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Paula Oyibo

Thanks, Kecia, and good afternoon, everyone. Today, I will start with a discussion of our fourth-quarter and full-year financial results and then provide color on our expectations for fiscal 2025.
Starting with the fourth quarter. We delivered better-than-expected performance across the P&L, reflecting stronger revenue growth, lower inventory shrink, better merchandise margin and continued financial discipline and expense management. Net sales for the 13-week quarter decreased 1.9% to $3.5 billion compared to $3.6 billion in the 14-week period last year.
During the quarter, we opened 9 new stores, closed 1 store and remodeled 5 stores. Comparable net sales -- comparable sales for the 13-week period increased 1.5% driven by a 3% increase in average ticket, partially offset by a 1.4% decrease in transactions. Other revenue declined $6 million to $71 million primarily due to lower income from our credit card program.
Now looking at the cadence of sales through the quarter, comp sales decreased in November and accelerated in December, reflecting the shift of Thanksgiving and a compressed holiday season. Growth moderated in January, primarily reflecting adverse winter weather.
Sharing more detail on our holiday performance. Comp sales for the combined November and December period increased in the low single-digit range, reflecting the cross-functional efforts of our team to deliver for our guests this holiday season.
Our marketing and social strategies drove strong omnichannel traffic. Our enhanced fulfillment options provided increased convenience and accessibility for guests. And our curated assortment of new and exclusive core products, balanced with value-focused holiday kits, drove strong engagement. With additional staffing, new tools and unique events, our store teams delivered great guest experiences, and our DC teams flexed up to ensure our stores recovered quickly post-holiday.
From a channel perspective, we saw growth across both store and digital channels. E-commerce sales for the quarter increased in the mid-single-digit range, and comp store sales were modestly positive, an improvement from the third quarter trend.
Turning to sales performance by category. Fragrance was our strongest category, delivering double-digit comp growth primarily driven by newness, men's fragrance, and multi-branded gift sets. Comp sales in the skincare category increased in the mid-single-digit range as strong growth in body care was partially offset by decreases in prestige and mass skincare.
New brands, including Sol de Janeiro, Naturium, and TATCHA delivered strong growth for the quarter. But this strength was partially offset by lower sales from brands, which have experienced increased distribution or lapped strong social engagement last year.
Comp sales in the hair category increased in the low-single-digit range primarily due to newness and product exclusives in hair tools as well as healthy guest engagement with key promotional events. The makeup category experienced a mid-single-digit decrease largely driven by mass makeup, reflecting softness in brands, which lapped strong newness and social engagement last year. Finally, services delivered low single-digit comp growth driven by increases in salon and specialty services, including ear piercing and makeup services.
For the quarter, gross margin increased 50 basis points to 38.2% primarily due to lower inventory shrink. Our investments in protective fixtures, training and labor, combined with enhanced inventory management processes, are delivering results. For the full year, shrink as a percentage of sales was 20 basis points lower than fiscal 2023.
Additionally, gross margin in the quarter benefited from favorable channel mix due to lower e-commerce shipping costs and a higher merchandise margins, mostly offset by higher supply chain costs, lower other revenue and deleverage of store fixed.
Moving to expenses. SG&A was $816 million, $5 million lower than last year largely due to lower corporate overhead, partially offset by higher store payroll and benefits. Corporate overhead was lower for the quarter driven primarily by lower consulting expense as we anniversaried implementation costs associated with key infrastructure investments. The increase in store payroll and benefits was driven by higher healthcare costs, increased payroll hours per store to support the guest experience during holiday, and higher average wage rates.
As a percentage of sales, SG&A increased 30 basis points to 23.4%. Depreciation increased 12% to $70 million for the quarter compared to $63 million last year, primarily reflecting new store and supply chain investments.
Operating profit was $516 million, approximately flat with last year. As a percentage of sales, operating margin increased 30 basis points to 14.8% of sales, and diluted earnings per share increased 4.7% to $8.46.
I am proud of how our teams persevered in quarter and -- Q4 to deliver these results, positioning us to close out the year better than expected. And I want to express my sincere appreciation to all our Ulta Beauty associates for their continued commitment and focus on serving our guests while continuing to manage our business thoughtfully.
To recap full year, net sales increased 0.8% to $11.3 billion. Comp sales increased 0.7% driven by a 1.1% increase in average ticket and a 0.4% decrease in transactions. We opened 60 net new stores, relocated 2 stores, and remodeled 41 stores.
Gross margin deleveraged 30 basis points to 38.8%. SG&A expense increased 4.2% to $2.8 billion. Operating profit was 13.9% of sales compared to 15% of sales in fiscal 2023, and diluted EPS decreased 2.7% to $25.34 per share.
Moving to the balance sheet and our capital allocation priorities. We ended the quarter with $703 million in cash and cash equivalents. Total inventory increased 13% to $2 billion, primarily reflecting additional inventory to support new plan launches, the impact of 60 net new stores, and investments to improve merchandise in stocks post-holiday. From a category perspective, most of the inventory growth is attributable to investments made to support fragrance and body care, which are key growth categories.
Turning to capital allocation, our healthy business model generated more than $1.3 billion in cash from operations, enabling us to reinvest $374 million to support future growth and return $1 billion in capital to shareholders through our stock buyback program. Since launching our share repurchase program in 2014, we've effectively returned $6.8 billion to shareholders while continuing to invest in strategic growth drivers.
Turning now to our outlook for 2025, the operating environment continues to be dynamic. And as we navigate ongoing consumer uncertainty, we believe it is prudent to take a cautious approach to our guidance for fiscal 2025. Additionally, as we shared at our Investor Meeting in October, we are planning fiscal 2025 to be a transition year, and our view has not changed.
For the year, we expect net sales will be between $11.5 billion and $11.6 billion with comp sales growth in the range of flat to up 1%. We expect operating profit will decrease in the low-double-digit range as we began to implement our Ulta Beauty Unleashed plan and continue to manage inflationary headwinds and lap one-time expense benefits in 2024.
Reflecting our expectations for revenue growth, we expect operating margin will be between 11.7% and 11.8% of net sales. To share more color into the primary drivers of the expected operating margin pressure, the largest driver of the deleverage is expected inflationary pressure on wages, healthcare, and transportation rates as well as impact of investments we've made over the last few years, including greater utilization of software as a service and higher depreciation.
The second largest driver is pressure from the investments Kecia discussed earlier, including brand building, personalization, digital acceleration, wellness and marketplace. Incentive comp will also be a headwind as we lap lower incentive compensation in 2024.
We expect these pressures will be partially mitigated by lower inventory shrink, supply chain optimization, benefits from UB Media, and targeted cost savings. We are confident the investments we plan to make this year are critical to strengthening our long-term market position, and we are tracking our spend and returns closely to ensure we deliver expected benefits. We also recognize the operating environment will evolve, and we will continue to be thoughtful about pacing and prioritization.
For modeling purposes, we expect gross margin for the year will deleverage primarily driven by store occupancy costs and supply chain costs, partially offset by lower shrink. We expect SG&A will increase approximately 10% for the year driven primarily by our strategic investments and advertising as we -- as well as increased store payroll and benefits. Reflecting these assumptions, we anticipate diluted EPS for the year will be between $22.50 and $22.90 per share.
Finally, we plan to spend between $425 million and $500 million in CapEx, including approximately $250 million to $275 million for new stores, remodels and merchandise fixtures; $125 million to $165 million for supply chain and IT; and $50 million to $60 million for store maintenance and other. We expect depreciation for the year will be between $290 million and $300 million.
In closing, we operate in an innovative and expanding category. We intend to continue to invest to strengthen our competitive position and drive growth while simultaneously looking for opportunities to reduce costs and increase efficiency. While we view 2025 as a transitional year, we are confident the actions we are taking will enable us to deliver our long-term financial goals and drive value creation.
And now I'll turn the call over to our operator to moderate the Q&A session.

Question and Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions)
Dana Telsey, Telsey Advisory Group.

Dana Telsey

Good afternoon, everyone, and congratulations, Kecia, on your new role. With the Unleashed plan that you discussed today with -- almost it seems like a greater sense of urgency to address and re-excite the core store base. How are you thinking about the in-store experience and guest presentation and what needs to change? And as that target of 4% to 6% sales growth that's out there on the long term, how do you think about getting back there?
With the Investor Day targets, which is a transitional year in '25, given the Unleased plan and what you need to do, should we expect a transitional year in 2026? Or how do you frame it? And Paula, is there any cadence to -- or shaping to '25 that we should be mindful of? Thank you.

Kecia Steelman

Well, thank you, Dana, for the question. Yeah, we're very excited about the Ulta Beauty Unleashed plan. And really, what we did was we took the long-term strategies from our financial targets that we outlined at our Investor Day, and we developed this plan to really simplify our focus for our internal teams so we can help them really prioritize and drive around the three areas of our business: driving core business growth, building new accretive businesses, and realigning the foundation. It's not necessarily new information since we had our Investor Day. It's really how we're approaching it internally.
What we found is when the teams clearly understand their objectives and their mission, the execution level continues to raise. And then I would say the other nuance is the change that we've made with the transformation office now reporting it to Mike Maresca. Having full visibility end-to-end and stage-gating our investments so we can see and track how the investments are performing and also holding our teams internally accountable give us great confidence and that we can continue to drive the execution in 2025 and continue to move the business forward. And then, Paula, you want to --

Paula Oyibo

Sure. Hi, Dana. What I would say is we continue to expect, as I said, 2025 to be the transition year. And so we are not anticipating anything beyond that to be considered transitional period.
And regarding your questions regarding comps, so expecting comp from flat to up 1. What I would say is we're not planning any wide variation in comp quarter to quarter. The environment continues to be dynamic with ongoing kind of consumer uncertainty and such. And so we've set this level at a comp level that we're confident we'll be able to achieve.
We do recognize, though, that given Q1 and Q4 were our strongest quarters in 2024 that Q2 and Q3 likely has the greatest opportunity from a comp perspective. Hope that helps.

Operator

Lorraine Hutchinson, Bank of America.

Lorraine Hutchinson

Thank you. I was just hoping for an update on how you're thinking about the fleet. I saw the 60 new openings this year. I know have a goal for 200 over the next three. Can you talk about the locations of these stores, the sizes, and then expectations for performance of those new stores that you roll out?

Kecia Steelman

Well, I would say that we have a very robust process around our real estate site selection. And the rich member data that we have, we can see opportunities where there's infill opportunities, and there's also opportunities in where we can continue to expand in the areas that we already have stores, because there's additional market share opportunities.
We see this being a mix of formats going forward. Very balanced in our approach. We don't really see that we're leaning one way or another on any of the formats in terms of size. So I'd say it's more of our traditional plan of new store launches and rollouts for the future.

Paula Oyibo

And the additional point I'd add is that we continue to see strong new store performance in our 2024 class and so anticipating similar results with our 2025 class.

Operator

Michael Binetti, Evercore ISI.

Michael Binetti

Hey, guys. Thanks for taking our question. So Kecia, you've been in Ulta a long time and you've developed a unique knowledge of what's made it successful in the past, but the industry dynamics that led to a lot of those successes have obviously changed. And you take over at a point in time with a lot of crosscurrents in what's a very resilient category historically.
Also, I guess, Ulta's experience through that period of slower sales and perhaps some share losses that you mentioned earlier on, you've been a part of the early innings resetting the strategy with the Analyst Day plan that you referenced. And the company has reset the near-term margins lower to allow for some investment. \
What do you see as the most important things to rebuild your moat around the business given the competitive dynamics today? Is it through assessment -- or sorry, through assortment? Or do you need to make meaningful changes to loyalty, serious changes to the supply chain? What are the critical pieces to get right today that are different in the past?

Kecia Steelman

Well, thank you, Michael, for the question. I would say that the retail environment, especially in beauty, has always been competitive, but the competitive intensity is continuing to accelerate. So there's not just one area, I believe, of the business that you can lean on. And you have to really be balanced in your approach, which is why we've called our Ulta Beauty Unleashed plan, really focusing on all of the parts of the business that make us not only uniquely special at Ulta Beauty but are also the drivers of leveraging our strengths in supercharging them.
For example, brand building. We know how to build brands, but leaning into building brands in a different and unique way, in a 360 approach in partnership with those brands. Marketplace, allowing us to have an even broader assortment in a lower-risk way to offer broader assortments to our guests. Personalization -- I could go on and on because they all really matter.
And the beauty of this business is when we hit on all cylinders, it's like magic. And you're right; when I go back to my early days, we were hitting on all of those cylinders. I do truly believe that by focusing on these parts of the business, along with getting back to basics and the everyday running of the business in an exceptional way, is what's going to really take us to the next level. And I mentioned in my comments, too, of really keeping the guests at the center of everything we do.
And that's really what this Ulta Beauty Unleashed plan is. It's about keeping the guests at the center of everything we do, along with closely aligning our associates at the same time because our associates are the best representation of our brand, because they're the ones who are interacting every single day with the guests that are coming in our stores.

Operator

Adrienne Yih, Barclays.

Adrienne Yih

Good afternoon. Congratulations, Kecia. I wanted to go to -- my one question is going to be on the new categories that you've talked about kind of to spur growth over the long haul. Can you talk about where you're underpenetrated? I think when we were at the Analyst Day, you and I talked about kind health and wellness as an emerging secular trend on top of beauty. If you could talk about some of the opportunities you see in the near term and then over the longer-term horizon. Thank you very much.

Kecia Steelman

You cut out a little bit in the beginning, but I think you were asking about wellness. Wellness is a category that's largely growing, and we see consumer engagement and product innovation just continuing to expand.
Today, we have dedicated space, but it's limited in our stores. It's about 8 feet in most of our store locations. There's new categories that we really feel like we can lean into like nutrition, mindfulness, every day care, and sleep. It's all really, really important.
In 2025, where we're going to be looking at leaning into is really -- it starts with our leadership. We've created a new dedicated commercial leader and team that they're committed to just driving wellness at Ulta Beauty. We're also looking at expanding our wellness assortment to at least 20 new brands in short order and then looking at designing and implementing an expanded in-store presentation in select stores.
We're continuing to lean in on this. We do think that there's just this mergence between beauty and wellness, and we'll be able to share more in the coming months. But we've got the plan and the team, and we're ready to now start moving in the right direction to bring this to life. And I appreciate the question.

Operator

Simeon Gutman, Morgan Stanley.

Simeon Gutman

Hi, Kecia. It's Simeon. My question is back at Analyst Day, I was a little surprised that there was more focus on new store growth as opposed to looking back at the fleet and enhancing the current fleet. So I wanted to get your take on it.
What can you do with the fleet? I'm surprised there isn't more of a refresh. Do you agree with that perspective? And then can the focus of the business tilt in '25 or '26 to focus more on remodels? Thanks.

Kecia Steelman

Yeah. I'll maybe take the start of it, and I'll ask Paula to weigh in on some remodels. What I shared earlier is that we do have such great data around where there's opportunities for us to continue to take share in the United States. And that's where we're leaning in in additional new stores.
We don't want to overbuild our store fleet. I've -- we've seen that before in retail. And I don't want to be a part of that by any means at Ulta Beauty.
So when we're looking at new stores, we're very confident that we can continue to take share and open those new stores in a very profitable way. In fact, one of the largest assets that we have are our stores in and of itself.
I appreciate your question around, can you make the stores that you have currently in place even more profitable? And I would say, yes; we're continuing to lean in and look at ways in which we can continue to drive even more profitability out of our existing store fleet. Wellness is one of those areas that we're leaning into, where you look at can we trade out categories that are less productive and give this space to a new and emerging-type category. Also looking at assortment and are there opportunities for us to continue to refine assortment to make sure we're looking at the tail. It's something that is really, really important.
And then keeping the guest experience front and center. Our stores are just so important for us to be able to continue to refresh our brands and the brands that we're bringing in. The one thing that's changed even in my 10 years here at Ulta Beauty is that beauty is becoming a little bit more fashionable and in and out. And you've got to be on the cutting edge and the trend. And you've got to be really flexible with the space that you have dedicated to brands in the store.
And that's one of the things that we've really been leaning into with our renovations is having more universal-type fixtures, so we aren't locked into bigger boutiques, et cetera. So it gives us a lot of flexibility to bring brands in and out. And then Paula, did you want to add anything about renovations?

Paula Oyibo

The only thing that I would add is just a reminder, we're expecting to remodel 40 to 45 stores this year. But the other thing to keep in mind is that we actually touch our fleet quite often with our -- as we are bringing in newness into our stores and launching brands and lifting certain categories. And so actually, we do a really good job of keeping our fleet up and -- updated and fresh.
And then also, as we shared at our Analyst Day, I mean, our fleet profitability is very, very high. And we watch it very closely to continue to maintain that level of profitability.

Operator

Steven Forbes, Guggenheim Securities.

Steven Forbes

Good evening, Kecia, Paula. I wanted to follow-up on the market share and certainly appreciate the optimism around the Unleashed plan. But curious if you could maybe frame or reframe how you guys are thinking about planning for some of the factors that may be out of your control, right, cannibalization and distribution, point expansion. And then specific to cannibalization impacts, now that we've sort of had more time pass here, can you maybe renew -- give us your new thoughts around how long it takes a cannibalized store to recover and return to company average comp profiles?

Paula Oyibo

Maybe, Steve, I'll start and, Kecia, if there's more, you add. As we've talked about, this has been a unprecedented period over the last several years with the increased points of distribution, particularly for prestige beauty. We expect competitive pressure will continue to impact our fleet, but we expect the impact will be lower than what we experienced in 2024.
At the end of 2024, more than 90% of our stores have been impacted by one or more competitive openings in recent years and then two-thirds of them impacted by multiple competitive openings. The good news is that we are seeing an improving trend in performance of the stores that were impacted by physical points of distribution the last several years.
And we believe both the lapping of the new openings and the impact of our operational efforts are contributing to the improving trend. And then layer on top of that the actions we're taking as a part of the Ulta Beauty Unleashed plan, we feel confident that it will still take some time, but things are moving in the right direction.

Operator

Mark Altschwager, Baird.

Mark Altschwager

Good evening. Thanks for taking my question. And Kecia, congratulations. With respect to the revenue guidance, up 2% to 3%, how did that compare to your underlying assumptions for the beauty category in 2025?
And then Ulta did lose a bit of share in 2024. In the prepared remarks, you talked about spending more on marketing. What's baked into the margin guidance in terms of promotions and other actions to defend or recapture market share in 2025? Thank you.

Kecia Steelman

All right. Well, I'll start with talking a little bit about the category trends. Yes, the consumers are navigating a dynamic macroenvironment, but we continue to expect the healthy consumer engagement with beauty. While the category did slow in '24, it continued to grow in the low- to mid-single-digit range. Part of that growth was driven by the growing connection between beauty and wellness, which is where we're leaning into. There was a healthy innovation pipeline, and we feel good about our innovation pipeline also for 2025 and also just having strong overall engagement within the category.
Others have commented -- and there's a lot going on, clearly out there in the world today -- January and February were impacted by a combination of some weather and fires in LA and heightened economic and geopolitical volatility. So I'd say, it's too early for us to know if this is really structural or a reflection of some of the weather disruptions or some of the things that were happening, because we are lapping some strong growth also from last year.
And then Paula, do you want to lean into the second part of the question?

Paula Oyibo

Sure. Specific to promotions and how we're thinking about promotions as it relates to our sales and our comp guide, what I would say is that underpinning our expectation is that the promotional environment will continue to be rational. And so what we saw last year in 2024 is the promotional environment increased. It still, in our opinion, was rational. And so we're planning 2025 to be rational as well.
Now we do understand that things could change. Well, if the consumer demand deteriorates, requiring or needing and having others to be more -- leaning in more heavily with promotions, then that is something that we would contend to. But we'll continue to evolve based on the environment and consumer demand.
One thing that I will say is that we continue to lean into our capabilities to optimize both the timing and execution of our promotional offers. We will, of course, balance discounts with value messaging and quality and leverage our member insights to really focus on executing productive targeted offers and continue to optimize our promotional effectiveness.

Kecia Steelman

I would just maybe add, in this environment, we're really focused on controlling what we can control.

Operator

Michael Lasser, UBS.

Michael Lasser

Good evening. Thank you so much for taking my question. Kecia, in your remarks, you noted that the competitive intensity of the category continues to increase. So was that in reference to both online as well as offline competitors? And does that mean that the cost of doing business within the beauty category increases, which should diminish the potential that Ulta will be able to scale its margins over time as it goes through this transition period this year? Thank you very much.

Kecia Steelman

Well, thank you for the question, Michael. I will say, like -- as I mentioned earlier, it's always been a competitive category. There were more players that are continuing to lean in. And I do believe that our Ulta Beauty Unleashed plan is really designed to accelerate and amplify our differentiation and what makes us unique. So we're really refocusing to ensure that the guest is at the center of all of our decisions.
We intend to move faster and invest with purpose, and we're really looking to optimize our business. And it's really in those go-to-market areas -- it's about brand building, digital acceleration, personalization, marketplace and wellness. And this is what we do. A lot of players are playing in the world of beauty, but this is what Ulta Beauty does.
And the fact that we have everything from mass to prestige, to luxury and everything in between, and we just need to continue to focus on our strengths and lean into them, it will help us continue to build that moat. And then, Paula, if you want to talk about the margin.

Paula Oyibo

Yes. Michael, as we think about some of the commentary we shared in October at Investor Day, we talked about -- that this continues to be a competitive category and in order to be, a market should have growth and be a market share gainer in this competitive, innovative category that we think it's important to continue to reinvest in the business to fuel growth. And that is why we shared the guidance that we gave, 4% to 6% of top-line growth, and that we expected from a margin perspective to be able to maintain margins around 12%. And so that reflects the current environment from our lens.

Operator

Michael Baker, D.A. Davidson.

Michael Baker

Thanks. I guess I'll ask about tariffs. Remind us your exposure now to Europe potentially seeing 200% tariffs, and presumably, they'll retaliate. So if you could sort of break down your exposure by different parts of the world.
And then there were definitely some price increases, as I recall, in 2017 and '18, but the timing was a little skewed. I think you took price before you even saw the margin. So it was a -- before you saw the price increases, so it was a margin enhancer early on. Can you remind us that price versus cost dynamic played out last time and what you expect this time? Thank you.

Paula Oyibo

Yeah. Thank you, Michael, for the question. What I would say, like everyone, we are monitoring the ever-changing landscape as it relates to tariffs. We don't believe the exposure -- while we don't know the exact exposure our brand partners have upstream, only about 1% of our shipments over the last 12 months were direct imports. And so our exposure is relatively limited.
I would say beyond merchandise, we have some exposures with areas like fixtures and lighting and supplies from a store perspective. And then largely from a merchandising perspective is our ULTA Beauty Collection brand. But again, like I said, relatively limited and similar to how we successfully navigated in the 2018-2019 period, our teams are staying very close to the evolving situations, and we're continuing to navigate it and scenario plan both for our business as well as with our brand partners.

Operator

Ike Boruchow, Wells Fargo.

Ike Boruchow

Hey. Good afternoon. Thanks for taking the question. I think, Paula, can I have two clarifications? So first, on the promo or I'll call it the merch margin line for this year. You said rational similar to '24. But the merch margin trend in the first quarter -- I'm sorry -- in the first half of last year was very different than the back half. You were much more stable. I think you were flat to up; you were down decently in the first half.
So just to compare it to '24 is tough. Like would you compare it to the back half of '24? Just some clarity on how to think about merch for the year would be helpful.
And then I'm sorry, just a clarification on the comp outlook, zero to 1. And I think you said similar every quarter, but Q4 and Q1, I guess, the low end of the zero to 1? Just trying to make sure I understand how to think about the first-quarter comp relative to your commentary. Thanks.

Paula Oyibo

Okay. Ike, I'm going to answer the last question around the comps. And then I might need you to give me what you're asking for on promo and merch margin if you were speaking of 2024 or 2025. On the comp for 2025, so what I shared is, yes, flat to 1% for the year. And we are not planning a wide variation in comp quarter to quarter. And then additional color I would give is that because Q1 and Q4 were our strongest quarters in 2024, then I would expect Q2 and Q3 to have the greatest opportunity from a comp perspective.

Ike Boruchow

Got it. Just to go -- yeah, thank you. And then basically what I was asking on the merch margin for '25, you said similar rational promo pricing in '25, which is what you said you saw in '24. I was just saying your merch margins were down in the first half and flat to up in the back half. So are you saying similar to what you saw in the back half of '24, just because it was very volatile through the year? A similar way to ask is just, are your merchandise margins planned flat to up, or should they decline again based on (multiple speakers)?

Paula Oyibo

No, I appreciate the question. I'm probably not going to get into specific expectations around merch margin for the year. But the point that I was making about promotionality is that we expect promotions to be rational this year, and that is assumed within our guidance.
If I go back to gross margin for '25, we expect gross margin will deleverage primarily driven by store occupancy costs and supply chain costs, partially offset by lower shrink. And obviously, gross margin is impacted by the comp of zero to 1, which is causing us to deleverage on many of our fixed costs.

Kiley Rawlins

I think Alicia, we have time for one more question.

Operator

Ashley Helgans, Jefferies.

Ashley Helgans

Hi. Thanks so much for squeezing me in. Any more color you can share on the new marketplace and just how it differs from your current online platform? And then, Paula, you called out that brands -- the brands that have increased distribution have been drags. Just curious how you combat -- how you're planning to combat that headwind? Thanks.

Kecia Steelman

Thanks, Ashley, for the question. I'll start. So yes, what we're seeing is that our beauty guest needs, they are continuing to evolve. And we want to be able to expand our offerings in a lower-risk way. And this really enables us to do that with marketplace.
We have thousands of brands that want to come work with us. And what we're doing is we're opening a closed marketplace -- so it's invitation-only -- to enable like a curation site. And that actually went up live today. So brands can actually start signing up officially today. We were expecting a mix of new and established, and emerging brands that are really focused around beauty and wellness.
And the other thing is that -- we're really focused on is that our members will be able to earn points on their marketplace purchases and that the guests will be able to return their marketplace purchases to our stores. So we're trying to make this as seamless as possible for our guests.
The plan is to launch this in the back half of '25. And we've got a dedicated team that we're building around selling and operations to operate this model. We don't expect it to be material in '25, and we're going to continue to share more details as they become available. Paula?

Paula Oyibo

Sure. Hi, Ashley. On your question about what we're doing to combat potentially some specific brands, the declines, generally, I guess I would zoom out and say, really, when we think about where there's opportunity for us from a business newness, we continue to work with our existing brands and new brands to bring newness into our assortment. And even for brands who've had expanded distribution, our merchant teams do a wonderful job with finding and launching specific and exclusive newness that's unique to Ulta, and so that helps.
And then one of the key priorities within our Ulta Beauty Unleashed plan is brand building, which is focused on building and growing brands and increasing the level of brands that are exclusive in our assortment. And so those are the key strategies that we have that will help with that.

Kecia Steelman

Great. And I would like to just thank everyone for joining us today. To wrap up, I'd also like to thank our loyal guests, our trusted brand partners, and dedicated associates for their engagement and support. I'm confident in the team's ability to reignite our momentum while making wise investments to set the business up for long-term performance. Thanks to you all for your interest in Ulta Beauty, and I look forward to meeting and connecting with you in person in the coming months. Thank you and have a good evening.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.