proud of what we've achieved over these past 8 years, I truly believe now is the time for my successor and their leadership team to continue the journey. Since joining Ulta Beauty as Chief Marketing Officer in 2014, Dave has continued to expand his leadership responsibilities, ultimately assuming the role of President in 2019. Highly regarded in the beauty industry, Dave is a results-driven, guest-focused, inclusive leader who've to motivate teams and activate strategies to move our business forward. Dave's passion for Ulta Beauty, our guests and our associates is extraordinary, and I believe there was no one more prepared or better suited to lead Ulta Beauty into the future. Kecia Steelman joined Ulta Beauty in 2014 as Senior Vice President of Operations before assuming the role of Chief Store Operations Officer in 2015. In this role, she has overseen all aspects of store and salon operations, leading passionate associates to consistently deliver great experiences for our guests, even as we nearly doubled our footprint. As Chief Operating Officer, Kecia will have responsibility for store and services operations, supply chain, external partnerships, including Ulta Beauty at Target and key enterprise-wide continuous improvement initiatives. Dave and Kecia will be supported by an executive team with deep expertise and Ulta Beauty experience. My focus has been and will continue to be on Ulta Beauty. And in my new role as Executive Chair, I'll advise and support Dave on key issues, including strategy, external relationships and organizational development. My plan is to remain in the Executive Chair role for 1 year. I am optimistic and excited about the long-term growth opportunity for Ulta Beauty, and I'm confident that under Dave's leadership, Ulta Beauty will keep shaping and leading the beauty industry for many years to come. Now let's talk about our fourth quarter performance. The Ulta Beauty team delivered better-than-expected results for the fourth quarter. For the quarter, net sales were $2.2 billion, and GAAP diluted EPS was $3.03 per share. Adjusted diluted EPS for the quarter was $3.41 per share. Strong enterprise-wide execution of our plans, combined with improving trends in consumer demand, resulted in momentum across multiple metrics, including sales, transactions and profitability. We experienced less disruption from COVID than we anticipated in the quarter, and top line trends improved across all channels and all categories, resulting in a comp store sales decline of 4.8%, an improvement compared to the 8.9% decline in the third quarter. We kicked off the holiday season in early November with our multichannel See the Joy campaign, targeted marketing and promotional activity and an extended Black Friday event. We continue to lean into our successful We Love Our Members events throughout holiday, rewarding guests with member-only offers promoted broadly across channels to reinforce the value of the program and to engage our members. And we leveraged our CRM and analytics capabilities to expand our reach and maximize productivity. We drove strong sell-through of holiday merchandise and core product, and transitioned quickly after holiday to support our strategic Love Your Skin and Jumbo Love events. The planned expansion of our gift card program drove robust year-over-year growth in gift card sales during the holiday period and delivered elevated redemption activity in stores post-holiday. Our e-commerce business increased more than 70%. With increased fulfillment capacity in place, our DC and store teams did an excellent job supporting record level of e-commerce demand. Limitations on in-store capacity and reduced operating hours are still in place, but we're encouraged by the momentum we're seeing in store traffic. From a category perspective, we continue to increase our market share across most major prestige beauty categories. Starting with one of our strategic growth categories, skincare delivered a low double-digit comp. In addition to broader self-care and wellness trends, newness and engagement and social media platforms are driving interest in newer brands like The Ordinary and Urban Skin Rx as well as established brands like CeraVe and First Aid Beauty. Fragrance and bath delivered strong double-digit comp growth delivered -- driven by newness and a strong base fragrance business from brands like Chanel and Dior. Bath also continued to benefit from self-care trends, newness and social media engagement. Comp sales in haircare were down slightly in the quarter, primarily reflecting planned changes to our Jumbo Love event, which negatively impacted top line growth but delivered significant profit improvement. Excluding the event, comp sales in the haircare category were positive for the quarter, driven by hair color, color care, texture and innovation. Prestige hair continues to be an area of focus. And in January, we launched Briogeo, a black-owned clean brand formulated for all hair types in all stores and online. Comp sales in the makeup category were negative but improved sequentially, reflecting less year-over-year product newness and continued mask wearing and limitations on makeup wearing occasions. While new launches were limited, we do see guests eager to engage with newness from established brands like Too Faced and NYX as well as new brands, including Laura Mercier, KVD Beauty and HOURGLASS. Sales from our services business were down more than 40% in the fourth quarter due to a decline in transactions, while average ticket continued to be higher. Our services business remains adversely impacted by COVID-related capacity constraints and local restrictions, but we're starting to see some local markets increase capacity thresholds. While we ended fiscal 2020 with 30.7 million loyalty members, about 10% fewer than last year, we maintained strong retention levels of our high-value platinum and diamond members. The reduction in total members was anticipated given store closures earlier in the year and ongoing store traffic challenges. Importantly, we saw a rebound in new membership this quarter as our store associates delivered stronger conversion versus last year. Reactivation trends also rebounded due to amplified marketing and promotional efforts across print and digital channels. We also saw good growth in our credit card program, increasing our member penetration by about 400 basis points versus last year, reflecting strong acquisition and retention of our highly engaged credit card members. We ended the year with noteworthy changes in our member channel mix. While 2/3 of our members continue to be in-store-only shoppers this year, our mix of omnichannel members nearly doubled to 23% of members, and our online-only members grew to 12% of members. While Scott will take you through the details of the P&L in a few minutes, I want to highlight 2 areas of focus that are delivering tangible results for our profitability. First, we continue to see strong success in optimizing our promotions. We offered a number of compelling promotions during holiday, but we further leveraged our CRM capabilities to be more targeted and more profitable with our offers. Post-holiday, we saw an opportunity to be more strategic and employ relevant storytelling to drive guest engagement. For our Love Your Skin and Jumbo Love event, we took a content-forward approach across print and digital channels to focus on education and routines, highlighted newness like never before and refined the focus of offers in brand participation. As a result of these efforts, we delivered meaningful improvement in our merchandise margin. Second, we continued to take steps to reset our cost structure. After a thorough and thoughtful evaluation of work and capabilities across every corporate function, this quarter, we eliminated approximately 340 roles, resulting in a charge in the quarter of approximately $10 million. Even as we made difficult decisions to eliminate certain roles, we also reorganized select teams, expanded some roles and introduced a number of new positions in key investment areas aligned to our strategic priorities. We expect these decisions will result in approximately $50 million of SG&A savings in 2021. These decisions were incredibly difficult, but I'm proud of the respect, care and compassion that went into the process. I'm confident these changes, combined with planned investments to enhance our enterprise capabilities, will position Ulta Beauty for continued success in the short and long term. And now turning to the full year. From a financial perspective, total sales were $6.2 billion; comp store sales decreased 17.9%; and GAAP diluted EPS was $3.11 per share. Adjusted diluted EPS for the year was $4.68 per share. While fiscal 2020 was not the year we originally planned, I am proud of how our teams adjusted and responded to the unprecedented challenges, and I want to express my sincere appreciation to my leadership team and all Ulta Beauty associates for their flexibility, agility and unwavering commitment to our guests and to each other. Facing a very dynamic operating environment early in 2020, we moved quickly to align on 6 strategic priorities intended to expand our market share and extend our competitive advantages. We made meaningful progress across each of these priorities in 2020. Our teams continue to deliver great omnichannel experiences for our guests. After temporarily closing all of our stores in March in response to the spread of the virus, we began welcoming back guests and associates to stores in May with our new shop safe standards in all stores and enhanced digital shopping capabilities to keep our guests and our associates safe. While store traffic remained challenged, sales through our digital channels doubled in fiscal 2020. To meet this increased demand, we expanded our e-commerce fulfillment capabilities, including the opening of our Jacksonville fast fulfillment center, expansion of our ship from store capabilities and introduction of curbside pickup. Reflecting increased safety concerns, we restricted the use of testers in stores but accelerated our virtual try-on capabilities. We expanded GLAMlab, our virtual try-on tool, beyond cosmetics to include hair color, false lashes and the Benefit Brow Bar. We expanded our shade library to include more than 11,000 shades. We introduced QR code so that guests could virtually try on shades while in store. We also introduced a digital skin analysis tool to assess guest skincare needs and offer personalized product and regimen recommendations. In 2020, more than 11 million guests engaged with these tools, trying on more than 100 million shades through the app and ulta.com. In a year that saw the contraction of the U.S. prestige beauty market, Ulta Beauty gained dollar share, specifically in key categories, such as makeup, skincare and fragrance based on NPD's point-of-sale data for the 52 weeks ending January 30, 2021. We expanded our assortment in key growth categories like skincare, haircare and wellness to provide guests with engaging newness and innovation. And we launched Conscious Beauty at Ulta Beauty in stores and at ulta.com, certifying more than 230 brands across 4 key pillars: clean ingredients; cruelty-free; vegan; and sustainable packaging. Our marketing teams pivoted quickly to reflect the environment. And as a result, we maintained our unaided awareness in the mid-50% range and increased our aided awareness. We drove innovation in our Ultamate Rewards loyalty program, launching new member appreciation events, implementing new reactivation campaigns and reinforcing the value of the program across all communication channels. Behind the scenes, we expanded our CRM capabilities, leveraging new propensity modeling applications to optimize the return on print investment and reengage with labs and at-risk members in our marketing outreach. We took actions in fiscal 2020 also to adjust our cost structure. We delivered meaningful reductions in occupancy costs through aggressive negotiations and effective portfolio management, and we permanently closed 19 stores to further strengthen our store portfolio. We made changes to our store management structure to improve efficiency and productivity, and we took steps to rightsize our corporate structure. We announced, of course, an exclusive partnership with Target Corporation that will disrupt the beauty category and change how guests experience beauty. And finally, we published our first ESG report, sharing our efforts and commitments in 4 key pillars: people, product, community and the environment. While we're early in our journey, I am proud of the progress we've made in these areas, particularly as it relates to diversity and inclusion. Diversity and inclusion have always been important at Ulta Beauty as we want all associates to feel they can be their true authentic selves. Given the events that unfolded throughout 2020, addressing racial and social injustice has become more important than ever. At the end of fiscal 2020, 91% of our associates were women and 47% of our associates were people of color. On our leadership team, 64% were female and 18% were people of color. We recently announced new commitments to help us progress further in our journey to support greater diversity, inclusivity and equity. Our team is deeply committed to leading purposefully with and for underrepresented voices across retail and beauty. Fiscal 2020 was a difficult year, but the progress we've made positions us well to grow and lead in a post-COVID environment. And now I'd like to introduce Dave Kimbell, who will share more about our plans and priorities for fiscal '21. Dave?

Thanks, Mary. Before I discuss our priorities for 2021, I want to thank you, Mary, for your world-class and exceptional leadership of Ulta Beauty, and personally, for your mentorship. Your impact on our company has been tremendous. Under your leadership, Ulta Beauty has grown to become a beloved beauty destination, known as a welcoming and accessible place for guests and an inclusive workplace, offering outstanding career opportunities for associates. I'm grateful to have worked alongside you for many years and look forward to your ongoing support and guidance as I transition to my new role in June. I also want to express my sincere appreciation to our Board of Directors for the opportunity to become Ulta Beauty's next CEO and to all of our associates and partners for their continued support. In addition, I want to offer congratulations to Kecia on her well-deserved promotion to Chief Operating Officer. I look forward to leading with Kecia and our experienced diverse executive team in service of our Ulta Beauty associates, our guests and our shareholders. I am passionate about the beauty category, the vibrant and dynamic business we have built, and the role we play in the beauty industry and in our guests' lives. Ulta Beauty is the leading destination for beauty discovery and meaningful human experiences, and I am excited and humbled by the opportunity to lead such a strong organization through the next phase of its growth. As Mary said earlier, fiscal 2020 was a difficult year, but our teams met the challenges with agility, creativity and an unwavering focus on serving our guests. As a result, we begin 2021 with a strong foundation from which we can accelerate our growth and shape how guests experience beauty in the post-COVID environment. As we think about growth opportunities in the new normal, we are focused on 6 strategic priorities to continue expanding our market share gains and extending our competitive advantages. First, we are committed to meeting guests wherever they want to shop, whether it's in physical stores or on digital platforms. To support this commitment, we're building capabilities to win in an increasingly omnichannel world. This is not a new journey for us. And as Mary noted, we made a lot of progress in 2020. As we look forward to 2021, we plan to continue to expand and refresh our store fleet, including opening approximately 40 net new stores this year; further accelerate our e-commerce business through elevated marketing, loyalty engagement and advancement on our journey to create a more personalized experience for our guests on all our digital platforms; continue to evolve our supply chain to enable more flexibility while also supporting our omnichannel strategies; and as the newest pillar in our omnichannel strategy, successfully open Ulta Beauty at Target. Since our November announcement about the new partnership with Target, our teams continue to make progress to bring our vision to life. Our brands are excited to partner with us, and we have more brands than originally considered for the space, with strong support from our largest brand partners as well as several brands, which are exclusive to Ulta Beauty across makeup, skin, skincare, haircare and fragrance. We remain confident that this partnership is an innovative, forward-looking approach to further delight our existing members while also acquiring new members from the millions of guests shop in Target every day. We continue to see great social engagement and enthusiasm for Ulta Beauty at Target, and we're on track to launch online in about 100 stores in the fall, scaling to hundreds of stores in the next few years. Our second strategic priority is to reimagine how guests experience and discover beauty across all touch points. COVID-19 has not changed the importance of beauty, and we are confident in the future growth of the category. Beauty enthusiasts still value the human connection and physical experience of beauty but want to balance safety with the desire to discover and play with product. Reflecting these factors, we are elevating the end-to-end guest experience at Ulta Beauty. In 2021, we intend to safely reintroduce testers in select areas of the store and work closely with our brand partners to develop innovative sampling programs; drive enhancements to our digital experiences, further investing in our app, including guided education and recommendation experiences like our skin advisor; implement layout changes in select new stores to elevate key growth categories; unify the presentation of skincare makeup and improve the focus pickup experience; and as our associates have the greatest impact on the guest experience, we plan to implement training for our team, focused on priority categories like skincare as well as key skills to further strengthen human connections with our guests. Our third priority is to drive winning category strategies to engage and delight beauty enthusiasts and expand our market share. Our curation of a diverse assortment focused on newness, exclusivity and leading brands has enabled us to grow our market share over time. Building on the progress we made in 2020, we plan to continue to strengthen our assortment in key growth categories like skincare and haircare while protecting our strength in makeup; scale our Conscious Beauty platform; introduce a new wellness shop to offer guests self-care for the mind, body and spirit; and double our number of black-owned brands while investing to increase awareness and support of those brands. Our fourth priority is to deepen Ulta Beauty love, loyalty and engagement. Over time, we've evolved our brand purpose to build stronger connections with our guests and the changes and challenges our guests experienced in 2020 provide us with a unique opportunity to reinforce our brand purpose. And of course, our loyalty program is central to our efforts to build brand love for Ulta Beauty. In fiscal 2021, we are focused on creating culturally relevant content that leverages the power of beauty to deeply engage with guests across channels, including expanding our Where Dreams Begin campaign and building out our MUSE platform, which was developed to celebrate, honor and amplify black voices in beauty; expanding Beauty School at Ulta Beauty, our content-forward entertainment digital platform to drive hyper-relevant product and services engagement; increasing member growth across channels through new guest acquisition, lapsed member reengagement and targeted retention efforts; and we will accelerate spend and engagement through further personalization efforts, including advancing offer optimization in print and digital channels. Our fifth priority is to drive holistic cost optimization. Like others, we face ongoing headwinds from macro cost, including wage pressure and transportation costs. We are also navigating category and channel shifts. In fiscal 2020, we actively took steps to reshape our organization and adjust our cost structure while also investing in new capabilities that will drive future growth. Building on these efforts, we will continue to pursue process optimization opportunities in merchandising and supply chain while also looking for ways to reduce occupancy and operating costs. Importantly, we will continue to invest some of these savings in support of our strategic priorities to drive growth. Our final priority is to develop our talent and strengthen our culture. This is not a new priority. Our talent and culture are always in focus, and we know that our associates bring to life the Ulta Beauty brand for our guests. I am incredibly proud of how our teams led through 2020 with respect, empathy and courage. Looking to 2021, we will continue to work to create an environment where every associate feels they can fully contribute, and every guest is optimally served regardless of differences. We will expand our training and development to inspire and empower our associates, and we will continue to enhance and magnify our diversity and inclusion efforts. In closing, I am excited and optimistic about the future of Ulta Beauty. Our business is emerging from 2020 with good momentum and a strong foundation in place. We are positioned to thrive going forward, and I am confident our team will continue to lead with creativity, passion and continued care for each other and our guests while leading the beauty industry, capturing market share and driving profitable growth. And now I'll turn the call over to Scott for a discussion of the quarter's financial results and our outlook for fiscal 2021. Scott?

Thanks, Dave, and good afternoon, everyone. Before I review our financial results and provide our outlook for the year, I just wanted to take a moment on behalf of the entire executive team and all of our associates to congratulate Dave on his upcoming appointment as our next CEO. We are excited for Dave as he takes this next step in his already successful career and have the utmost confidence in his ability to lead Ulta Beauty through its next phase of growth. Now beginning with the income statement. Net sales for the quarter declined 4.6%, and total company comp declined 4.8%. As Mary mentioned, we are incredibly pleased with our performance as top line results for the quarter were much better than our internal expectations. Average ticket increased 8.3%, primarily driven by an increase in units per transaction. Transactions declined 12.2%. As we have seen in recent quarters, we experienced nice conversion in both channels. We continue to be impacted by softer traffic to stores as well as capacity limitations and fewer operating hours compared to last year. However, we are encouraged by the sequential improvement in store traffic during the fourth quarter. As expected, e-commerce growth slowed relative to the third quarter as demand in stores improved but still delivered very strong growth versus last year. Our e-commerce operations delivered a sales increase of 72% for the quarter as guests continue to take advantage of our omnichannel capabilities. Buy online, pick up in store and curbside were strong again this quarter, particularly in the weeks leading up to Christmas, and totaled about 15% of e-commerce sales for the quarter. Gross profit margin was 35.1%, an increase of about 10 basis points compared to 35% a year ago. The largest driver of gross margin performance was an increase in merchandise margin, which was driven primarily by lower promotional activity as we chose not to repeat certain promotional activity from last year and continue to refine our promotional strategies. We also experienced a positive outcome from our holiday purchasing strategy, which reduced our exposure to limited edition holiday sets and leaned more into core product, resulting in higher sell-through and minimal post-season markdowns and clearance. Lastly, we continue to see benefits from our cost optimization efforts across the organization. The increase in merchandise margin was partially offset by the impact of channel shift. However, we are pleased with the profitability improvement in our e-commerce business driven by continued strong adoption of our BOPIS and curbside capabilities as well as the impact from our efforts to refine our promotional strategy. We also experienced deleverage of fixed costs due to lower sales, although the headwinds improved from what we experienced earlier in the year given the better sales trend and actions taken by our real estate team to strengthen our portfolio and reduce occupancy costs, including lease negotiation efforts and our decision to permanently close 19 stores. SG&A expenses decreased to $514.1 million compared to $515.5 million in the fourth quarter of 2019. The largest drivers of the decrease were lower store payroll and benefits, and lower variable store expenses as we adjusted to softer store traffic. These reductions were partially offset by higher marketing expense as we continue to prioritize and invest in digital and social channels and resume print advertising in preparation for the holiday season. We also experienced an increase in corporate overhead, primarily due to higher incentive compensation, reflecting our financial performance versus our internal targets, partially offset by reduced spending across multiple areas. We incurred about $18 million in PPE and COVID-related expenses during the quarter. This quarter, we recorded a charge of $30.4 million for impairment, restructuring and other costs. Last quarter, we suspended our planned expansion to Canada, and our teams completed the wind down effort during the fourth quarter. This resulted in a $13.2 million charge related to lease termination costs, long-lived asset impairment charges and severance. We also recorded $10 million in severance associated with the charges -- changes made to our corporate and field management organization, $5.6 million in lease termination costs related to the previously announced permanent closure of 19 stores and $1.5 million due to the impairment of tangible long-lived assets and operating lease assets associated with certain stores. GAAP operating income decreased to $224.3 million compared to $287.8 million a year ago. Adjusted operating income was $254.7 million or 11.6% of sales. Diluted GAAP earnings per share was $3.03 compared to $3.89 for last year's fourth quarter. Adjusted diluted earnings per share was $3.41 compared to $3.83 a year ago. Moving on to the balance sheet and cash flow. Total inventory decreased 9.7% compared to last year as we adjusted purchasing to maintain flexibility and manage inventory. For the year, we invested $152 million in capital expenditures, including approximately $70 million for new stores, remodels and merchandise fixtures, $49 million for supply chain and IT, and about $33 million for store maintenance and other. We ended the year with $1 billion in cash and cash equivalents. Reflecting our confidence, we resumed our stock buyback program in the fourth quarter and repurchased approximately 148,000 shares of stock. We have $1.5 billion remaining under our current repurchase authorization. Turning to our outlook for 2021. While we are encouraged by recent sales momentum, visibility into the timing of a demand recovery remains limited. We expect much of 2021 will continue to be negatively impacted by masking requirements and social distancing. And while we expect sales trends will improve as we progress throughout the year and COVID-19 vaccines become more accessible, we are planning for total sales to be slightly lower than 2019. That being said, we plan to be nimble and agile, and we'll be prepared to capitalize should the environment improve earlier than we expect. Now specifically for 2021. We expect to open approximately 40 net new stores, remodel 11 stores and relocate approximately 10 stores. Note that when the pandemic hit last year, we moved quickly to defer most of the new stores planned for 2020. As a result, more than half of our new stores are expected to open in the first quarter. We anticipate net sales for the year will be between $7.2 billion and $7.3 billion, with comp sales planned in the 15 to 17 percentage range. We 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. With this in mind, we anticipate comp growth will be in the low to mid-30s for the first half of 2021 and then moderate to low- to mid-single-digit growth for the second half. We expect operating margin rate for the year will be around 9% of sales as we lap easier top line comparisons due to COVID-19-related store closures in 2020. To give you a little more color on the expected puts and takes driving our operating margin expectation, overall, we expect the largest driver of operating margin expansion will come from gross margin. For the year, we anticipate an improving sales trend from our brick-and-mortar operations, resulting in less headwind from channel shift and leverage of fixed costs. We are planning e-commerce penetration to be in the low to mid-20s for the year. We also expect merchandise margin will improve modestly as we continue to optimize our promotional strategy and continue to pursue efficiency for growth opportunities. We also expect SG&A will deleverage, driven primarily by higher store payroll, as we anniversary the $52 million benefit from the CARES Act in fiscal 2020. In addition, we expect to see payroll deleverage from store management changes made in 2020 and ongoing wage pressures. Recall that in the fourth quarter of 2020, we realigned our store management structure to create a more cost-efficient store model. As a result of these changes, we will see a reduction of salon payroll, which is part of cost of goods sold, and an increase in retail payroll, which is included in SG&A relative to last year. The deleverage of retail payroll should partially offset by lower corporate overhead, reflecting changes we made in 2020 to reset our corporate cost structure. We anticipate advertising will be relatively flat for the year as a percent of sales. These assumptions result in guidance for diluted earnings per share in the range of $8.85 to $9.30 per share, including the impact of approximately $850 million in share repurchases. We plan to spend between $200 million and $250 million in CapEx, including approximately $115 million for new stores, remodels and merchandise fixtures, $77 million for supply chain and IT, and about $33 million for store maintenance and other. I would note that our guidance for 2021 assumes a 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. Before we take your questions, I want to announce that we plan to host an analyst and investor conference this fall to share our longer-term plans and outlook. We'll share more of the logistical details later this summer. And now I'll turn the call back over to our operator to moderate the Q&A session.

[Operator Instructions] Our first question comes from the line of Kate McShane with Goldman Sachs.

Congratulations, Mary and Dave, on the news today. My question is centered around the guidance for the 15% to 17% comp growth for 2021. I just wondered to the extent that you could comment how you expect the cadence or the role of haircare and skincare driving that comp versus makeup.

Yes, Kate. Yes. Great question and one that we're spending a lot of time on. As we look out over the course of the year, we continue to be encouraged by the engagement that we're seeing from our guests across channels, both in stores and online. Our non-makeup businesses have been strong throughout -- really, throughout 2020 and certainly in the fourth quarter with skincare, fragrance, haircare, bath, all performing at or above our expectations. And we anticipate that continuing throughout this year. There is -- continues to be a fair amount of uncertainty about makeup. And I'd say that's, as we look out over the year, while we have a lot of confidence in the long term of makeup and we know that there will be innovation and growth and new behaviors that will drive long-term growth, and we see signs of engagement through our consumer research, and we anticipate pent-up demand and excitement from guests -- from consumers as they feel more comfortable participating in society and going out and celebrating and doing all the things that I think we know is coming. The question for us is when that will come. And we've built in a number of models where we're certainly prepared for that renewed engagement in makeup. We haven't fully seen it yet even though we've seen signs of it. But we have a whole line of sight towards driving innovation with our brand partners, highlighting through our marketing and communication, leveraging our digital tools, our virtual try-on tools and then being prepared from -- with close coordination with our brand partners on inventory as we see makeup grow. So uncertainty by when because it's been a bit of a ride even before COVID on makeup, but we're confident in the long term and prepared for that growth. And all of that is reflected in our guidance for 2021.

Our next question comes from the line of Christopher Horvers with JPMorgan.

And so, Mary, you're still young. You own a lot of stock in the company, and the business is clearly poised to recover here in 2021. So I think a lot of investors look at the announcement and think this is at least a year early. Can you share your thoughts on why -- further why now? Why investors shouldn't think that way? And any thoughts on how you're thinking about your next career steps beyond June '22 when you leave the board?

Well, Chris, I'll take that as a compliment. I'm teasing you. Listen, this has been planned for a while with the Board in terms of the kind of governance and succession planning that we all do. I just feel that this is the right time for me personally. I'm excited. I'm going to be the Executive Chair for a year. So I'm excited about that as well. I'm staying very close to the strategies in the future as well. We're coming out of 2020 strong. The foundation of the business is very strong. Most importantly, Dave is ready to take on the next chapter of growth as the CEO of the company. So it just felt to us and to me like a natural time to make this transition. I'm very confident, very confident about the future of Ulta Beauty. And we're excited. I'm also excited that Kecia Steelman is going to have new responsibilities as Chief Operating Officer. So all told, I think this is about as seamless of a succession story as you can come up with, and that we're really excited about it.

I guess from the personal side, I mean, do you view this as also a good time for you to take another transition into your career? As you think about beyond Ulta, do you still think you're sort of going to stay in the game here as a retail executive? Or any thoughts there would be really helpful. I know it's a personal question.

There is so many questions. Yes. No, listen, I'm focused on Ulta Beauty right now, and I'm very excited about that. And that's why I'm going to be the Executive Chair. I'll be the CEO through June and the Executive Chair for a year after that. And we'll see. I'm excited to the next -- for the next chapter, but I don't really have any plans yet.

Our next question comes from the line of Omar Saad with Evercore ISI.

I would add my congratulations to everyone as well. I'd be curious -- this is kind of a specific question on makeup, but I'd just be curious what you're seeing given this kind of uncertainty around what the recovery is going to look like and when it's going to start to happen. But a lot of the products you sell have expiration dates on them, expiration periods. I'd be curious if you're seeing any consumers come back into the store or online and kind of throwing out the expired makeup that hasn't been used in the last year and starting to replenish that part of their closet, if you will.

Well, first, yes, we don't -- we haven't had any issues for sure with expired products or too much inventory or anything like that. But your point about consumers refreshing their stock, their cabinets at home is, we believe, a behavior that is happening throughout 2020. There's been -- as there's been slower engagement in makeup pre-pandemic and then certainly all the disruption that happened throughout 2020, we see a renewal coming in just how people will engage -- how our guests will engage in makeup. The behaviors, the fashions, the looks, the styles will continue to evolve. We're excited and optimistic about that emergence. As I said earlier, the timing is a bit uncertain, but we see it coming. And we feel that with that -- our guests are -- they love makeup. They love beauty. They love diving into different categories. They love newness. And I think because the makeup category has been challenged, as a reflection of less engagement for probably the last couple of years, we know our beauty enthusiasts are excited about it. So we'll see that exact behavior you talked about of cleaning out your stock, replacing it with new, leaning into newness, which there is tons coming, and then kind of embracing new looks and new styles as that moves forward. So we think that will be part of the total story.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group.

And Mary, congratulations on a wonderful career at Ulta, and who knows what comes next.

Thank you, Dana.

And Dave, congratulations to you on assuming the new role also. As you think about the changes that happened in 2020 going into 2021, how do you think of the digital channel and e-commerce and the margins that you've had in the past? Any opportunity for margins on e-com and digital to improve go forward and how we get there?

Well, we're thrilled with our digital and e-commerce experience. The growth has been strong for many years and, of course, was extraordinary in 2020 as our guests embrace that channel. And our entire team worked tirelessly to make sure that we are able to service our guests with really unexpected growth in demand. So -- and that engagement will pay off for Ulta Beauty for a long time, not only in the short-term sales, but history shows that as we get our guests engage in multiple aspects of our business, not just in stores, but in stores and online and participating in salon and other aspects, their total loyalty to Ulta Beauty, their total spend, their frequency increases dramatically. And so we're confident that, that will pay off. And so overall, it is a very good outcome for our business to have more people engaged in our digital channels and driving that growth. We are, of course, focused on -- there are margin pressures on that part of the business. Again, overall, a very positive part of our business, but -- and so we're focused on that. And we have an entire kind of process to try to continue to optimize costs through promotional activity and cost to serve, and we see that as an important part of the business. And Scott, do you want to give a little more color on how we're approaching that?

No, no. We've seen -- we've demonstrated in the fourth quarter some of the benefits from promotional optimization, which, again, a lot of that occurs in the digital channel just by the very nature of the shopping experience there. So we believe there's plenty of opportunity to improve the profitability of that channel of our business, both on the promotional side, but also on the supply chain effectiveness side of the business. So the FFC strategy, the ship from store strategy, getting closer to our end customers will help. But also just overall scale as that business continues to grow, we believe, will help drive some rate improvement there over the long term.

Our next question comes from the line of Kelly Crago with Citi Research.

Mary, Dave, congratulations. Mary, you will be missed. My first question or my question is really around the gross margin. A couple of different areas I want to focus on. I guess, number one, is there a chance that gross margin could reach back to F '19 levels in F '21? And then just drilling down a little bit further on the rent and occupancy line. Could you first talk about some of the abatements you got this year and how we should think about the rent and occupancy line in '21? And then on the merch margin, I think you said that you expect the merchandise margin to be up for the year. Is that going to be pretty consistent throughout the year given it seems as your [ strategy ] can pull on to some of these lower promotional [ savings ] going forward?

Yes. So there's a lot connected to that question, but the overall theme about gross margin getting back to 2019, again, there's a lot of puts and takes. If you go back to the -- our prepared remarks, just we gave a lot of detail -- provided a lot of detail on that. I would say our initial outlook is not to get back to 2019. Part of it is the geography change on the services manager moving out of gross margin. So that's a plus up for us, but there is something -- the sales -- lower sales overall, at least our initial outlook there, creates a bit of deleverage there when we look back and try to compare to 2019. So there is quite a laundry list of things besides channel mix, which is one of the biggest drivers when we look at '21 versus '19. Again, a reminder, 2019 e-commerce was in the mid-teens as a percent of total sales, and we're thinking it's going to be in the mid-20s for 2021. So a lot of puts and takes there. I mean I would go back to the comment we made about sales upside. So we are optimistic. We feel good about exiting the fourth quarter. And if sales come back stronger, especially in the makeup part of our business, then there's potentially some good tailwinds there. And that, again, sales helps scale and helps drive leverage.

Got it. And then just on the merchandise margin side, is it -- do you expect it to be consistently up throughout the year? Or is it sort of weighted to the first half given some of the pressures you saw in the first quarter last year?

Yes. I think it'll be a little stronger first half of the year because we're lapping some large disruptions over a year ago and then building momentum throughout the course of the year. So again, there's a lot of levers that we have to pull and push as we navigate through the course of the year with promotion cadence and some of our major events. So again, we're be looking to optimize the total business as we navigate throughout the year.

Our next question comes from the line of Simeon Gutman with Morgan Stanley.

Congratulations, Mary and Dave. I want to ask a question that I think you'll probably defer to the Analyst Day. So I guess, Dave, in the next chapter of growth where margin can go, and part of the question is, it looks like your sales level is not going to be that far below 2019, and it looks like your SG&A level is somewhat back to 2019 levels. So I guess, what level of sales can you get back to 2019 level of margin?

Well, you're right, we'll talk a lot more about the future growth and what we have seen coming ahead at the Analyst Day in the fall, and we're excited to share those plans with you. We do see pressure now that Scott just -- Scott has described on the guidance that we've given around our overall profitability for 2021, and said that over time, we see that we're focused on improving that. We're optimistic that we can improve that, and we see that continued growth as we manage through some of those short-term disruptions. So we'll have much more detail in the outlook, on the planning and the timing of our sales outlook beyond this year. We're focused right now on driving our business through the reemergence as we get in through 2021.

And I would just add to that, that we are -- and we've talked about this over the course of the last couple of phone calls, I mean, that we're -- the executive team and all the senior leaderships are focused on getting back to double-digit EBIT margins. We're very confident we can do that. I think you can look at the fourth quarter result and see it's within striking distance. Again, that's a little bit of an outlier because of the level of sales there and some of the leverage it creates by nature. But we're confident that as 2021, the plan is put together, again, in a prudent and reasonable fashion here initially, and hopefully, the crisis passes by us a little bit quicker, and we can get some win in our sales and hopefully drive a better result overall than what we're planning for today.

Yes. And Dave, when Mary did the keynote for shop talk a couple of years back, she came out dancing. So yes.

Yes. I'll work on that, Simeon. Thanks.

Our next question comes from the line of Steph Wissink with Jefferies.

And I'll add our congratulations as well to the whole team. Dave, this is a question for you. It's on the changes in the loyalty balance. I think, Mary, you mentioned a 10% reduction in customers within the program. Can you help us just think through, is that a function of how you define customers -- active customers, meaning someone that hasn't shopped with you within your defined period? Or are those customers that have opted out of the loyalty program? And if so, is that giving you any indication about how you have to think about retaining or reengaging those customers that you may have lost?

Yes. Of course, our loyalty program is key to our success and has been for a long time and will be well into the future. We believe we've got just a world-class loyalty program. The engagement, it remains incredibly high. We think we've got one of the best loyalty programs in all of retail. There's been no change to how we define our guests. Our definition is to be counted as a member, you need to have shopped at least once in any of our touch points in the last 12 months. So that hasn't changed. But what we are seeing is we -- as -- particularly early in this crisis when our stores were closed, so a little over -- really about a year ago and for the next few months, we'll start lapping that. Our store-only guests, we lost some of the less engaged -- less tenured, less engaged members that either stepped out of beauty for a little bit or shopped at some of the retailers that were open and did not pivot to our e-commerce business. We've had a big focus in reengaging them. We know who they are. We know that they didn't have a bad experience with Ulta. They just changed behavior in the short term. And so some of this is the math as we start to lap. We're lapping -- we're strong months, 12 strong months in 2019 with some of the challenges we had in 2020. And so we'll continue to work through that over these next few months. Said that there's nothing in any of our research that suggests our guests are any less engaged in beauty over time, in Ulta Beauty or anything that we've done. And one of the biggest and most important parts of that is our diamond and platinum guests, our most engaged guests, have maintained really best-in-class retention, really, very committed and connected to Ulta Beauty. So we have a whole team that's focused. Really everything we do is for our loyalty guests. The communication we have through personalization, the broad scale marketing, our assortment evolution, they love our newness, and the merchant team has done a great job. Our stores are focused on ensuring that every guest gets a great experience. So we're confident. There's a bit of a lapping element going on. And as we work through those short-term disruption, but the long-term outlook for loyalty is very positive.

Our next question comes from the line of Michael Lasser with UBS.

And congratulations to everybody. As part of the succession process, was there a thought to guide conservatively for the year ahead to help with the transition and provide more flexibility for 2021 as folks will be in their new roles? Or does it simply reflect the fact that Ulta's long-term operating profit margin won't be as high as it's been, in part to e-commerce penetration being in the low to mid-20% range versus 2019 when it was in the 13% range?

Well, I would say this. We guide, to the best of our ability, to what we think is going to happen with some range around that. So if you look at the guidance, we feel encouraged and optimistic about the momentum on the business. But as we said, there's a great deal of uncertainty still ahead, and we've embedded some of that uncertainty into our outlook as we would normally under any circumstances, not just due to a transition. As we said, we still lack clear visibility into the exact timing of an improvement in our largest category, which is makeup. So while we see something -- I think Dave explained it really well. We see some green shoots, and we're excited about the pipeline, but the timing is uncertain. So with all the puts and takes, both in managing costs, which I think we're doing well, but also investing in the future of the business, that leads us to the guidance that we provided. We think it's achievable. We're ready to move quickly if things get even faster in terms of the economic recovery and consumer recovery. But we think this is very reasonable guidance.

Our next question comes from the line of Paul Trussell with Deutsche Bank.

My congratulations as well Mary, Dave and Kecia, and also to the team. On the MUSE campaign, this household is a fan. Just wanted to inquire about a few updates. One, 40 store openings this year, just maybe if you can put that in context of how you think about long-term door growth and potential kind of reacceleration in the outer years and maybe incorporate just any updates on Canada into that? And then similarly, just any updates as you've had further conversations with your vendor partners around the Target shop-in-shop and that partnership and what your expectations are for when that launches.

Yes. So yes, I'll start here. The -- first of all, thanks for the shout-out on MUSE. The team -- we're all really proud of that work. And I'm sure some of our team is listening, and they'll be glad to hear that. On stores, we have 40 stores this year, and we remain consistent with the guidance that we've had that over time can grow in to 1,500 to 1,700 stores. No update, no changes to Canada specifically as related to that. That's all on pause, and we have no news related to that. We continue to be optimistic and positive about the outlook of physical retail, and we'll continue to find just terrific locations across the country. The 40 that we're opening this year, we're -- we feel really, really good about, and we see plenty of growth ahead of us. So that's the plan on stores. That's connected in ways to our Target business. So your question about how that's coming along, we're just really, really pleased with that partnership. The relationship we have with Target as we've been building this together has just been exceptional, and we're really thrilled with the feedback that we've had from -- on the concept from our consumers. They are pumped up about this and excited for it to come to life. We really see this as just a completely new way to engage our consumers in the prestige segment, and in beauty overall, it's definitely not. I mean we've worked so hard to make sure this is not just more of the same from a retail standpoint, which we think is really critical in this time of disruption in the marketplace. So this is going to be completely new, totally different, focused on the best of the best in prestige, highly curated assortment, beautiful presentation, exceptional staffing, and we're anticipating high consumer engagement, compelling guest experience and, for us, acquiring millions of new members over time. We're not sharing much more detail than what I shared in the script earlier today. We'll be sharing that as we get a bit closer. But I can assure you that our plans are on track. We're ready to launch Ulta Beauty. And we have tremendous support from our brand partners, both big, the biggest brand partners that we have, and small and emerging brands. In fact, we're going to launch with more brands than we originally considered. We have the brands that we wanted to launch this with and more, and we're excited about it. So it's coming together great. We think it's going to be an awesome experience. We're thrilled to be partnering with Target. They've been nothing but just exceptional partners to build this with, and we're excited to go create this next chapter in the future of beauty.

Our next question comes from the line of Michael Binetti with Credit Suisse.

And let me add my congrats. Mary, we'll miss you a lot. And Dave, we look forward to working with you. Congrats on the new role. I guess maybe my first one will be for Scott. But I'm wondering if you can help us understand any of the metrics around how much of the SG&A that you guys have in the plan that you guided us to this year is what you'd call investment. I know -- I think Dave described it as investments partially offsetting some of the tailwinds on the margin. But if we just look at EBIT dollars per store, I think you're at like $740,000 in 2019, and the guidance looks like it's closer to $500,000. So I'm just curious, it seems like a lot of the focus here is in SG&A. And then, Mary, in the markets that have been less restrictive or opened up more quickly, what are you seeing there as leading indicators that leads you describing the beauty category -- the color cosmetics category as low visibility or uncertain as you guide us with your thoughts on how the rest of the markets will start to reopen?

Yes. I wouldn't say that we've seen a material difference in performance across markets for the most part. I mean there's certainly been weather disruptions and everything with COVID. We've been watching it closely. And I think just with makeup, we just know it's a category that's been under pressure even prior to COVID. And then we have a long period of time where folks are changing their makeup routines. And so we know that the category has lots of newness and innovation to come, and it's large. People are very engaged in the category. We're just not sure exactly when people are going to start wearing makeup, more makeup for social occasions and things like that. So we're watching it closely. But it's a great aspect of our business model that we are across so many categories that the self-care, the skincare, the bath and fragrance categories have performed, as you know, exceptionally well. So we're well balanced, and we're poised to take advantage of the uptick, which we think will come.

And on the SG&A part of the question. So again, it depends what you're trying to measure against, 2020 or 2019. I guess I'll keep it in context to 2019, be specific that there's roughly 50 net new stores in the store fleet compared to 2019 by the time we get the end of 2020. So there's a natural fixed cost element of that, that runs through gross margin, and then there's a variable cost piece of that, right, on payroll for stores and all the signage and other variable costs that it takes to operate a store. So that's embedded in there. A top line that's slightly weaker than 2019 is what our initial outlook is. So that's a big element of it. The service manager recategorization, right, out of gross margin down into SG&A. So it's a help on the gross margin line, but it is a headwind on the SG&A line, but it's an overall win for the company because we're more effective in it. It is plus up on operating margin overall. The investment, I mean, we don't -- we've never shied away from that. I mean, yes, 2019, it's a recovery year. That's how we're looking at it. Makeup is a big part of our business. As Dave and Mary both said, there's a lot of uncertainty on when it will come back. We're optimistic that it will, but there's just a question of timing, and that's a big part of our business. And then there's continuing investments in just all the infrastructure, especially in the digital and IT space, which, again, is a key component to being able to deliver a great omnichannel experience to the guests and to make sure that we're continuing to innovate for the long term and to help drive future growth for the business.

Our next question comes from the line of Steve Forbes with Guggenheim Securities.

Let me extend my congratulations as well. Maybe I wanted to sort of focus on the outlook for ad spend. So a quick 2-part here. Scott, you mentioned flat year-over-year. Maybe just tell us, if you can, on what the expense ratio was for 2020. And then more importantly, for maybe all of you, as I think about the reopening opportunity here, right, to drive new customer acquisition, to drive services adoption, right, and maybe reaccelerate those member trends, it just seems like there's a very large opportunity ahead of us. So I'd love to just hear about why not be more aggressive, right, or sort of how you're thinking about overall ad spend, whether it's payback or -- just love to hear just higher level thoughts on how you're sort of viewing this reopening opportunity, right, in terms of customer acquisition vehicle.

Yes. So maybe I can start there. So again, I would just say we're being flexible. Like we were in 2020 when the COVID crisis was on us, we pulled back significantly, especially in area of print and reallocated resources into the digital space, I think, smartly, right, looking at the results of that. So again, this is an area when we talk about EFG, efficiencies for growth, the print -- the whole advertising bucket is another large area of opportunity for us over the long term. And so we continue to look for ways to optimize both print, just the cost of print overall, but also the distribution and the postage and working with our vendor partners on new, better ways to be thinking about how we go to market over the long term. So that's part and parcel of our everyday activities, I guess, I would say. And again, we're thinking it's going to be flattish year-over-year as a percent of sales. So -- but always a work in progress.

Yes. And just to reiterate on the -- yes, your points about reopening and guest reengaging in the category. We feel confident in what we're seeing but uncertain about the pace and the return, particularly in our biggest category of makeup. And so we feel, as Mary has said, I think, as Scott has said, we feel the guidance that we have is right, but we're also prepared to adjust. We've -- becoming increased -- 2020 just further enhanced our skills at agility and being prepared to take whatever comes at us. And so we're ready to drive growth and lead the industry and -- but also feel like the guidance that we've given is correct.

Our final question comes from the line of Ike Boruchow with Wells Fargo.

Congrats to everyone as well. Just 2 quick ones. So Dave, for you, on store productivity, can you talk to us -- I think you were doing around $500 a foot pre-COVID. Can you -- not necessarily this year, but maybe over the next 2 to 3 years, where do you see store productivity kind of normalizing to given the rise in e-com? And to that point, Scott, on the guidance, it seems to imply that e-com sales, you're expecting them to decline year-over-year in dollars based on the mix. Could you maybe give some color about what's embedded on e-com revenue, either first half, back half or full year? Anything would be helpful.

Yes. Store productivity, I'm not going to give any specifics right now because we've got a lot to figure out of where things settle out and settle down. Having said that, we remain really committed and positive about the physical store channel for Ulta Beauty and in beauty in general. And so we're watching that closely. We're seeing positive trends as guests are getting reengaged. We know our guests are telling us and then increasingly demonstrating that they want to get back in a physical way, but we know e-com will play a bigger part of it, too. So I imagine that'll be a big part of our discussion in the fall as we kind of talk about a longer-term outlook, but it's a big focus for sure.

Yes. I would just, yes, add on to that exactly. In the fall, we'd have more to share on that with investors. I mean the fact is that the trends in the store, the traffic trends, have been negative now for a while. And so we're going to have to watch how consumers -- how that rebounds here as 2021 plays out and how that fits into the overall digital part of our business and omnichannel equation. As far as the e-com question goes, Ike, so yes, you're on the right track there. We're guiding 20 -- mid-20-ish kind of penetration for the year, which, again, we're not apologizing for based on what we just delivered in 2020. That business is twice the size it was a year ago this time. And the team is ready, and we're ready to scale that up and take advantage of opportunities that are presented to us. And now we're just focused on making sure we take care of the store fleet, the teams that are out there and make sure as customers come back and shop us in brick-and-mortar, that we're delivering a great guest experience and continue to keep them engaged with the brand.

Okay. I think we're done with the questions. Thank you. So I just want to thank everybody for joining us today. The future is really bright for Ulta Beauty. We have a strong and differentiated business model. We're emerging from the 2020 pandemic with good momentum. We're strategically investing in our business to drive further market share gains, and we have strong leadership for the next chapter of growth. I'm really proud of the job that the Ulta Beauty store, distribution center and corporate associates did all year to deliver this amazing but tough year. I remain very excited about the long-term growth opportunity. I'm confident Ulta Beauty will continue to shape and lead the beauty industry. I'm excited about the next chapter ahead for all of us. It's the right time for me personally, the right time for Dave and Kecia and the right time for Ulta Beauty as the team continues to drive growth for many years to come. We look forward to speaking with all of you again in May when we report on our first quarter results. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.