Problem
ULTA Beauty Inc. of Bolingbrook, IL offers over 20,000 products through 500 different brands through 970 stores (each with a salon inside) and through e-commerce. The firm has stores in 48 states and they routinely anchor one end of a so-called strip mall/shopping center. The firm's common stock (62M shares outstanding) is $282 per share, in April of 2014 it was $86. The firm pays no cash dividends, but it does repurchase shares. ULTA has no long-term debt. The firm's performance has been breath-taking (see below $M), fiscal years ending 1/31/XXXX:
2017 2016 2015 2014
Revenue 4855 3924 3241 2671
CGS 3108 2540 2105 1729
SGA 1092 878 726 614
EAT 410 320 257 203
Current Assets 1536 1357 1260 1003
Total Assets 2552 2231 1983 1603
Current Liabilities 529 396 360 267
Other Liabilities 473 392 376 333
Equity 1550 1413 1247 1003
Task
i. What is ULTA's sustainable growth rate?
ii. The firm has no long-term debt. Under what circumstances might this be optimal?
iii. What benefits are ULTA shareholders potentially missing because there is no debt? With rates perhaps starting to rise, should management issue debt?
iv. Many investment firms are urging the firm to split its stock (at least 4-1, some recommend 7-1). Would you concur with this assessment (give reasons why)?