Elf beautyThe growth story continues.
On Thursday, the cosmetics retailer once again beat quarterly expectations, with sales rising 50%.
The company’s fiscal first-quarter sales surged to $324.5 million, leading it to raise its full-year guidance. This growth follows a 76% increase in the same period last year.
CEO Tarang Amin told CNBC that the company has grown across all categories. He added that the company’s Bronzing Drops serum quickly became a best-seller on the company’s website after launching this season.
Here’s how the cosmetics company performed compared to Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: Adjusted $1.10, expected 84 cents
- income: $324 million vs. $305 million expected
The company reported net income of $47.6 million, or 81 cents a share, for the three months ended June 30, compared with $53 million, or 93 cents a share, a year earlier.
Sales increased to US$324.5 million, an increase of approximately 50% from US$216.3 million in the same period last year.
After massive growth quarter after quarter, Wall Street has high hopes for Elf Beauty. Despite Thursday’s upgrade to guidance, the outlook remains flat after such a strong first quarter.
Elf now expects fiscal 2025 sales to be in the range of $1.28 billion to $1.3 billion, compared with the previous forecast of $1.23 billion to $1.25 billion. Analysts had expected sales guidance of $1.3 billion, according to LSEG.
The company now expects adjusted net income to be in a range of $198 million to $201 million, compared with its previous forecast of $187 million to $191 million. Elf expects adjusted earnings per share to be in the range of $3.36 to $3.41, compared with previous guidance of $3.20 to $3.25. Analysts had expected earnings of $3.42 per share, according to LSEG.
Shares fell about 6% in after-hours trading.
When Elf reported fiscal 2024 results in May, its outlook came in weaker than expected, disappointing investors. Sentiment subsequently improved after its finance chief, Mandy Fields, signaled the company was leaning toward issuing conservative guidance.
“Last year, our guidance range started at 22% to 24% and ended the year at 77%,” Fields told analysts at the time. “I’m not saying we’re definitely going to hit 77% this year. But what I will say is , which can give you some insight into our guiding philosophy.”
Amin told CNBC on Thursday that Fields takes a “balanced” approach to guidance, preferring to take action one quarter at a time.
“If you look at our history over the past five years, these 22 quarters, our guidance has typically been lower than where we ended up,” Amin said. “We never want to get ahead of ourselves, and overall the strategy has been very effective… We’ll take you through what we’re seeing each quarter and hopefully we can continue to outperform that.”
He added that he was not worried about a consumer pullback in the beauty category and remained “bullish” on the broader environment.
“We’re hearing this at the macro level: ‘Hey, are consumers becoming more discerning?’ I would say if they are, they’re going to go with Elf,” Amin said. “So our positioning may be different, and if you look back over the last 22 quarters, it doesn’t matter what’s happened in the category, whether it’s the pandemic, whether it’s inflationary pressures… you name it. , we’ve performed well throughout, and I think it really comes down to our fundamental business model and what sets us apart.
Elf, a digitally native beauty retailer founded in 2004, has gained new relevance among Generation Z and Alpha consumers through marketing to attract younger shoppers and meet them on platforms like TikTok and Roblox.
The company is known for creating beloved value-for-money products, such as its new Bronzing Drops, which customers are comparing to Drunk Elephant’s Sunshine Drops. Products from the famous skin care line sell for $38, while Elf’s retails for just $12.
“These foil drops were the first item our community requested, and our community came to us and said, ‘Hey, there’s a premium item there. We love them, but elves, help us. We can’t afford 38 foil drops. Money,” Amin said. “So we’re going to look at it. We’re going to put our own elf style on it and launch our product for $12. Get #1 on Elfcosmetics.com right now.”
The company doesn’t compare its products to any specific brand, instead letting its fan base fill in the blanks.
“Although we don’t do comparisons ourselves, after we launched this product, there were about a thousand TikTok videos where people were doing side-by-sides or comparisons,” Amin said. “They said this product was $12 and the $38 product was actually the Elf one that I liked better, it was better quality.”
In July, the company expanded its partnership with Roblox to allow users ages 13 and older to purchase limited-edition products like the “elf UP! Pets Hoodie” as well as flagship products like lip and SPF products.
During the Olympics, the company worked with three-time gold medalist gymnast Gabby Douglas and blind swimmer Anastasia “Tas” Pagonis Attention-grabbing marketing campaigns. It also stars Alicia Keys and Jameela Jamil.
However, all this marketing expense doesn’t come cheap and puts pressure on Elf’s bottom line. During the quarter, selling, general and administrative expenses increased by approximately $88.6 million to $180.6 million, or 56% of net sales. A surge in marketing spending caused Elf’s net profit to drop 10%.
Amin said the company is spending more on marketing this year than last year, but that’s more a result of timing. He added that Elf is working to make marketing spending as a percentage of sales “more consistent” throughout the year.
“We continue to invest more in marketing because it’s working,” Amin said. “Our return on marketing investment is multiple times higher than comparable benchmarks, and our revenue growth is very strong. We are increasing awareness.”
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