E.l.f. Beauty blows past Wall Street’s estimates, raises full-year guidance again

E.l.f. Beauty raised its full-year outlook for the second quarter in a row on Wednesday after posting another 76% year-over-year sales jump, beating Wall Street’s expectations. 

The cosmetics company, known for its viral TikTok marketing and middle-of-the-road pricing, also saw profits nearly triple compared with the year-ago period. 

Shares jumped about 9% in extended trading Wednesday.

Here’s how E.l.f. did in its fiscal second quarter, compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: 82 cents, adjusted, vs. 53 cents expected
• Revenue: $215.5 million vs. $197.1 million expected 

The company’s reported net income for the three-month period that ended Sept. 30 was $33.3 million, or 58 cents per share, compared with $11.7 million, or 21 cents per share, a year earlier. Excluding one-time items associated with stock-based compensation and intangible assets, as well as other items, E.l.f. reported adjusted earnings of $47.1 million, or 82 cents per share. 

Sales rose to $215.5 million, up 76% from $122.3 million a year earlier. During the previous quarter, sales were also up 76%. 

The strong results prompted the company to raise its full-year outlook for the second quarter in a row. It now expects net sales to increase between 55% and 57% to an estimated range of $896 million to $906 million. That’s ahead of projected full-year sales of $852 million, or growth of 47.1%, that analysts had expected, according to LSEG.

E.l.f. previously expected sales to be up between 37% and 39% to between $792 million and $802 million. 

The company also raised its adjusted profit guidance. It now expects full-year adjusted earnings to be between $144 million and $146 million, compared with a previous range of $125 million to $127 million. It’s expecting adjusted earnings per share to be between $2.47 and $2.50, compared with a consensus estimate of $2.46, according to LSEG. E.l.f. previously expected full-year adjusted earnings per share to be between $2.19 and $2.22.

During the quarter, the company increased its marketing spend, helping to propel sales. But CEO Tarang Amin said E.l.f.’s success is more than just effective advertising. 

When asked what drove sales, Amin told CNBC it was “Our value equation, the ability to make prestige quality at these extraordinary prices, our holy grail innovation, taking inspiration from both prestige and our community, and having products consumers can’t seem to get enough of.”

Digital sales were up about 75% during the quarter, and international sales came in 157% higher year over year, Amin said. E.l.f.’s skincare line, which is popular with younger consumers, was also up over 100%, the chief executive said. 

When asked how long Wall Street can expect to see such strong sales growth, Amin said the company’s raised guidance “speaks for itself.” 

“We’re quite bullish about the future and particularly in terms of how we’re positioned,” said Amin, who got his start working for consumer product companies such as Procter & Gamble and Clorox. “We’ve doubled our market share in the last three years, and I feel we can double our market share again over the next few years.”

E.l.f.’s margins for the quarter came in at 71%, up 5.7 percentage points from the year-ago period. That increase was attributed to lower inventory adjustments, cost savings and mix, improved transportation costs and favorable foreign exchange rates. 

E.l.f. started out as an online-only company, and while it continues to sell directly to consumers on its digital channel, it has a strong presence in drug stores and mass retailers such as Walmart and Target. Despite the heavy wholesale presence, Amin said E.l.f. is able to maintain high margins because it sees high volumes and doesn’t lean on promotions and discounting in the same way other retailers do. 

“When retailers display our brand, we ask them to do it at full retail, because it’s a great value everyday,” said Amin. “So that’s one. Two is, given this value equation, we have incredible volumes, and so the volumes really help us when it comes to the efficiency of how we operate our supply chain.”