Ulta Beauty, Inc. (ULTA) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Rupesh Parikh, I'm the senior food, grocery and consumer products analyst at Oppenheimer. I'm happy to introduce our next presenting company, Ulta Beauty. We're excited to have joining us today Mary Dillon, CEO; and Scott Settersten, CFO. So prior to the coronavirus pandemic, the Ulta management team, under Mary's leadership, drawn strong market share gains during both the boom times in 2015 and 2016 and more recently, in 2019, during significant challenges in the makeup category. This has helped to drive meaningful outperformance in shares versus both the S&P 500 and the XRT in recent years. We remain very bullish on Ulta's ability to continue gaining share coming out of the coronavirus pandemic, especially with all the challenges out there in select parts of the retail backdrop. So the format of today's session will be a fireside chat, going through a number of questions that I prepared. We hope to cover both the shorter-term questions, given all the volatility out there, and some medium- to longer-term questions following the company's recent report. So let's get started. So Mary and Scott, thank you very much for joining us today.

So as of the Q1 call in late May, Ulta had 840 stores offering curbside pickup and more than 330 stores open to guests and 283 salon services. Can you share with us the latest?

Sure, Rupesh, and thank you. It's great to be here. Second annual time that we've been at your conference, 2 years in a row. So doing it in a different format this time as sitting on the stage with you, but really happy and glad you guys are having us here. If you just take a step back, as you know, as the virus started to spread across the U.S., we made the difficult decision to temporarily close all of our stores on March 19. And then at the same time, we started planning what -- how we're going to reopen, right? So it was a -- certainly not the only retailer in that situation, but to overnight become a digital-only business was quite a moment. And -- but now as we're starting to reopen, I'm feeling good. I think we've done everything that we can to make it as safe as possible to bring commerce back. We have a very rigorous process, frankly, that we've been using to really be sure that we understand the local health authority's assessment of the situation, our associate readiness to come back. And we've got a lot of safety procedures in place. So right now, I'm happy to tell you that, so in April, we started curbside, and May 11, we started reopening stores. And today, we've got 90% of the fleet open in some way, shape or form. So over 1,100 stores doing curbside, over 800 stores where the full retail stores open and about 800 where we're also offering salon services. And we continue that by the end of this month, most of the stores will be open in some capacity. So -- and listen, our associates are super excited to come back to work. We had to make the difficult decision to furlough 33,000 people. I think we did it in a way that was as humane as possible, including personal discussions with everybody, from their managers, helping them access unemployment benefits in their local -- in their states. And so now when it's time to come back, our associates are really anxious to do that and do it well.

That's great. That's great to hear. And I'm happy my store is open as well.

We're happy, too. You know I'll see the average ticketing go through the room now, I hope.

Well, starting tomorrow. So with your Q1 release, you also mentioned that omnichannel comp sales were collectively flat. Wondering how this has trended since then? And have there been any changes in the categories consumers are interested in?

Well, yes, so we're not going to get into specifics on each wave. But I do -- we do tend to be encouraged by what we're seeing, but it's super early in the process. I mean there's so much more to be told about what's going to happen in the second half of this year. As we said on the call, we -- the first wave of reopened stores, we tried to take an omnichannel view, and really, in total, they were flat. The markets were flat. If you looked across all channels a year ago, some were up, some were down. So that was early, and I'm not saying it's going to be like that every week, but that was encouraging. And what we saw probably at the beginning was some real pent-up demand, stimulus checks, people wanting to get out and start spending. E-commerce has remained healthy as we continue to roll out the ways. I would say e-commerce is remaining healthy. Rupesh, I'm very happy that we opened up the ability for curbside. What we saw is that people wanted to get out of their house and the ability to come in, pick up at the store, people were bringing signs and welcome -- were so excited Ulta Beauty is back, and our associates were doing the same thing. So I guess, we'll see as time goes on. We do know that the digital adoption, of course, a lot of that is going to be sticky. But it's also a great opportunity for us to have more omnichannel shoppers. And I'm sure we'll talk more about that and how important that is for us. So I feel pretty encouraged right now as we're reopening stores. We're watching it very closely to see how the -- what demand looks like. You asked also about what people are buying. It was kind of interesting. You could almost map the consumer psyche week-by-week based on what was being bought, which when we became an e-commerce-only business there, at the beginning, what you saw is things like soaps and antibacterial hand gels, and then started over time, people getting a lot more into, like, self-care and wellness and skin care and bath scents and things like that and then more skin care. And then even as we open up curbside, some pent-up demand for makeup as well, right, coming into the mix. So a lot of that stuff are trends that I think were happening anyways that are probably going to be amplified. But beauty is back, I mean the Ulta Beauty guest seems to be engaged and ready to shop, which I am glad about.

Okay. That's great to hear. And then as you look at these, I guess, the last several weeks of opening, has there been anything that surprised either positively or negatively with the openings?

Yes. I mean, actually, I'd say, first of all, curbside pickup, I kind of branded that Ulta Beauty to the go, we never done that before. I was frankly pleased by how quickly our team was able to set up the IT system to allow that to happen. And I was surprised at how quickly guests started to realize that was an option and engaged in it. So that was a positive surprise, for sure. On the salon side, we've got some salons that are booked and stylists that are booked for a few weeks out. So not surprised because there's a lot of pent-up demand for hair services, but pleased to see that people, they understand our safety procedures, that's a positive surprise. I'd say on the consumer behavior, the safety side is a little tricky. Testers, we can talk more about this. And -- but we are trying to have people understand they were for display-only, but sometimes people still wanted to use them. So we've had a method that we figured out how to manage that. And last, I would say face mask. So I mean, listen, I'm going to tell you, our associates are wearing masks, and we are encouraging everybody to wear a mask. It's pretty much -- that's what people are doing, but you can imagine that everywhere. So that's just something we continue to manage

Okay. And with regards to your salon, have you guys adjusted the capacity for your salon in a typical store?

Yes. So basically, right now, what we're doing is we're starting with hair and then we're going to go to brows next. Skin is a little bit more intimate. So we're working on that. But we've said, first of all, appointment-only, so no walk-ins for a while. The guest has an opportunity to talk to a stylist in advance, without a mask, just doing it digitally to make sure we understand what we're trying to get done there. And then what we have is spread out, so people are not next to each other, they're socially 6-feet apart. Also just increased protocols in terms of health and safety and masks and gloves and all that kind of stuff. So I think we're just following -- we've got great medical experts that are helping us. Our associates are following the rules that we're asking them to follow and guests are for the most part as well.

Okay. And then I guess, looking toward the future, with regards some the new merchandise opportunity for skin care, hair and wellness, should we expect to see greater square footage dedicated to these areas in stores?

Well, it's an evolution, and we've been adding tons of skincare brands over the last few years anyways because we know skin is a strong opportunity. It's a segment that's been growing. Certainly, everything that's happened in terms of people kind of hunkering down in self-care has accelerated. I think even just trial and discovery of the very many different types of things that are in a skin care ritual. A lot of people figuring out how to do the cleanser, toner, serum, moisturizer, vitamin C on top of it, takes a minute to figure all that out. So people had a little time at home, doing more mask and all that. So we've been on that path already. It's not like you want to pivot the whole store overnight for a whole bunch of reasons not the reason, which is the complexity of doing resets, the margin impact, but we've been expanding our skincare selection online and in-store. We've added -- used a lot of our flexible fixturing to allow us to give more spaces in without a big commitment to it. And then over time, you'll see us continue to flex, I think, the category, more big space as well.

Okay. And this is -- I mean, this is -- I don't envy you for this, but how are you balancing the need to adjust or reinvent the store experience for shorter-term safety concerns, but at the same time, not dramatically reshaping the experiential part of the Ulta offering, that could again be more relevant once we move past the virus?

Yes. Well, yes. I mean it is interesting, right? We're in a category that is very much, I'd say, physical and digital, and it's even very emotional. And you see people really love the notion of coming back and being part of the Ulta Beauty family and shopping experience again. That said, there are certain things like testers that are not really as relevant right now, right, the way we used to do that. And so what I'd say -- but here's what we have, as we've been on the path of innovation here already and GLAMlab, which I honestly would encourage anybody to just please download the app and try GLAMlab because I think it helps give a real sense of what we've been investing in, in this capability. It is unbelievably realistic and experiential. Literally, you can like change your hair color; you can see what you look like with false eyelashes on if you want. I mean -- I'm not kidding, it's fun. And we've seen a big increase in engagement. It's like 5x the amount of people that are engaged in it right now because trying on thousands of millions of shades of products. So what we're doing is that's an opportunity for us that when you're in a store and would still -- we're seeing people coming at our stores, right? They want to shop. We've got enthusiastic and informed associates. They want to help. So they're not going to be able to say, "Here, put this on your skin," but they'll be able to -- I'll come back to testers, but help demonstrate to folks like, "Here's how you download the app and how you use GLAMlab because that's going to be a huge engager for us." And then even in the stores, frankly, the testers are there, but we cover them with like a plastic cover and so that people can't actually take them out and use them. But honestly, you can actually see the product, and that's meaningful as well. Like I was just in a store this morning. And if you think about a whole section of like eyeshadow palettes, if you have one open, even if it's covered up, at least you can see what's inside, right? So I know that our guests are going to get used to that kind of engagement, services, we're putting that back on the map, and that doesn't seem to be an issue with people wanting to come back and get services done. So I think it's just going to look a little different, but we're going to do our level best to make sure that it's fun and innovative and relevant.

Okay. And then with some of these things, testers, I guess, temporarily cover up, but as you're still opening up new stores, like whether curbside or anything else, do you change -- do you make any changes to the stores in real estate or in your -- sorry, in your pipeline in terms of -- for safety, et cetera?

Do you mean in terms of the store there...

Like curbside has become more popular. Like do you change anything in the store design for curbside because it's actually...

Yes. No. I mean curbside is a new one for us. And we launched buy online pickup in-store last year. Thankfully, having it in line for holiday was really a great competitive advantage. And there's a lot of folks, I'd be the first to admit, I'm kind of a last minute shoppers. So when you're down to the wire trying to get things to be able to go now, you can pick it up in the store is really important. And so when we then look at the curbside, I was, like I said earlier, surprised at how much people love it. And to me, it's more about like we want to keep it in the mix, even if it's just, "Hey, I've got a couple of kids in the back, and I don't feel like getting them out of the car. I can drive up and have somebody put it in my car." We're seeing this a real benefit. The issue would just be, is the parking lot appropriate? Is it -- are we going to have a place for people to pull up? That's a detail that we'll work out. But I'd say some of the safety measures are probably here to stay for a while, and some will evolve over time when we post vaccine. One of the things that I was going to say about testers is that besides using the AR capability through GLAMlab, we're, of course, working with our brand partners on innovation around what are all the ways you can give people sample our product to try that's different and safer than we have in-house. So there's a little bit more happening there, too.

Okay. Okay. Great. So a question for Scott. Going back to the conference call, there were some impairments, take you for a select number of stores. And then commentary suggests an even more aggressive review of the real estate footprint going forward, whether it's relocations, store closings or just adjusting your footprint for the future. So besides a higher e-commerce penetration, what else is driving this more aggressive strategy right now? And then anything more you can share in regards to the updated real estate strategy?

Yes. So thanks, Rupesh. So there's a couple of different elements at play here, and I'll get into those more here in a second. But I just -- the backdrop is the store fleet, unlike some of the other headlines maybe that people are seeing these days in the news with retailers shuttering stores and whatnot, our fleet is very strong, very profitable overall. So it's a little different set of circumstances that we're kind of managing our way through here. So the first piece is the impairments that you mentioned. So again, a very small number of stores, I think 10 stores, were driving the majority of the charge there in the first quarter. And that's just really subject to the accounting conventions, right? They're like in any -- all things, there's your top performers and your low bottom performers. And there was just a handful of stores that were challenged a little bit. And with the COVID crisis and reduced sales and then there's accounting rules about how you measure fair value with your leases and things like that, so lease terms, rates coming down, revenue is coming down, it just resulted in the math coming up with an impairment charge, again, for a very small number of stores overall. So it leads to the second element here, which is us just taking the opportunity. Again, there's a lot of uncertainty in the world now, right, what we're seeing with the digital pivot with consumers. And again, we had planned for some of that, right, to become part of our business over the longer term, but it's accelerated. And we would be naive not to be taking a hard look at consumers and how their shopping behaviors are changing and how that fits in with our longer-term store build out targets. And so we just think it's smart, right, to take this opportunity to kind of rethink. So first of all, with the digital sales piece of this and what the penetration could be long term and how the stores and e-com play together over the long term and try to optimize that. And then there's the whole real estate scenario with co-tenants struggling and certain centers probably struggling and some landlords as well. So again, just taking -- stepping back and taking a thoughtful look at the entire footprint and what the ultimate build out might look like, and just challenging, are we in the best centers? Are we in the best positions in those centers? And what is the status of those centers as we exit this crisis, and just make sure we're in the right real estate with the right economics overall and positioning ourselves well for the long term, right, health of the business. So again, it's a small number of stores. I would call this more of a pruning or an optimization kind of exercise than I would any kind of a larger, broad brush kind of store closure activity at this stage.

Okay. That's helpful color. And then shifting to e-commerce. So what has been the biggest challenges on the e-commerce front? And at this point, how should we think about your sales capacity for your current online operations can support?

Well, I'll step back by saying it's kind of a high-class problem to have, in that we had more demand than we could fulfill there for a while when this thing first started to take off on us, which when we closed the stores, we expected, of course, that e-commerce would pick up. I am really thrilled that we were able to keep our e-commerce business flowing because we were deemed an essential business because we did -- I think most e-commerce were, I wasn't sure at the beginning that, that was going to be the case, right? I mean, state by state, it was a bit of a grab bag here at the beginning. So -- and then our e-commerce -- our supply chain teams. I mean, frankly, it's a lot to ask for that team to say, okay, you're staying a business. We've got to figure out new ways of working. We got to do it overnight. And they did a fantastic job, right? But we had to implement all new protocols to keep our DC center employees safe. So I'm proud about that. What I'd say is that, yes, so demand, as you heard on the call, increased by over 100% in the quarter. So it was great, but we weren't exactly prepared to do that. We actually had to do a little bit of shifting some -- pulling back some demand creation so that we could not -- we don't want to disappoint guests where all of a sudden things were going to take a lot longer than they were used to or expected. So we kind of moved into a holiday playbook in the distribution centers. And it's kind of interesting, but post-COVID, our weekly average volume for our e-commerce or demand, I should say, was slightly higher than a weekend holiday. So I mean that's how strong it is, but we weren't set up to be able to shift that much during that period of time. So when we -- I'm proud that we have the IT infrastructure and processes to support it. But -- and I'm also really glad that we opened up curbside because that helped to take some of the pressure off of the buildings to do that. So at holiday, we have the ability to plan ahead and higher up and all that stuff, and you also don't have social distancing happening. So the fact that we're able to accomplish as much as we did in the quarter is something that we don't take for granted. And I'd say that as we look forward, so I feel good about our capacity for this year. I think it's going to balance out now that I think it's going to stabilize. We definitely are going to have higher e-commerce penetration probably than we planned, right, because I think some of that behavior is sticky. And we've been accelerating -- investing in supply chain and we've accelerated something. So in particular, the Jacksonville fast fulfillment facility, we've moved that back into 2020 as a way to help make sure that we got the capacity that we need. So I feel good about it. I think we'll be fine. And again, I think curbside of BOPIS will always be a part of what we do. These are not, like, shocking revelations that the world is evolving this way because we've long been planning for a business that will have a physical and a digital reason for being. And that if you -- the channels are blurring, we want the guest experience to be seamless so that we're following and we're with them throughout the entire journey, and this is just a good test of how fast we can get there.

That's great. I guess just from a demand -- your comment on demand creation. So clearly, I think Ulta has been less promotional lately. So at what point can you go back to your normal activities? Like sending the flyers in the mail, sending the coupons, et cetera?

Yes. It's a great question. Never let a good crisis going away, says -- has been quoted many a times. So one of the things that we've done is -- I'd say 2 things. One is when we did pull that promotion, and frankly, it's like a social marketer's like dream job, right? It's like, okay, figure out a way to engage with your guests that isn't about an offer, but about a mindset and about engaging, creating your brand. If you know what I mean, like a lot of our ability to connect with our guests, where they were thinking about them to the lens of balancing, working at home with children or homeschooling your kids or just the stress and I figure that people were under. We really connect with people on a level that I think got met where their heads were, and sold a lot of product at the same time, but we also had to be less promotional to kind of mitigate the matter -- manage the demand. And we also -- let's just say, I don't know how much we talked about it externally yet, but I'll just say, we've definitely taken the opportunity to continue to evolve our marketing mix. Assets that are -- weren't relevant during that time, like maybe more print, we're able to pull back some of that. And do you go back to it? Maybe not, it's not the most efficient thing that we do. So having to lever -- push harder on digital channels and digital tools was a great opportunity for us. We already were doing that. But when you have the opportunity to kind of pull away some things and then they're not in the base anymore, that's a good thing. And I'd say, certainly, I know you know this, but Loyalty, our ultimate rewards program, continuing to make sure that we drive member growth, and we drive -- get people signing up in digital channels as well as in the store and continuing to drive the personalization engine behind that is going to continue to be important. And of course, we're doing that as well.

Okay. That's great. And then sticking on e-commerce. So I think another question for Scott. So curbside, buy online, pickup in store, how does the profitability compare to an online purchase? Is this something that can help your overall, I guess, e-commerce margins going forward?

Yes. So overall, I just want to reiterate how happy we were. I think we already mentioned this. How quick the teams were able to pivot. I mean we didn't offer curbside last year in the fourth quarter, right? We just had gotten BOPIS kind of off the ground. So there's lots of learnings fresh coming out of holiday. And so the team did a great job getting it live for us, so that we could leverage it during the crisis here. And so we would expect -- so again, we were opportunistic. It was great to take advantage of that. As stores reopen, again, people were sensing, are excited to get back out and being able to interact with our associates and shopping in the stores. So the curbside is probably going to moderate somewhat as the direct-to-consumer piece will as well as stores reopen. So we expect to see that. To answer your question, I mean, yes, the -- we see the basket, nice healthy average basket sizes that are stronger than maybe they would be with just a direct-to-home kind of order. And so it does overall, it's less deleveraging on the margin line overall. So that's a good thing. But at the end of the day, we're here to make sure we make it as frictionless as possible, right, for the guest regardless of how they want to shop with us, right, because at the end of the day, we want to capture the sale. I don't care if it's an in-store sale or an online sale, direct-to-consumer, or if they come and pick it up at the curb. However, they want to shop, we want to be ready, we want to be able to execute that at a high level, right, because that's the key at the end of the day. In our job, the other piece is, okay, how do we optimize that, right? So let's make sure we capture the sale, but what can we do? And a lot of this gets back to our EFG efforts, right, that we've been talking about for a while around the in-store, the assortment decisions we make and the processes to support that and make sure we're managing our inventory well and have it in the places where we need to get the right times. And all the other things, the initiatives we have underway, whether it's in the SG&A line or in the margin line or whatever it is on the P&L, there's a lot of initiatives underway have been. And while we're a little bit paused here with the crisis and the other issues that we're kind of grappling with these days, there have been lots of seeds planted across the business and across different lines in the P&L that will help us manage that, right, help us mitigate that over the long term.

Okay. So Scott, that's a good way to segue into a few more financial questions. And margins is actually something I wanted to touch on. So first, store profitability in a social distancing backdrop, so as you look forward, and clearly, it's dynamic out there, we're obviously struggling to forecast your business. How do you believe store economics could be impacted going forward and the positive/negative drivers as you see them?

Yes. So to your point, fluid, dynamic, uncertain, there's a lot of variables we're dealing with right now. So again, I don't think it's any shock to anybody to realize that it's tough, right? The store environment is tough when they're closed, and now they're slowly ramping up, right, to what we hope will be a nice, healthy, cleaner rebound here in the fall. But it's difficult to be able to get a handle on kind of what the sales volumes might look like. And of course, you get a lot of leverage in those stores, right? There's a lot of benefit that comes with that with higher sales trends. So again, it's prime -- one of the primary reasons why we had to pull back on our guidance for the year and why we're not in a position today to really provide any update. So again, as we get deeper into the year and we get a better handle on the guests, the shopping patterns and how good they feel about coming back to stores and kind of the competitive landscape, again, we're monitoring all those things real time. And when we feel more comfortable that we got a handle on it, we'll be able to provide more color and insight just to our investors, right, on how we see things playing out.

Okay. And one more question, which -- same thing, and maybe difficult to answer. So clearly, it's very fluid out there. But is there anything that you see out there right now that makes it difficult to get back to the 12%-plus operating margins you had right before the pandemic?

Yes. So that's a good one. Thanks for helping me with the answer there, Rupesh. I mean it's -- again, we're still in the early days, right, of -- it seems like the shock, right, factor has kind of worn off a little bit. So we've been able to react. We pivoted the business, making sure we're taking care of liquidity concerns. And yes, we're in a better space than some others, maybe not as strong as some of the retailers that were able to stay open through all this. And so we've got our bearings now. We've got the stores opening. We've got digital business at capacity, and we're pulling all the levers we can to try to optimize the business overall. But it's -- there's still a long way to go for 2020, right? And the virus, is it going to bounce back? What's the overhang of some of the economic factors out there, right, with unemployment in different sectors of the economy and how they're going to rebound here in the back half of the year. And of course, 2020 then ladders to 2021, right? So I would just let investors know that we're committed and focused on making sure we optimize the financial outcomes here in the short term, while also making sure we got the synchronized wheel rolling here on the longer-term strategy decisions where we're going to place bets for the longer term. So there's a lot of work going on behind the scenes right now. And to Mary's point, I mean, we're doing the best we can with the circumstances that we have, and we feel good. Again, we feel totally confident about our business model, the beauty category overall, and the brick-and-mortar part of our business, it's going to be a key component regardless. And so we're just looking at all the elements here to make sure we're making smart decisions.

Okay. So on the shorter term, so, I mean, I guess, we're still in the first wave or maybe, clearly, a lot of concerns out there about a second wave coming. So if we do have a second wave later this year, I mean what are the key strategies you guys have in place to make sure you're well positioned to leeway some of the negative impacts? It sounds like to me, I mean, e-commerce between the curbside pickup and the investment that you're making are going to be better on an e-commerce front. So just curious, if we see a second wave, like what are the key efforts to make sure the company is able to prosper during, I guess, a second wave?

Yes. I mean the main thing is right now -- I mean, gosh, we have a lot of scenarios we're looking out for the second half. And we work with all the experts out there, get everybody's advice and I tap into other CEOs I know within retail and outside just to all compare notes, right? Nobody really knows exactly what's going to happen. We certainly learned a lot about how to close and reopen stores. And so I think we have that down now. Hopefully, it will come to that. But I think for us, the good thing is, if we have markets where there is a pullback and a need to pull back, e-commerce and curbside, we're going to get better at that every day. And so that, I think, at a minimum, we think, is going to be the way that we play this thing out. But we have great safety protocols in place. So I don't want to be part of the problem, I want to be part of the solution. And I think Ulta Beauty is going to earn that trust, guests also operate that way. And then we have just different like a dashboard of ways that we look at what's happening from -- through the lens of what the state and local health authorities are saying. The disease transmissions, is it up or down, we're not a epidemiologist, but trying to keep an eye on that because we're in a business of people, well, keeping our associates safe and being able to come to work as well as our guests. So we'll look at that, but I think that we certainly would be reluctant to close any stores unless we really have to, but the fact that we've got a strong digital capability up and running, and that's the piece that -- the other piece I'd say is just trying to stay smart and flexible about spending and commitments, and we don't want to sacrifice the long term. But we also, during this time, obviously, had stopped a lot of spending, cut things back, stopped growing headcount, adding positions, I should say, thinking about managing expenses. We're just going to take that stance throughout the year because nobody really knows. I feel generally pretty good today right now we've how -- it's very sunny and beautiful here in Chicago, maybe that helps. But generally pretty good, but I think we'd be crazy not to say we also are very cautious.

I mean we are -- again, we're not going into the turtle shell, so to speak. I mean there is newness planned for the back half of the year. And again, we're just being thoughtful about making sure it's the best of the best. They were being very thoughtful about the investments that we're making in the store fleet. But again, that's part of what drives the category in our business. And so we're still moving ahead with a lot of great things in the back half of the year, which we believe will excite our guests, right, and help us drive sales.

Okay. Great. So one last question to wrap it up. So on the consumer, so unemployment rates are meaningful highs and some of the job losses have actually been skewed more towards women. How are you thinking about the health of your consumer today? Any impact of the macro on beauty spend in the short to intermediate term?

Well, everything that we have seen and studied would suggest that, again, nobody has studied a pandemic before. But then generally, if the economy gets weaker, if we go into a recession, beauty is a category that tends to do better than others during this time. And we know that -- we saw that in our own business back in 2008, 2009. We've got -- we're in a category with a target segment of very, very engaged people. These are -- the beauty enthusiasts are people that sort of buy mascara once in a while and wear it once in a while. I mean these are folks deeply engaged in a category. And that is important because that's such a personal thing for people that I think, certainly, you're not going to stop those routines. Now having said that, we also are well positioned, as you know, with the range of products and categories that we offer. The Loyalty program, which provides strong incentives for people to spend their money with Ulta Beauty and get discounted -- get points to spend, I think we're as well set up as anybody to weather that kind of storm. It's affordable indulgence. It's -- we're in the right place, I'd say, in a stronger business model than we had the last time we went through a recession in this country. So we're keeping our eye on it, but I feel good that we can manage it and that -- well, again, stay attuned to what's happening and stay flexible as needed.

So as you look at the backup, like are you -- so I speak to a lot of my companies, and generally speaking, most companies are more cautious on the consumer in the back half of the year. But in investor conversations, I think it's turned more upbeat on V-shape recovery, et cetera. Are you guys more in the camp of a V-shape recovery or like other companies having more cautious...

We studied every shape of recovery, refashion. I don't want to be there personally speculating because I don't know who knows really the answer to that, right? So I think you just take it a step at a time. Right now, the openings have been going quite smoothly. And I'd say that the demand is it's going to take a while to get back to where exactly it was, but it feels pretty good. But I don't -- I just don't know if there's a big outbreak of the coronavirus in parts of the country that starts to affect people psyche again and actually closes these down, then you've got to be cautious. So I like to sort of be in a position to be opportunistic to move ahead, to assume the best, but also prepare for the worse, which is a bit cliché, but I don't know how else to play it right now. I see my CFO shaking his head. So that's good, we're on the same page -- even not in the same room, we're on the same page.

That's it. Well said, well said.

Very well. Thanks, Mary. Thanks, Scott, for joining us. And best of luck for the balance of the year.

Thank you so much. Pleasure to be having here.

Thank you.