ULTA - NASDAQ

Good afternoon, and welcome to Ulta Beauty's conference call to discuss results for the Ulta Beauty Third Quarter 2024 Earnings Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. We ask that you please limit yourself to one question and then re-enter the queue for any additional questions. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kiley Rawlins, Vice President of Investor Relations. Ms. Rawlins, you may proceed.

Thank you, Julian. Good afternoon, everyone, and thank you for joining us for a discussion of Ulta Beauty's results for the third quarter of fiscal 2024. Hosting our call today are Dave Kimbell, Chief Executive Officer, and Paula Oyibo, Chief Financial Officer. Kecia Steelman, President and Chief Operating Officer, will join us for the Q&A session. Before we begin, I'd like to remind you of the company's safe harbor language. Many of our remarks today will contain forward-looking statements which speak only as of today, December 5th, 2024. We refer you to our earnings release and SEC filings where you will find a number of factors which could cause actual results to differ materially from these forward-looking statements. We'll begin this afternoon with prepared remarks from Dave and Paula. Following our prepared comments, we'll open the call for questions. As always, the IR team will be available for any follow-up questions after the call. Now, I'd like to turn the call over to Dave. Dave?

Thank you, Kiley, and good afternoon, everyone. We appreciate your interest in Ulta Beauty. Our team delivered improved performance for this quarter with better-than-expected sales and profitability. For the quarter, net sales increased 1.7% to $2.5 billion and comparable sales increased 0.6%. Diluted EPS increased 1.4% to $5.14 per share. As we shared on our last call, we are navigating a number of headwinds, including the normalization of the US beauty category, a dynamic consumer environment, and elevated competition, particularly in prestige beauty. We are starting to see benefit from actions we are taking to reinforce our market position and improve our performance. And while the headwinds have not abated, we are making progress. In the third quarter, our prestige market share trends improved, resulting in flat market share this quarter based on Circana data for the 13 weeks ended November 2, 2024. The trend was driven primarily by improvements in makeup and hair, and we continue to see strength in fragrance and skin care. Our share performance in Mass Beauty was consistent with the second quarter. Comp growth improved from the second quarter trend, driven by stronger transaction trends across both stores and e-commerce channels. We continued to expand our loyalty program, ending the quarter with 44.4 million active members, 5% more than last year. We continued to convert new members, we reactivated more lapsed members, and we improved existing member retention. Our marketing strategies to support our tent pole events and drive relevance and buzz deliver double digit growth in earned media value and stronger sentiment. And we made progress to optimize our new ERP system and help our teams adapt to new processes, balance inventories across the network, and deliver a better guest experience. Our teams are working hard to strengthen our market position, and I want to thank all of our associates for continuing to deliver great guest experiences while working collaboratively to drive improved performance in a dynamic operating environment. Turning to performance by category. Fragrance was our strongest category, delivering high single-digit comp growth, driven by men's fragrance, gender-neutral fragrances, and new products, including new fall and holiday gift sets. The growth of men's fragrance was fueled primarily by newness from ARMANI and YSL and the appeal of established franchises from Jean Paul Gaultier and Valentino. Consumer interest in gender neutral scents is increasing and our assortment including Billie Eilish and NOY

Thanks, Dave, and good afternoon, everyone. I want to echo Dave's sentiments and congratulate Monica. Monica has been a trusted leader and steadfast ambassador of our brands, and we are so grateful for all of her contributions. Now turning to our financials. I'll begin with a discussion of our third quarter financial results and then provide more color on our fourth quarter and full year expectations. For the third quarter, we delivered better-than-expected performance across the P&L, reflecting stronger top line growth, continued financial discipline and expense management and favorable shrink trends. Net sales for the quarter increased 1.7%, sales contribution from new stores and a 0.6% increase in comp sales was partially offset by lower other revenue. During the quarter, we opened 28 new stores, closed two stores and remodeled 27 stores. The comp sales increase was driven by a 0.5% increase in transactions and a 0.1% increase in average ticket. Other revenue declined $5 million to $48 million, primarily due to an increase in deferred revenue related to our loyalty program, driven by the expansion of our member engagement efforts, which were partially offset an increase in income from our credit card program. Looking at the cadence of sales throughout the quarter. Comp sales in August decreased slightly primarily due to a shift in timing of our semiannual 21 Days of Beauty event, which resulted in stronger comp performance in September. October trends were positive but softened compared to the previous period. From a channel perspective, our e-commerce channel delivered mid-single-digit sales growth. The sales trend in comp stores improved from the second quarter, decreasing modestly compared to last year. For the quarter, gross margin decreased 20 basis points to 39.7% compared to 39.9% last year. The decline was primarily due to deleverage of fixed costs and lower other revenue, which was partially offset by favorable channel mix due to lower e-commerce shipping costs and lower shrink. Lower revenue growth resulted in deleverage of store and supply chain fixed costs. Additionally, more new store openings and the expansion of our supply chain network pressured these areas. As a percentage of sales, inventory shrink was lower than last year. Our investments in secure fragrance fixtures combined with new inventory management processes and enhanced training for our field teams are helping us control inventory shrink. Year-to-date, shrink as a percentage of sales is roughly flat with last year, and we continue to expect shrink will be flat for the full year. Merchandise margin was flat with lower inventory reserves primarily related to the relaunch of Ulta Beauty Collection, offset by unfavorable brand mix. Moving to expenses. SG&A increased 3.2% to $682 million. Overall, SG&A spend was better than planned again this quarter, primarily due to focused expense management. As a percentage of sales, SG&A increased 40 basis points to 27% compared to 26.6% last year, reflecting lower top line growth, most expenses deleveraged this quarter. In addition, SG&A deleveraged primarily due to higher store payroll and benefits, primarily due to higher average wage rates and higher corporate overhead, primarily due to strategic investments. These pressures were partially offset by lower incentive compensation, reflecting operational performance that was below our internal targets. Depreciation was $67 million for the quarter compared to $61 million last year, primarily due to new store and supply chain investments. Operating profit decreased 2.7% to $318.5 million. As a percentage of sales, operating margin was 12.6% of sales compared to 13.1% of sales last year, and diluted GAAP earnings per share increased 1.4% to $5.14 compared to $5.07 last year. Moving to the balance sheet and our capital allocation priorities. We ended the quarter with $178 million in cash and cash equivalents and $200 million in short-term debt. Similar to third quarter last year, we drew on our revolving credit facility during the quarter to support working capital needs and ongoing capital allocation priorities, including share repurchases and capital expenditures. Total inventory increased 1.9% to $2.4 billion compared to $2.3 billion last year. The increase was primarily due to the impact of 63 net new stores. Year-to-date, through the third quarter, we generated $302 million in operating cash flow. Capital expenditures were $114 million for the quarter, primarily reflecting investments in new and existing stores, IT investments and merchandise fixtures. In the third quarter, we returned $267 million of capital to our shareholders through the repurchase of 731,000 shares. At the end of the quarter, we had $2.9 billion remaining under our $3 billion share repurchase program we announced at our investor meeting in October. Now turning to our outlook. We have refined our sales and EPS guidance for the fiscal -- for fiscal 2024 to reflect our third quarter results, while continuing to take a cautious view of the consumer and operating environment. We expect net sales for the year will be between $11.1 billion and $11.2 billion, with comp sales growth between negative 1% and flat. For the year, we continue to plan to open approximately 60 to 65 net new stores and remodel or relocate 40 to 45 stores. We expect operating margin will be between 12.9% and 13.1% of net sales, with deleverage to come from both gross margin and SG&A, reflecting our top line expectations. Reflecting these assumptions, we now expect diluted EPS for the year will be between $23.20 and $23.75. With one quarter left in the year, I want to share how we are thinking about Q4. While we are encouraged by our third quarter results and our performance quarter-to-date, we also acknowledge that the fourth quarter will likely be impacted by a compressed holiday season, a dynamic operating environment and continued uncertainty around underlying consumer demand. For Q4 modeling purposes, we expect comp sales will decline in the low single-digit range and operating margin will be between 11.6% and 12.4%. One final update. We have updated our capital expenditure expectations for the full year and now expect to spend between $400 million and $425 million in CapEx in fiscal 2024, including approximately $230 million for new stores, remodels and merchandise fixtures, $130 million for supply chain and IT, and about $50 million for store maintenance and others. In closing, we know it will take time to see the full benefits from our efforts, but we remain confident that our go-to-market strategies and investments along with continued operational and financial discipline will enable us to drive stronger sales and value creation over the long term. 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 Simeon Siegel, BMO Capital Markets.

Thanks. Hey, everyone. Nice job, and if I forget later, I hope you and your families all have a nice holiday season. Dave, any further color you can share on how you're thinking about the broader competitive and promotional landscape over holiday? And then just Paula, could you quantify any of those gross margin pressure points this quarter, how you're thinking about the next quarter and beyond? And then just does any of today's progress in the full year guide lift impact your initial margin views you had given us in October? Thank you.

Great. Thanks, Simeon, and happy holidays to you as well. I'll start with just the broader competitive and promotional landscape. And Paula, you can pick up on some of the margin specific areas. So for the third quarter, what -- as we -- as I mentioned in the remarks, we continue to see this is an intensely competitive time frame. And we've been managing and discussing that throughout the year. We feel like our actions, the adjustments we made in the third quarter helped us improve our performance, strengthen our performance, but we also recognize we have more work ahead of us. The dynamics in the marketplace continue, particularly in the prestige space, but we're seeing progress. And our unique proposition, the aspects that only Ulta delivers through our assortment, our loyalty program, our points of presence, the experience we deliver have always been key to our business and continue to be core drivers. Promotionally, what we experienced in the third quarter was continued normalization after some reduced promotion coming right out of COVID. So we anticipated that coming into Q3 -- coming into this year. We saw that in Q3. Our promotional rates in Q3 were lower than Q2, but still somewhat higher than last year. But as I mentioned in the remarks, our efforts to adjust our promotional strategy to lean in and amplify our tent-pole events, made our overall efforts more effective leveraging our CRM program and our personalization efforts are driving the business. As we look into the holiday, it is obviously a very promotional time frame, the most promotional time frame. That's certainly true this year. And as we navigate through and share our fourth quarter results, we'll have reflections on the overall dynamics, but we're anticipating continued promotional intensity, but not significantly outside of what we would expect so far this holiday. Paula, do you want to talk about that?

Sure. Good afternoon, Simeon. Yeah, so we raised our full year operating margin and EPS, reflecting Q3 performance and also ongoing expense discipline. What I would say as we think about kind of Q4, generally for the full year, we continue to expect gross margin deleverage, and when we think about Q4, reflecting the top line expectations in a competitive environment. Gross margin will continue to de-leverage. And really, the trends we've seen all year will continue. So, headwinds are the deleverage we expect to see from a fixed cost perspective, merchandise margin pressure will continue given promotions and category mix. And then our tailwinds, lower transportation costs, which we've been speaking about all year, we'll continue to provide some offsets to that. I would say from an SG&A perspective, we're expecting growth from a full year in the mid-single-digit range. But Q4, expecting that to be in the low single-digit growth range. We still expect or most of our expenses to deleverage on the lower sales. But we'll continue to maintain financial discipline as we have in Q3.

Great. Thanks…

And I think the second -- okay. Thank you.

No, sorry. Didn’t mean to cut you off.

No, all good. Thank you, Simeon.

Thanks, guys.

Thank you. Our next question comes from Kelly Crago, Citi.

Hi, thanks for taking my question. I just wanted to see if you could provide a little bit more context on the prestige makeup line that was flat in the quarter. How was it for the industry overall? And if you could just talk about the innovation pipeline in prestige -- I'm sorry if I said prestige beauty before, I'm talking about prestige makeup. If you could talk about the innovation pipeline there. And then just secondly, any way to kind of quantify the drag you've seen from the competitive pressures specifically with those new points of distribution and sort of where we're at in the timeline for when you expect those headwinds to abate further? Thanks.

Great. Well, thanks, Kelly. Yeah, let's see, starting with prestige makeup, obviously, an important category, our largest category. And I'd start with saying, overall, we're pleased in the third quarter that prestige makeup was flat for the quarter for us, which was improvement from some of the trends. The drivers behind that are our innovation that we continue to launch brands like ILIA coming into our portfolio, strong execution across our key programs like 21 Days of Beauty, which is focused on prestige and make up, of course, is the highlight of that, and real emphasis on some of our core brands like the Clinique and MAC and other strong performing brands that we've been working closely with to ensure we're delivering for our guests and our guests respond well to them. And so we're really -- we've been focused on this category for a long time to strengthen its performance and we're really pleased that it was able -- that we were able to do that. Overall, in the category, we saw the category, the total prestige makeup category a bit more than us in low single-digits. So we saw pressure share, although our share performance, while still pressured, improved from the second quarter. So we're making headway, and we're pleased with that. Overall, on the competitive environment, you asked about competitive openings. As we've been talking about throughout the year, that's certainly a meaningful dynamic as there's been more than 1,000 new points of distribution in prestige beauty that over the last couple of years. And that has been a pressure. I shared in previous discussions that 80% of our stores have experienced at least one competitive opening and more than half have had multiple competitive openings, and that continues to be a dynamic that's going on in the marketplace. Having said that, we're confident in the actions that we're taking. We know we've seen historically new store openings. We're able to absorb the shorter-term hit, but then turn our stores back into positive contributors to our business over the long term. This is a different dynamic given the scale, just the sheer number of new stores opening in a short period of time. But we're confident in our ability to do that. We did see improvements in Q3 that contributed to the stronger performance we had in Q3 in total versus Q2. So we feel like we saw some headway in that. But we're not -- but it's we're still in the midst of it. And so by no means are we claiming that we're through it. We've got more work to do. We're working through the dynamics. And our focus there is continue to do what we do best, lean into our strengths in our stores and online and all of our experiences that activity, those things that I highlighted on earlier are what helped us make progress this quarter and other things that are going to drive us into 2025 as we continue to strengthen our business.

Thanks. Best of luck and happy holidays.

Happy holidays.

Thank you. Our next question comes from Korinne Wolfmeyer, Piper Sandler.

Hey, good afternoon. Thanks for taking the question and congrats on the quarter. I'd like to touch a little bit on the competitiveness on the mass piece of business. I feel like we talked a lot about prestige, but I do want to understand mass, a lot of the broader mass -- larger mass retailers have been talking a little bit more positively about beauty. You've got dollar stores expanding more in beauty. So, how is this impacting the competitive landscape would you say for that piece of the business? And how are you thinking about the mass piece going forward and heading into 2025? Thank you.

Well, yes. Thanks, Korinne. The -- I'll start with saying that beauty is a very attractive category. And so we've talked many times about the fact that anybody in beauty, whether in the mass side, prestige side, luxury is emphasizing the category, investing in the category and that's been going on across all of our competitors. In the mass specific business, yeah, that -- the total mass business continues to perform in that mid-single-digit range for the quarter in total mass. And it's an important category for us. As you know, one of the key differentiators of our business is strength in mass and [mass] (ph) and prestige and luxury. And so we continue to be focused on our mass business and the important role that it plays. So that we're well aware of the dynamics. We have seen mass makeup as a category -- cost of category decelerate. Certainly, there's brands that are stronger, but the total category has been more pressured, but we're seeing strength -- continued strength in mass skin, which is an important business for us. So we're focused on continuing to drive our mass business and make sure we're delivering the assortment that we know our guests love the ability to engage with us across all price points and continue to be confident in our ability to excite them and engage them in our mass business.

Okay. Thank you. And our next question comes from Anthony Chukumba, Loop Capital Markets.

Thank you so much for taking my question. Hopefully, you can hear me okay. And I'll just keep it to one question. Obviously, you had a very impressive sequential improvement in your performance. And you've touched on a few different things, but if you had to sort of almost like kind of stack rank what you thought drove the better performance, would it be the more effective promotions? Would it be some of the merchandising changes? Would it be some of the partnerships you talked about, like, with Wicked and I guess, the Mini Brands or whatever. Yeah, if you could just give us -- help us to understand what, from a sequential perspective led to the improvement in performance. Thank you.

Great. Thanks, Anthony. Yeah, I mean, I wouldn't point to one thing. There was not one thing that ever really drives our business. And we talked about coming out of the second quarter. While we're pleased with some aspects of our business, we were clear on areas that we needed to address, and we leaned into several of the key factors. Assortment is always critical. Bringing in newness, some of the brands I highlighted like ILIA into the quarter played an important role. The collaborations that you mentioned also drove excitement and enthusiasm. Assortment is always a key driver and certainly was in the third quarter. Our promotional effectiveness, we had some learnings in the second quarter as we were faced with more pressure sales, how we adapted our promotional environment. We had learnings there that we built from into the third quarter. Leaning in, strengthening our core tent pole events that our guests value from Ulta Beauty, 21 Days of Beauty, our hair brand and Fall Haul as well as smart, purposeful targeted and effective complementary promotions throughout the quarter in a very personalized. So that drove a strong effectiveness. We worked hard throughout the quarter. Our teams across the organization, store teams, for sure supply chain, our IT teams, our digital teams to make sure we were delivering a great experience to improve conversion, and we're pleased that we were able to do that both in store and strong performance online. And that took a holistic effort with making sure we have strong engagement from our store associates and strong execution online. And we also -- the last thing I'd mention is we highlighted in the second quarter, some disruption from some system changes and we made improvements in that space to make sure our products were where they needed to be. So multiple elements contributed. It was a really holistic effort across the organization, and we're pleased. Having said that, we know we've got more work to do. We're -- while we're pleased with the sequential improvement, we are focused on stronger improvement over time as we move both through the holiday period and into 2025 and beyond. So we'll continue to lean into all of those things and the broader strategies that we went through in a lot of detail at our Investor Day in October.

Very helpful. Thank you.

Thank you. And our next question comes from Christopher Horvers, JPMorgan Chase & Company.

Thanks, good evening. So I'll throw a quick two-parter in there as well. So the first part is, are you positive quarter-to-date? You mentioned encourage -- and how are you thinking about the balance between the five fewer days but at the same time, have a very substantial gift card business and five fewer days would suggest a strong January follow-through. And then following up on an earlier question, any further thoughts on how you think about '25. You talked about a floor of 11% long-term 12% plus, how did this quarter change that point of view, if at all? Thanks.

Hi, Chris, thanks for the question. What I would say is we won’t necessarily get into the details of specifically comp quarter-to-date. But what I will say is that, our holiday season is off to a solid start and our teams are executing well. We are encouraged by what we're seeing, but we also recognize that we have several important weeks ahead of us in the holiday season, even an operating environment is dynamic. And so that is why we shared that we're expecting Q4 comp sales to decline in the low single-digit range. So that's what we're thinking from a quarter perspective. And I would say, yeah, there is a component of the dynamic environment that is related to how consumers the fewer shopping days and things of that sort that we are obviously contemplating as we think about our expectations for Q4. As we think about 2025, again, still several important weeks left ahead of us, and we're focused on closing -- getting to a holiday strong and closing out the fiscal year strong. And we will provide additional color on 2025 when we provide our guidance in March, consistent with what we typically do. Now that being said, I would say directional color that we provided at our Investor Day remains the same. We expect 2024 and 2025 to be transitional period as we invest to reaccelerate our growth, and we continue to expect to make investments in 2025 that will position us for a stronger long term. but we will make decisions to enable -- to ensure that we're delivering operating margin at least above 11%.

That’s great. Thanks very much.

Thank you. Our next question comes from Kate McShane, Goldman Sachs.

Hi, this is Emily Ghosh, on for Kate. We were wondering on UB Media, how big of a competitive moat do you think it could be, especially considering what it does to help your relationship with vendor partners? And how much is UB Media contributing to the long-term operating margin outlook that you provided at the Investor Day?

Great. Thanks, Emily. Yes, the -- we think we're very optimistic and excited about the role that UB Media is and will play on our business going forward. As you suggest, we have a real competitive opportunity because of the scale and the breadth of our business, the data that we have, the understanding of beauty engagement and transactions across really all beauty enthusiasts of all ages and all geographies is really unmatched. And so we've worked hard to deliver an experience for our brand partners that adds value and most importantly, adds strong ROI in their media investments and the growth that we've seen in that business reinforces that we're able to do that. We're -- as we did talk about at our Investor Day, continued investment and capabilities. I highlighted a couple of those capabilities on the call earlier today related to roadblocks and other ways that we can further give our brands opportunities. But because of the brand relationships that we have and the role that we play in the category, we are confident that our opportunity to grow this business, continue to grow this business over time will be will be a positive impact on the business. Paula, do you want to talk about the financial impact?

Sure. What I would say is UB Media, Emily, is contributing positively to gross margin in a way to think about it over time is that it plays in for role for us, and it will help offset some of the merchandise margin pressure. We currently see we have shared as we make certain investments in brand building and other things in 2025 and beyond that would serve to help offset some of those pressures.

Thank you.

And our next question comes from Oliver Chen, TD Cowen.

Hi, thanks, David and Kecia. On your thinking longer term, what will it take positive comp in terms of what categories perhaps you see as the biggest opportunities? And was the commentary on October being a bit softer. Was that surprising to you? It sounds like you may continue to expect to see a fair bit of volatility. And Kecia, online half store sales, is it a mid-single-digit leverage occupancy. Anything we should know about that in terms of achieving fixed cost leverage based on the comp? Thank you.

Thank you. Oliver, let's see. So first on long-term growth, what's going to deliver positive comps. I guess I would go back to what we talked about in detail at our Investor Day. We really see a combination of leaning in and reinforcing our established strengths as well as innovating across our entire ecosystem as key contributors to our performance. We talked about four key pillars or platforms assortment, having the best assortment across beauty and wellness experience, delighting our guests in every touch point that we have access, continuing to expand our availability, both with stores, accelerated new store openings as well as strong online expressions and then, of course, loyalty and building brand love. We're really focused on driving innovation across each of those and making sure that we're ready to do that. And what we -- what I talked about in an earlier question, that contributed to the third quarter improvement versus the second quarter. It's the foundation. It's the fundamentals. It's the core things, Oliver, you know about our business having tracked us for a long time. When assortment is stronger and experience is right and our loyalty is working and our touch points are driving both in-store and online, those are the things that will come together. So much -- really all of it, we just shared a couple of months ago, those are the aspects that will drive our business going forward.

Yeah. And, Oliver, this is Paula. Given you asked a question about October and whether or not we were surprised. What I would say is now -- and we thought, Dave mentioned and we talked about the timing and some of our tent pole event. And so that had a role to play in kind of the by period performance in Q3. And then I think you had a question about leverage points, and we don't specifically disclose a specific point, and we've shared in the past one way to think about things is from a rent perspective, expense is around 4%. And so as you think about comp and total growth, maybe think about it in that perspective.

Happy holidays. Thanks.

Thanks, Oliver.

And our next question comes from Krisztina Katai, Deutsche Bank.

Hi, good afternoon. Congrats on a nice quarter. So I just wanted to follow up on your early learnings from your market share reinforcing strategy. It obviously enabled you to maintain flat market share in the third quarter, at least in prestige. Where are you seeing some of the biggest gains in member engagement? I think, Dave, you talked about both platinum and diamond members are up in the program year-over-year. And then just as the competitive opening pressures abate, is it fair to say that maybe the worst is behind us? And is there a timeline for when you think maybe you could return to market share gains? Thank you.

Well, let's see. So, on the -- where we've seen engagement, yeah, you highlighted an important part of our business, which is what we call our lead guest, our Platinum and our Diamond members. And we're pleased that we continue to see strong performance from them, high engagement, high spend, they are obviously our best guest. But we're seeing that across the board, and it's something we've been focused on to continue to grow our business. Our loyalty program in total was up 5% for the quarter, and that was a combination of attracting new members as one of the things we talked about in October was even though we've had a lot of growth in that -- in our loyalty program over time, we still see a lot of opportunity ahead, and we're continuing to attract new members and bring them into our business. And that, of course, is important fuel for future growth. We also had success reactivating lapsed members, a lapsed member is somebody that has a -- is part of the program but hasn't purchased with us for the at least once in the last 12 months. And we have a very focused CRM personalized program going after that group, and we continue to see success with that. And then our retention is strong. There is an intense competitive environment, but our guests continue to demonstrate that they like what Ulta is offering. And so retention remains healthy. And so those things come together. We're seeing it across all ages, all geographies, strength across all types of beauty enthusiasts, which is an important part of our business. Competitively, you asked about the dynamics there. And I continue to say something that we've shared in the past is, it's difficult for us to exactly predict or lay out when we would see us completely moving through this because we've never experienced the scale of this in such a concentrated period of time. Having said that, I'll reiterate something I mentioned earlier, which is we have confidence. We've seen it in the data before new store openings. Our stores are able to recover and return to strong contributors. The data that we see now, stores that have not been impacted by competitive opening continue to perform better and positively, and we saw improved performance in Q3. But I would not take that fully as a, okay, we're through 100% through it, and it's totally behind us. This is a meaningful disruption in the category. We're learning every period. What -- how the dynamics are evolving, but we did make progress in Q3, and it's our focus to continue to do that as we move into 2025.

All right. So with that, thank you all. I will wrap up. Thank you for joining us today. So, I want to close out by thanking our more than 55,000 Ulta Beauty associates working together in our stores, in our distribution centers and across our entire corporate team. I sincerely appreciate their continued focus and commitment to delivering unique and memorable guest experiences across all our channels. So, as we close, I want to wish you all a happy and healthy holiday season. There's still time to get out and shop at Ulta Beauty. So make sure you put that into your holiday shopping plans, and we look forward to speaking to you again when we report results for fiscal 2024 on March 13. Have a great evening. Thank you all.