- Elf Beauty exceeded Wall Street’s quarterly forecasts with a 50% jump in sales and profits.
- Tarang Amin, CEO of the cosmetics company, said that the new serum “Bronzing Drops” was extremely popular.
- Despite the significant increase in sales, the beauty retailer issued cautious forecasts.
The growth story of Elf Beauty continues.
The cosmetics retailer again exceeded its quarterly forecasts on Thursday, reporting a 50% increase in sales.
The company’s revenue rose to $324.5 million in the first quarter, prompting the company to raise its full-year guidance. This increase follows a staggering 76% increase in the year-ago quarter.
CEO Tarang Amin told CNBC the company saw growth across all categories, adding that the Bronzing Drops Serum quickly became a best-seller on the company’s website following its launch in the quarter.
Here’s how the cosmetics company performed compared to Wall Street expectations, based on an analyst survey conducted by LSEG:
- Earnings per share: $1.10 adjusted versus 84 cents expected
- Revenue: $324 million versus expected $305 million
The company reported net income for the three-month period ended June 30 was $47.6 million, or 81 cents per share, compared to $53 million, or 93 cents per share, a year earlier.
Revenue increased to $324.5 million, an increase of approximately 50% over $216.3 million in the previous year.
After quarter after quarter of above-average growth, Wall Street has high expectations for Elf Beauty. Although the forecast was raised on Thursday, the outlook was still disappointing after such a big first-quarter success.
For the 2025 fiscal year, Elf now expects revenue of between $1.28 billion and $1.3 billion, compared to the previous forecast of $1.23 billion to $1.25 billion. Analysts had expected revenue of $1.3 billion, according to LSEG.
The company now expects adjusted net income of between $198 million and $201 million, compared to a previous forecast of $187 million to $191 million. Elf expects adjusted earnings per share of between $3.36 and $3.41, compared to a previous forecast 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 Elf announced fiscal 2024 results in May, the company disappointed investors with a lower-than-expected outlook. Sentiment later turned around after Chief Financial Officer Mandy Fields suggested the company tended to give conservative guidance.
“Last year we started our forecast with a range of 22 to 24 percent and ended the year at 77 percent,” Fields told analysts at the time. “I’m not saying we’re predicting 77 percent this year for sure. But I am saying that gives you a little insight into our forecasting philosophy.”
On Thursday, Amin told CNBC that Fields takes a “balanced” approach to forecasting and prefers to take things quarter by quarter.
“If you look at our history over the last five years, these 22 quarters, we typically provide lower guidance than we end up achieving,” Amin said. “We never want to get ahead of ourselves, and overall the strategy has just worked great… we’ll take you through what we see quarter by quarter, and hopefully we can continue to somehow exceed that.”
He added that he was not worried about a decline in consumption in the beauty sector and remained “optimistic” about the wider environment.
“We’re hearing sort of a question at the macro level, ‘Hey, are consumers more selective?’ I would say if that’s the case, they’re choosing Eleven,” Amin said. “So we’re perhaps positioned differently, and if you look at the last 22 quarters, it didn’t matter what was happening in the category, whether it was the pandemic, whether it was inflationary pressures… whatever, we did well through it, and I think it’s really because of our fundamental business model and how we’re different.”
Elf, a digital beauty retailer founded in 2004, has found new relevance among Gen Z and Gen Alpha consumers through marketing that speaks to these younger shoppers and meets them where they are, on platforms like TikTok and Roblox.
The company is known for creating inexpensive versions of popular prestige products, such as the new Bronzing Drops, which customers are comparing to Drunk Elephant’s Sunshine Drops. The prestige skincare line offers its product for $38, while Elfs retails for just $12.
“These tanning drops have been our community’s most requested item, and our community is coming to us and saying, ‘Hey, this is a prestige item. We love them, but Elf, help us. We can’t afford $38 for tanning drops,'” Amin said. “So we’re going to look at it. We’re going to add our own Elf touch and launch ours for $12. It immediately hit No. 1 on Elfcosmetics.com.”
The company does not compare its products to specific brands, but leaves it to its fan base to fill in the gaps.
“Although we don’t do the comparison ourselves, after this product was launched, there are about a thousand TikTok videos where people put the products side by side or compare them,” Amin said. “They say it’s $12 compared to the $38 item and actually I like the Elf one better, the quality is better.”
In July, the company expanded its collaboration with Roblox, allowing users ages 13 and up to purchase limited-edition products like the “elf UP! Pets Hoodie” and classics like lip and sunscreen products.
During the Olympics, the company ran spectacular marketing campaigns featuring gymnast Gabby Douglas, a three-time gold medalist, and blind swimmer Anastasia “Tas” Pagonis. The company also collaborated with actress Jameela Jamil to launch its new Bronzing Drops.
However, all this marketing doesn’t come cheap and has eaten into Elf’s bottom line. During the quarter, selling and administrative expenses increased by about $88.6 million to $180.6 million, or 56 percent of net sales. The increase in marketing expenses contributed to a 10 percent decline in Elf’s net income.
Amin said the company is spending more on marketing this year than last year, but that’s more a matter of timing. He added that Elf is working to make marketing spending “more consistent” as a percentage of revenue throughout the year.
“We continue to invest more in marketing because it works,” Amin said. “Our marketing ROI is outperforming our category benchmarks by a lot, we’re seeing very strong revenue growth. We’re driving awareness.”
