Elf BeautyIts development story continues.
The cosmetics retailer on Thursday again blew away previous quarterly estimates, posting a 50% jump in sales.
The company’s sales jumped to $324.5 million in the fiscal first quarter, raising its full-year guidance. This increase follows an impressive 76% jump in the previous quarter.
CEO Tarang Amin told CNBC that the company saw growth in all its categories. He added that the Bronzing Drops serum quickly became a best seller on the company’s website after its launch during the quarter.
Here’s how the cosmetics company performed compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $1.10 adjusted vs. 84 cents expected
- Annuity: $324 million vs. $305 million expected
The company’s reported net income for the quarter ended June 30 was $47.6 million, or 81 cents a share, compared with $53 million, or 93 cents a share, a year earlier.
Sales rose to $324.5 million, up about 50% from $216.3 million a year earlier.
After quarter after quarter of strong growth, Wall Street expects a lot from Elf Beauty. Although it raised its guidance on Thursday, the outlook remained stable after such a big drop in the first quarter.
For fiscal 2025, Elf now expects sales of between $1.28 billion and $1.3 billion, compared to its previous outlook of $1.23 billion and $1.25 billion. Analysts had expected sales guidance of $1.3 billion, according to LSEG.
The company now expects its adjusted net income to be between $198 million and $201 million, compared to a previous outlook of between $187 million and $191 million. Elf expects adjusted earnings per share to range between $3.36 and $3.41, compared to 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 extended trading.
When it reported fiscal 2024 results in May, Elf disappointed investors with an outlook that fell short of expectations. Sentiment later changed when its chief financial officer, Mandy Fields, suggested that the company tended to issue conservative guidance.
“Last year, we started our guidance in the 22% to 24% range, ended the year at 77%,” Fields told analysts at the time. “I’m not saying we’re definitely promising 77% this year. But what I will say is that it gives you a little insight into our guiding philosophy.”
On Thursday, Amin told CNBC that Fields takes a “balanced” approach to coaching and prefers to take things a quarter at a time.
“If you look at our history over the last five years, these 22 quarters, we’ve typically driven lower than where we ultimately exit,” Amin said. “We never want to get ahead of ourselves and overall the strategy has worked just perfectly … we’re going to take you to what we’re seeing quarter by quarter and hopefully we’ll continue to win it.”
He added that he is not worried about consumer backsliding in the beauty category and remains “bullish” on the broader environment.
“Are we kind of hearing in the macro, ‘Hey, is the consumer pickier?’ I’d say if they are, they’re choosing Elf,” Amin said. “So maybe we’re in a different position, and if you look at the last 22 quarters, it hasn’t matter what was happening in the category, whether it was the pandemic, whether it was inflationary pressures… you name it, we’ve done well in that time and I think it really comes down to our fundamental business model and how we’re different.”
Elf, a digitally native beauty retailer founded in 2004, has gained a new relevance among Gen Z and Gen Alpha consumers through marketing that lands with these younger shoppers and meets them where they are on places like TikTok and Roblox .
It’s known for creating value versions of prestige favorites like the new Bronzing Drops, which customers compare to Drunk Elephant’s Sunshine Drops. The prestige skin care line offers their product for $38, while Elf’s sells for just $12.
“These copper drops have been the No. 1 requested item from our community, and our community is coming to us and saying, ‘Hey, there’s a prestige item. We love them, but Elf, help us. We can’t afford $38 for bronze drops,” Amin said. “So we’re going to study it. We’re going to put our own Elf twist and launch ours at $12. We went to No. 1 right away on Elfcosmetics.com.”
The company doesn’t compare its products to specific brands and instead lets its fan base fill in the blanks.
“Although we don’t do the comparison ourselves, there are about a thousand TikTok videos after the launch of this product where people are doing side-by-sides or comparing it,” Amin said. “It’s like, it’s $12 versus the $38 item and actually, I like the Elf better, the quality is better.”
In July, the company expanded its partnership with Roblox, which allowed users 13 and older to purchase limited-edition merchandise such as the “elf UP! Pets Hoodie” and staples such as lip products and SPF products.
During the Olympics, it had edgy marketing campaigns with gymnast Gabby Douglas, a three-time Olympic gold medalist, and blind swimmer Anastasia “Tas” Pagonis. He also teamed up with actress Jameela Jamil to launch the new Bronzing Drops.
However, all this marketing doesn’t come cheap and has weighed on Elf’s bottom line. During the quarter, selling, general and administrative expenses increased by approximately $88.6 million to $180.6 million, representing 56% of net sales. A rise in marketing costs contributed to a 10% decline in Elf’s net income.
Amin said the company is spending more on marketing this year than last year, but that was more a result of timing. He added that Elf is working to make marketing spend “more consistent” throughout the year as a percentage of sales.
“We keep investing more in marketing because it works,” Amin said. “Marketing ROI is multiple times the category benchmarks, we’re growing a very strong top line. We’re building awareness.”
