E.l.f. Beauty, a cosmetics retailer, continues to experience impressive growth, surpassing quarterly estimates once again with a 50% increase in sales. In its fiscal first quarter, the company’s sales reached $324.5 million, leading to an upward revision of its full-year guidance. This growth follows a remarkable 76% jump in the same quarter the previous year.
CEO Tarang Amin attributes the company’s success to growth across all its categories. He highlights the rapid success of its Bronzing Drops serum, which became a bestseller on the company’s website shortly after its launch. The company’s earnings per share also exceeded expectations, with $1.10 adjusted compared to the anticipated 84 cents. Additionally, revenue came in at $324 million, surpassing the expected $305 million.
Despite consistently strong performance, E.l.f. Beauty’s outlook for the future fell short of Wall Street’s high expectations. The company raised its full-year sales guidance to a range of $1.28 billion to $1.3 billion for fiscal year 2025, compared to the previous outlook of $1.23 billion to $1.25 billion. However, analysts had anticipated sales guidance of $1.3 billion. Adjusted net income is now projected to be between $198 million and $201 million, with adjusted earnings per share between $3.36 and $3.41. Analysts had expected earnings per share of $3.42.
E.l.f. Beauty’s previous conservative guidance has caused some initial disappointment among investors. However, the company’s finance chief, Mandy Fields, explains that they prefer a balanced approach to guidance, focusing on one quarter at a time. Amin affirms this strategy, highlighting the company’s historical pattern of guiding lower than their eventual performance. He emphasizes the importance of not getting ahead of themselves and the success of their fundamental business model.
Amin remains optimistic about the beauty category, dismissing concerns of a consumer pullback. He asserts that if consumers are becoming more selective, they are choosing E.l.f. Beauty. The company’s performance over the past 22 quarters has been strong regardless of external factors like the pandemic and inflationary pressures. Amin attributes this success to their unique business model and their ability to connect with younger consumers through platforms such as TikTok and Roblox.
E.l.f. Beauty has gained relevance among Gen Z and Gen Alpha consumers by offering affordable alternatives to prestigious beauty products. For example, their Bronzing Drops, priced at $12, have been compared favorably to Drunk Elephant’s Sunshine Drops, which retail for $38. The company’s marketing strategy involves engaging with their fan base and allowing them to make comparisons, which has resulted in positive feedback and increased sales.
To reach younger consumers, E.l.f. Beauty has collaborated with platforms like Roblox, allowing users aged 13 and up to purchase limited edition products. The company has also engaged in marketing campaigns during the Olympics, featuring athletes such as Gabby Douglas and Anastasia “Tas” Pagonis. These marketing efforts have contributed to an increase in selling, general, and administrative expenses, which affected the company’s net income.
While E.l.f. Beauty acknowledges the increased spending on marketing, CEO Tarang Amin asserts that it is a worthwhile investment. The company’s marketing return on investment surpasses industry benchmarks, and they continue to experience strong top-line growth and increased brand awareness. The company aims to achieve more consistent marketing spend throughout the year as a percentage of sales.
In conclusion, E.l.f. Beauty’s growth story remains impressive as it surpasses quarterly estimates with a 50% increase in sales. The company’s success can be attributed to growth across all categories and the popularity of its affordable alternatives to prestigious beauty products. Despite falling short of high expectations for its outlook, E.l.f. Beauty remains confident in its business model and its ability to connect with younger consumers through platforms like TikTok and Roblox. With continued investment in marketing, the company anticipates sustained growth and increased brand awareness.
