E.l.f. Beauty stays optimistic despite concerns over beauty-industry slowdown

By Bill Peters

The beauty-products maker's full-year forecast came up short of expectations

Cosmetics and skincare-products maker E.l.f. Beauty on Wednesday offered up a full-year growth forecast came up short of expectations amid worries over an industry-wide slowdown.

Yet during the company's fourth-quarter earnings call, E.l.f. executives downplayed those concerns.

The company (ELF), whose lower-priced offerings have been popular with younger shoppers, said it expects sales gains in its current fiscal first quarter to outpace growth for the year. And one analyst noted that the company tends to be conservative in its financial forecasting.

Speaking on the call, Chief Executive Tarang Amin said he is still optimistic about color cosmetics. He noted that while trends there may have been weaker, they were still coming off several years of surging demand.

"If you take a look at our history over the last 21 quarters, regardless of the pandemic, container imbalances, wherever the category was, we have proven the ability to grow our net sales and market share quarter after quarter," he said.

Cosmetics chain Ulta Beauty Inc. (ULTA), through which E.l.f. sells a lot of product, recently warned of weaker trends across the beauty industry. But Amin said the company put up big sales gains at Ulta as well as at Target Corp. (TGT) stores. Products like its Power Grip Primer and Bronzing Drops are popular, while the company's acquisition of skincare brand Naturium is paying off and E.l.f. is expanding abroad, he added.

Shares of E.l.f. rose about 2% after hours on Wednesday, after initially falling sharply after the company released its quarterly results.

E.l.f. said it expects sales of $1.23 billion to $1.25 billion in the fiscal year ahead, or year-over-year growth of around 20% to 22%, with an adjusted per-share profit of $3.20 to $3.25.

That forecast came in below expectations. For the company's coming fiscal year, which wraps up at the end of next March, analysts had expected adjusted earnings per share of $3.56, with sales of $1.27 billion.

However, Amin said that for the first quarter, he expected net-sales growth to come in "well ahead" of its growth forecast for the full year.

For its fiscal fourth-quarter, the company reported net income of $14.5 million, or 25 cents a share. That compared with $16.2 million, or 29 cents a share, in the same quarter last year.

Adjusted for stock-based compensation and other items, E.l.f. earned 53 cents a share. Sales jumped 71% to $321.1 million.

Those figures were better than expected. Analysts polled by FactSet expected E.l.f. to report adjusted earnings per share of 33 cents, on sales of $292.6 million.

The company's results and outlook come amid concerns of a drop-off in sales of beauty products, following years of growth as people began gathering in public again after pandemic lockdowns.

In April, Ulta Beauty said that higher prices for basics, along with higher borrowing costs and rising consumer debt, were hurting demand. Newer offerings had helped sales for lower-priced mass-market makeup, but prestige lines had suffered as they became available for sale in other places.

However, E.l.f. executives on Wednesday said there is still room for growth.

"The average price point for E.l.f. is about $6.50 today, as compared to nearly $9.50 for legacy mass-cosmetics brands and over $20 for prestige brands," Amin said on the call. "Our value proposition underpins our strong unit growth."

-Bill Peters

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05-22-24 2022ET

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