Greetings, and welcome to the Ulta Beauty Fourth Quarter 2016 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Laurel Lefebvre. Please go ahead.

Thank you. Good afternoon, and thanks for joining us for Ulta Beauty's Fourth Quarter Conference Call. Hosting our call are Mary Dillon, Chief Executive Officer; and Scott Settersten, Chief Financial Officer. Also joining us is Dave Kimbell, Chief Merchandising and Marketing Officer. Before we begin, I'd like to remind you of the company's safe harbor language. The statements contained in this conference call, which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC. [Operator Instructions] I'll now turn it over to Mary.

Thank you, Laurel. Good afternoon, everyone. The Ulta Beauty team delivered very strong fourth quarter results, capping an exceptional year of sales and earnings growth while investing to drive market share gains and create sustainable long-term shareholder value. Let me start with a quick review of the headlines for the fourth quarter. We grew the top line 24.6% and delivered 16.6% comps on top of 12.5% comps in the fourth quarter of 2015, driven by strong traffic and ticket growth. Multiple factors, strength across our product offerings, our best-in-class loyalty programs, great in-store execution, investments in marketing and labor and steadily improving supply chain capabilities, all worked together to drive stellar growth across both our retail and online business. E-commerce growth exceeded our plans, driven by strong traffic and outstanding fulfillment execution during the holiday. Our services continue to gain share as we grow our business with existing guests and acquired new ones, significantly outpacing industry growth. In concert with above planned sales growth, earnings per share growth of 32.5% also exceeded our expectations. Before I dive into a detailed review of the fourth quarter, I'd like to highlight some of our team's accomplishments for the full year. In fiscal 2016, we drove top line growth of 23.7% and earnings growth of 30.9%, well above our expectations at the beginning of the year, achieving robust market share gain, solid execution and strong flow through on better-than-expected sales. We achieved a 15.8% comp with 13.4% comps in stores and 52% -- 56.2% growth in e-commerce, with healthy traffic and ticket growth each quarter during the year. Underlying this financial performance were the many significant accomplishments we achieved as we executed against our 6 strategic imperatives. We opened 100 net new stores and continued to deliver very healthy new store productivity. We…

Thank you, Mary. Good afternoon, everyone. Starting with the income statement. Net sales for the quarter increased 24.6% to $1.58 billion, driven by 16.6% comparable sales and excellent new store productivity. The total company comp was composed of 10.9% transaction growth and 5.7% average ticket growth. The retail comp of 13% was driven by 8% traffic and 5% ticket. Ticket growth was driven primarily by average selling price. The units per transaction were also up, in line with the UPT performance for the year. The salon business comped 8.8% driven primarily by ticket growth but also included some encouraging signs of traffic growth. The retail and salon comp combined produced a total store comp of 12.8%. Operating margin increased 80 basis points, driven by strong SG&A leverage. Since components of the P&L are quite different this quarter compared to the rest of 2016, let me give you some color on the moving parts. Gross profit decreased by 10 basis points. But on a 2-year basis, gross profit increased 110 basis points. While we leverage fixed store cost on strong sales, product margins were down slightly for 2 primary reasons: First, and most importantly, we cycled over the elimination of a 20% off postcard promotion in Q4 of last year, resulting in similar year-over-year promotional levels versus the last several quarters when we were also able to opportunistically eliminate the similar 20% off postcard promotions. Second, channel and product mix put modest pressure on margin rates. While our e-commerce business continues to improve its overall profitability with more efficient fulfillment capabilities, Ulta.com's lower gross margin had a more significant impact on the total company margin rate during the quarter as our e-commerce channel represented a larger percentage of the business in Q4 at 10% of the mix versus 7% for the…

[Operator Instructions] Our first question comes from Omar Saad with Evercore.

I know it's just the beginning of the year. I want to just kind of have you talk about how you think about the long-term comp guidance you gave at the Investor Day in the fall and the initial kind of comp guidance for the year and how we should think about the fact that you're expecting the 2017 comp rate to be in that 8% to 10% range versus the 7% to 9% longer-term guidance you gave. And what kind of what gives you confidence that this year will kind of be above that longer-term trend that you expect.

Great. Thank you, Omar. We try to be prudent, I guess, and really reasonable with the guidance that we give on every dimension. We see, obviously, the core of their brand. We've guided the 9% to 11% for the quarter. We feel confident about the strength of what's happening in the business, our ability to understand the dynamics and the levers that we have to continue to drive the results in a healthy long-term way. So I would just say that, really, there's no change to the long-term guidance. We always said that it would be stronger in the beginning and start to moderate a bit out in the outyears, so the 7% to 9% is the longer term. And as we guided 8% to 10% for this year, we feel it's just very much in our sight, line of sight, and feel very confident about being able to deliver that.

Our next question comes from Steph Wissink with Piper Jaffray.

Mary, could you talk a little bit about the brand boutiques? Just give us a sense of the current number across the 4 or 5 brands. And then of course, with the addition of MAC in that rollout how should we think about the staging and phasing of the rollout of those brand boutiques? And if you can just remind us what the productivity is of those prestige boutiques on a relative basis to your overall store average?

Yes, I'll talk about these in sort of just overall terms. First of all, let me reiterate, we're thrilled about the launch of MAC. We're thrilled about the progress we're making across the box in terms of brands and newness and innovation. There's hundreds of boutiques with brand expansions that will happen this year. We talked about that in the script. We're not going to break that out in specific detail or the productivity. What I would say, again, we've referenced this. So in the upfront, there's some investment in terms of getting a brand up and going, and these fixtures are a little bit more expensive but they drive incremental sales and profit. And also in the long-term, excellent for our brand in terms of really reinforcing ULTA Beauty as a great destination for All Things Beauty. So we feel very good about that current status.

Our next question comes from Kelly Halsor with Buckingham Research Group.

My first -- or my question is really around the margin expectations, and I appreciate, Scott, the color you gave. So if you can just dig in a little bit more on the puts and takes as you look at gross margin versus SG&A. Should we expect the same sort of dynamic to play out as we did in 4Q given that you have fully lapped the pulling of the coupons from last year? So not really expecting much product -- margin expansion from here? And then on the SG&A line, could you kind of quantify the dollar amount that you spent last year around the boutiques and how that plays out in '17? Is it going to be more? Or is it the same amount? Any color on that would be great.

Sure, thanks, Kelly. As far as the gross profit question is concerned, I'd say looking ahead, I think that's where your pivot point is. So as I look ahead to 2017, I'd say gross profit largely in line with what we saw in the fourth quarter. So to your point, we have -- we are now lapping what I would call, the low hanging fruit of the postcard elimination that we saw in the fourth quarter of '15 and then carrying through the first 3 quarters of 2016. I will, again, for investors, we opportunistically took advantage of that. There's still, we believe, plenty of opportunity to continue to tweak our promotional and discount tactics and strategies as we look out over the long term. And with benefits of that, we're still not counting on that being a major driver of our mid-teens operating margin target here over the next couple of years. Again, as a reminder, most of the benefits we see there will come from fixed store class leverage and capturing benefits from our supply chain investments. So still very confident in our long-range target there. As far as SG&A is concerned, we really don't get into the details of the boutiques, how much they cost and exactly the productivity, but rest assured, you see the results of that in our comp results, right? I mean, that's part and parcel of what we're doing, continuing to invest in the store environment which, again, is our most important investment. It's one of the reasons we're able to drive such healthy traffic gain to our stores, right, continue to invest in that to keep it fresh and exciting and fun for our guests. So we believe these are great investments for now and for long into the future.

Our next question comes from Jason Gere with KeyBanc Capital Markets.

Okay. I guess I got a question that I get from a lot of investors, and it's basically more of the male investors, so bear with me on this question. Can you just talk about the beauty enthusiasts? And I know that they're really the ones who are driving a lot of excitement on some of these new startup brands so -- as a means to drive sales. So can you talk about the sustainability of the beauty enthusiasts? So I guess the question I'm going to ask is really about the advertising that you're putting in-store, the support you get. But really, it feels like a lot of some of these brands that you're carrying are getting a lot of just word-of-mouth traction, YouTube support, et cetera. So can you maybe educate the male audience out there about beauty enthusiasts and your confidence that these enthusiasts can really continue to drive a lot of the excitement that's going on in some of your key categories?

We will be very enthusiastic to teach more about the beauty enthusiasm. But honestly, I'll ask David Kimbell to add. I just want to say that it's actually one of the core reasons and one of the core foundations as to why we feel very confident about our long-term prospects is our understanding of this segment, the size of this segment and the momentum. So I'll let Dave take it from there.

Yes, yes. We're -- we've spent a lot of time really trying to understand her behavior. And our beauty enthusiasts, I think, we shared at the Analyst Day, just some information about her. She makes up about 57% of total women in the marketplace that drives a disproportionate amount of the revenue in the category. So to your point, it's critical that we continue to find ways to connect with her. We're very optimistic about her long-term engagement in the category. In fact, every indicator we have is -- shows that she's just getting more engaged, and that's largely due to the relatively new tools that she has at her disposal through social media and YouTube and the ability to learn more, to share more, to be more engaged in makeup and hair trends and skin trends. So she is not demographically defined. We see that across all ages from teenagers, through millennials all the way up from an age, from an ethnicity standpoint. It's not demographically defined, but it is a mindset that keeps her positively engaged. And so many of the things that we've been doing over the last 2 years-or-so to pretty significantly change our marketing mix had been very purposeful in order to reach her in new and compelling ways. A lot of the tools we used in the past, we've found weren't as effective in meeting her today. So our advertising, even some of the broad scale advertising, like TV and radio, we think sets the stage, and then we're building much more communication through social media, our own applications on [ph] our own website to provide content and engagement tools, influencers in the marketplace that are driving much more change in how consumers behave. And then even tools like our GLAM LAB that we launched on our app, which is a way for her to engage in beauty, virtually engage in beauty in a way that she couldn't before. So we're focused on meeting her needs. We're, as I said, very optimistic about her continued engagement, and it's really center of everything that we're doing in building our business for the future.

Okay. I appreciate that. And then Scott, can you just -- did you say what the preopening expense was going to be for the year, just so we have that?

Yes. As a percentage of total sales, roughly flat with 2016.

Our next question comes from Dana Telsey with Telsey Advisory Group.

As you think about MAC, and it's so exciting that's coming in the stores, what could it contribute in sales? And how does the margin compare to the rest of the product categories? And then with online, the margin progression of online, where does it go and when does it balance out with stores? And just lastly, what kind of comps do you need to leverage expenses going forward?

Thank you, Dana. It's a 3-point question.

Exactly.

Yes, we share your enthusiasm about the launch of MAC, and we're not going to give specific value. We're just getting started, right? So we're starting online, and we're going to launch to a little over 100 stores this year. And it's a really important brand for us to have, and we're confident it's going to add to the mix very nicely and our guests will be very excited about it. Your second question was, remind me.

Online.

Online, you mean the margin, right? So I will say that we're very focused on improving the profitability of our online business. As we've talked about today. And the big part of our supply chain investment is around fulfilling the online orders in a way that's better for our guests in terms of speed and also more efficient in terms of cost. But we expect to see it to improve, but we expect that, that -- the four wall margins are always going to be higher than the online margin. On the flip side, so the margin is getting stronger, but the great thing is it's a very incremental business to us, right? So we study this closely. We look at it very closely at consumer and our guest trends. And the guests who are shopping online only, this is a small number of people, it's really about guests who are shopping in-store and online, and that guest is involved across both channels is really driving 2.5x more sales, really, than somebody who's just buying in store. So even if that margin is, I think, in some ways, inherently going to be somewhat lower than the bricks and mortar, it's a very incremental business to us, feeds very much into the dynamic that Dave was just describing about how the beauty enthusiast shops.

Our next question comes from Simeon Gutman with Morgan Stanley.

Back to the question -- well, let me phrase it this way. Thinking about 200 basis points of margin expansion over the next few years, is the cost component of these continued rollouts of new brands, is that factored in? And I guess as part of it, would you say it's fair that new brands rolling into your top line, benefit your top line as well. But maybe you haven't built the full ramp of a brand like a MAC into that longer-term outlook?

Yes, we certainly are doing the best job we can thinking about the cost of roll out of brands, and I say that's inherently assumed. We feel confident about the ability, we're maintaining the goal of reaching that '15 margin target by the end of 2019 and -- but being really, I think, very smart and prudent about how we get there, balancing short and long-term. And Scott talked about it well in his prepared notes, we adapt to the opportunity to invest long term in this business, and we're definitely going to do that because we know we've got -- we need to have the right brands, the right in-store experience and the capabilities to support that. So whether or not that top line could be stronger with some of these brand launches, I don't know. We try to be really as prudent as we can with our guidance. But we like to see how it goes before we call it higher than we think we need to. So...

And I would just add to that. Assuming things, again we're giving guidance here early in the year, there's a long way to go in 2017, but even if we only achieve to what we're guiding to today, by the end of 2017, we'll be halfway to our goal, right, of close to 15% by the end of 2019. So there's still plenty of room left for us in a long time. And again, we always weight these decisions carefully, right, versus dollars, and we think today that these investments and these choices are the best for our investors for the long-term.

Our next question comes from Oliver Chen with Cowen & Company.

This is Courtney Willson, in for Oliver tonight. We just had a question regarding expansion into urban locations. You mentioned more capital, higher rents. Will you be merchandising these stores much differently on the product side in terms of the balance of mass versus prestige? And do you have any plans to adjust your service offerings at all to cater towards the urban customer versus your traditional suburban customer?

Yes, Courtney. It's Dave, I'll take that. Overall, no. We're -- we think our model works in all types of locations, urban, suburban. So we're merchandising these locations pretty consistently with how we're doing in all of our stores. There may be some fine tuning changes that we'll make, and we're certainly looking at making sure that these stores are efficient and effective. But we don't see a big mix. I mean, a big part of what ULTA stands for is All Things Beauty, All in One Place, having the proper category and mix, being able to have mass and prestige and hair care. And so we're going to make sure that it's reflected in that location. As far services, we think that's a big part of our mix, too so we anticipate very strong service businesses in those high-traffic locations, and we're preparing for that, but we're not radically changing the store design and the amount of space allocated towards that.

Our next question comes from Ike Boruchow with Wells Fargo.

I guess, Mary, this might be for you. Just looking at the loyalty membership growth, the growth rate, I think, has accelerated the last couple of years. I think now it's like 29% at the end of this year. Can you just talk to some of the things that you've done the last 18 or 24 months that's helped you accelerate that growth? And then kind of what's baked into your plan for this year in terms of new membership adds? And I'm just kind of curious if there's a way to talk about how loyalty is maybe even benefiting the comp. And if that does start to normalize, how should we think about more sustainable comp growth rate? Just tying comp and loyalty together would be great.

Yes. So let me take some of that. Maybe I'll start. Dave, if you want to add. I will say, this is a bit of the secret sauce so I'm not going to get very specific about a lot of it because we're really proud about the loyalty program is working. And as you know, the loyalty members are driving the majority of our sales. So obviously, that's part and parcel to comp growth. I mean, that's the kind of the way to think about it. Comp is driven by a lot of components, but the sales are coming from our loyalty members. We've done a few things. One, is obviously, we just converted a couple of years ago to one loyalty program. We've simplified it. Our fleets make it very -- I think our communication about how the program works, how we communicate with that guest and how we convert new members, potential members in store, are all kind of components of what we've done that's making it work well. And I'll ask Dave to add some more color, but I will just say that also, what's exciting to me is we're not going to drive that rate of growth with new members forever, right, because we're kind of early in the program. But yes, we still really only have 20% of the beauty enthusiasts as we define them shopping at Ulta in the U.S. There's plenty more loyalty prospective members out there. And also even the folks that are on the program, we certainly don't have 100% of their share of beauty spend, and they're not even buying every category that we offer today. So we see these as all levers to continue to pull at the top line -- at the top level to help drive -- to continue to support the kind of comp growth that we're guiding. And maybe, Dave, just add a couple more points about what we've done with the program.

Yes, absolutely. As Mary said, the combination and the simplification into one program a couple of years ago really has allowed us to accelerate our growth in that space by a few things. The marketing has, by adding one program, has allowed us to just be sharper and clearer about marketing that on a national scale, which we couldn't do before. So we've been able to leverage that in all of our vehicles, reaching all of our guests. We have significantly increased our in-store execution, our store associates are -- better understand the program, they participate in the program, and they've done a great job educating our prospective members and converting prospective members into that program. And then we really made sure that just the value is there. It is fundamental to our overall business, and we want to make sure that we're continuing to meet her needs. There's 3 core things that we deliver to her. She finds value first in the points program, and we've got a number of levels and elements to that, but she finds that valuable, the ease of accumulating points and the simplicity of redeeming those points. She gets -- the second piece is she gets a lot of content from us. And this beauty enthusiast that I've described is open and interested in the content that we give her, whether it's our mag or e-mail or other activity that we have reaching out. And then we try to delight her throughout the year with special perks, birthday -- birthday gifts, anniversary gifts, sample programs. So those things keep her engaged, and the execution we've had through marketing and in-store and our merchandising partners have allowed us to drive that growth, and we're going to keep focused on doing that in the future.

Our next question comes from Rupesh Parikh with Oppenheimer.

So I also wanted to ask about your urban locations, and maybe even the Manhattan location. I just wanted to get a sense of whether you guys expect similar returns for the urban units? And then secondly, when you enter new markets such as, I guess, in this case, Manhattan, do you also typically see a meaningful lift on the e-commerce side of your business?

Yes, let me start with that one. So to Manhattan specifically, and I guess the other urban sites that we're going forward with this year. By and large, we expect the same kind of financial results. I would say Manhattan is a special case. I mean, so back to Dave's earlier point about we're putting our standard prototype store in there, right? It's 10,000 square feet, and that's an expensive proposition anywhere on the island. We went to a place where we felt most comfortable, kind of a neighborhood feel there with a lot of traffic. I know we've got a new subway station, right? It's just right near our front door. So we're trying to make smart decisions as far as the location is concerned. That would be a case where we would take something less than our internal hurdle rate, which is way north of 20%, right? And most of our stores that we open each year performed way in excess of our internal hurdle rates. In the case of Manhattan, we're still expecting to recruit investment returns well above our cost of capital. I think that would be another measure that would be significantly lower than the 20%. So we feel very comfortable that this is a wise decision, and it's going to produce great returns for us.

And in the question about e-commerce business when we open a new store, we do see that not only driving growth in that store but driving our e-commerce business. We see it in all types of markets, small markets and we anticipate that to be the case in Manhattan. We do have a strong awareness, and we surround Manhattan, so it's not like we're unknown in that area. But obviously, this will be the first time we're serving them directly and we anticipate our e-commerce business to benefit from that as well.

Next question, Chris Horvers with JPMorgan.

I'd like to peel apart the $80 million increase in CapEx. It seems like the number of Clinique and Lancôme upgrades were -- are in line with what you previously planned at the Analyst Day. Or I'm guessing that they were given that happened in October. So is the $80 million, is that MAC counters in the store, as in are you buying some of the real estate in markets like New York and Chicago? So perhaps you could lay out the size of the buckets of the incremental CapEx year-over-year?

Yes. This one is one that I could understand. It could get a little murky for people who would just looking at the numbers at the top level. So I would say that short but easy way to think about the $80 million is, it's just incremental store fleet investment, all right? So when we gave the guidance earlier in the year about CapEx maybe being kind of flat-ish in '17 compared to '16, we didn't have line of sight clear on MAC at that point in time or how many stores it might go into and things like that. Since that guidance, we've increased the number of Lancôme and Clinique and Benefit boutiques versus our prior thought process, you layer in MAC on top of that, you layer in a bit of inflation in the new store, cost to open the new store, so most of it is primarily boutiques in those new stores, which is again is a great -- it's great news for investors because it's a lot more cost efficient for us to put this boutiques in new stores versus going back and remodeling stores, right, kind of disrupting guest activity, and it's a lot more expensive to do that. So it's kind of a combination of those things. But by and large, the $80 million is going into the store fleet, which again, our most productive asset and the reason why ULTA is a standout as far as driving traffic.

Yes. And there's no purchasing of MAC real estate or anything like that. You asked that question at the end. Just to be clear, this is just investment in our stores.

Understood. So as a follow up, the CapEx should also drive extra depreciation expense which was not in what you previously guided in terms of margin expansion and getting to the mid-teens. So following up on a prior question that tried to address this, what's the offset in the margin line that allows you to stick to your existing long-term algorithm? Are you embedding more sales? Is there margin benefits that you are seeing now that you previously didn't expect when you laid that out?

No. I mean, again, we're giving guidance, there's a range of outcomes, right, that you're looking at, a continuum. And so we feel comfortable that between having flexibility on the upside to do better with promotion tactics, I mentioned earlier, other benefits coming out of supply chain investments may be quicker than we had originally thought and just other stronger retail trends that drive a lot of leverage on fixed store cost. So combination of those things. And as we look at the range, we feel very comfortable that we can stick to our target.

Our next question comes from Joe Altobello with Raymond James.

Krystyna on for Joe. I was wondering if you can talk about the promotional environment and who you're taking market share from?

The promotional environment, what that we're -- who are we taking market from.

Yes, I guess the best way to think about it is that we compete across a lot of dimensions, right? So I mean, we compete with the, I'd like to say, 70,000 places in any given day that you can buy beauty because we offer all the product categories and price points. So department stores are certainly one source. But we also compete with mass, with drug, online retailers. So it's really kind of across the board. Promotional environment, I guess, for us, what I feel good about is that we -- the quarter that we have with consistent levels of promotion a year ago, I think is a really good way to think about the underlying health of our business and that we have -- we're always going to make sure that we're providing a great value to our guests. And so there's always going to be some levels of coupons or promotions in store. But certainly, our loyalty programs allow us to get that much more focused and targeted and we've been doing that over the last few years. So I feel like we've got good control about our levers. We've got levers that we use as we need them. And more importantly, we're really just in an environment where beauty is certainly it's a growing category. It's very active. There's a lot of players. Nobody is doing exactly what we do, so we really try to just play our offense, and that's why we're talking about we're continuing to invest in the long term of our business because obviously, the beauty enthusiasts is voting with their dollars. We are not complacent. We're not perfect, right? So we know we just have to stay on top of our game.

Our next question comes from Mark Astrachan with Stifel.

I wanted to ask about the percent of stores with at least one prestige boutique if you could comment -- if you cannot answer directly, just give some direction sort of how that's increasing over time. And commentary about more expansions for Clinique and Lancôme that you mentioned on the call, that relative to the 100 more boutiques that you announced at the October investor meeting. And just sort of broadly, given growth and seeming increasing focus on prestige brands relative to mass, any thoughts about how you see the sales split over time between mass and prestige within the stores?

Yes. So I'd start by saying we don't give, as we've said before, we don't give specific numbers on that. But I'd say increasingly, many of -- most of our stores, certainly more than half have at least one boutique in them. And as we continue to grow, I think if you look at the history of what we've talked about, we said at the beginning of last year that we started the year -- started 2016 with approximately 200 of each of Clinique and Lancôme and 700 of Benefit, and then we added about 500 boutiques last year. And this year, as we said, another 700. So increasingly, we'll be reaching pretty much the whole fleet with at least one over time, and we think that's important to continue to elevate the experience and invest in our stores, as Scott has said. As far as the mix between prestige and mass, we really focused on making sure the entire store is growing. Certainly, prestige has been leading. But our mass business across cosmetics for sure, but also skincare and bath has also been contributing in a very strong way to our overall business. And that's really important because that's ultimately what our guest comes to us for is that mix. So as much as we talk about and we spend a lot of time today talking about prestige boutique investments, we've been equally as focused on building all parts of our store. We're investing in our haircare business, adding a lot of new brands there, we're, as I said, building our mass side. So the balance overall is important. We don't see a real dramatic shift. It might gradually continue to grow within prestige but we are focused on keeping that balanced for the long-term.

Next question, Simeon Siegel with Nomura.

Scott, just maybe to follow up on a few of the others. Just I guess, could we -- what do you expect depreciation to be this year? And then any update to what you'd expect CapEx to look like beyond '17? And then maybe for Mary or Dave, I don't know if I missed it, but where is the private label penetration at this point? Do you see any big difference between stores and online? And I don't know if you think about it like this, but is there a ceiling level that you wouldn't want to surpass?

Yes. So as far as D&A and CapEx is concerned, I think D&A we said $215 million.

$250 million.

$250 million, sorry, 2-5-0, for 2017, is the estimate. In CapEx, Simeon, it's hard for me to sit here today and think about how we could do anymore, right, how could we take on any more with the capacity that we have. So we expect that CapEx, I've learned now never say never, but it's hard to imagine that the number could get larger than what we're looking at for 2017. It's a large undertaking, but again, a lot of that is going into the store fleets, and we think there's great payback there and great prospects for our investors over the long term. One other thing I would say about CapEx, so again, getting back to that $80 million number year-over-year. There's a lot of other things going on behind the scenes, I guess, right, besides, just the MAC and the Clinique and Lancôme boutiques. There's things like Estée Lauder, right, we introduced it last year. Going much larger with it this year across the fleet, 250 comp stores, up an additional 100 new stores. There's things like that. Remember, when we go to the stores and we do these boutique drop-ins, we're also taking the opportunity to refresh the store, right, on a pretty large scale. So we're going in with new nail features, fragrance fixtures, updating the ULTA Beauty collection where it makes sense. So there's a lot of activity going on in the store just to keep it fresh, right? When she comes back, it's like a new shopping experience, right? And we just want to continue to do that. So that's the CapEx explanation.

Great. And then the ULTA Beauty Collection. I think we break it out. It's -- between 3% and 4% of the business similar online to in-store, which is true for most of our business. But actually, I'm really proud about our little Ulta Beauty Collection, the growth rate. I mean, Dave talked about this. The mass side of our business is very important to our guests. And our private label brand, we've really, really doubled down in making that a stronger brand than we had, and I'm proud of it. So part of the investments in store had to do with making sure that we're using fixtures and showcasing that brand and to its best possible light. We've invested in -- yes, we've redone the packaging. We're really bringing newness to that line, much more rapidly, and it is doing very, very well. So I don't know if there's a. cap. Certainly, like it. It's a great margin, and our guests -- the response of our guests is wonderful. The constraint would be, we're not going to be too big at anything, right? I mean, we want this to be a mosaic of brands that our guests want and love. Having said that, we know it can be bigger. It will be bigger, and we have a fair amount of space dedicated. We can make that space even more productive over time, and we will. So -- but we're proud about what's happening in Ulta Beauty Collection.

The next question comes from Matt Fassler with Goldman Sachs.

This is Katie Parson for Matt tonight. Just taking a little bit on the SG&A cadence that you guys have had over the last year. Obviously, the growth per store was elevated, reflecting the investments that you've made. In the fourth quarter, that growth rate came back down pretty sharply. But as we think about how the investments that you're going to continue doing over the next year will flow through, should we expect that growth rate to reaccelerate once again? Or kind of given the base of investments that were made last year that, that growth rate would remain below prior year levels?

Yes, I guess, I would say, again, in the quarter, when we look at individual quarter, every quarter has its special set of challenges and opportunities, right? And really, over the last couple of years, there's been a lot of investments, right? So I think we saw last year in the fourth quarter, we deleveraged on the SG&A line, right? I think for the year, we were kind of flattish. But the fourth quarter included some consulting expense. We were thinking about our Analyst Day and refreshing the 5-year plan. We were -- the business was strong. So we pulled forward some of our supply chain expense to try to get a head start on things. We also had some people decisions that we made to try to get more footsteps on the ground to make sure we could ramp up some of these investments even quicker. So again, we're lapping that in 2016. And you saw fourth quarter this year, right? We saw the fruits of our labor, so to speak, in a lot of different ways. We got a lot of leverage this year because we got an early start on a lot of those things. So I think we mentioned, as we look at 2017 now, SG&A, slight leverage, I would say, for the full year. So there's still a number of things that we need to work on, people-wise and tool-wise and we're just thinking what -- being pragmatic and doing what we think is good for the business for the long term.

I would like to turn the floor back over back to Mary Dillon for closing comments.

Thank you. I just want to reiterate, we're really proud about the year that we had in 2016, and I'd really like to thank our 32,000 associates for delivering that year and all their efforts to continue to drive our success in 2017 and beyond. I appreciate your interest in Ulta Beauty and look forward to speaking with everyone soon. Take care.

This concludes today's teleconference. You may disconnect your lines at this time.