E.l.f. Beauty Sees Strong Q3 Sales, but Adjusts Full-year Forecast After Soft January
E.l.f. Beauty surpassed Wall Street’s top-line forecasts in the third quarter, but lowered its full-year forecast on the back of a softer-than-expected January. The latter sent its share price down more than 20 percent in extended trading Thursday.
Net sales increased 31 percent to $355.3 million for the three months ended Dec. 31, primarily driven by strength in both retailer and e-commerce channels, both in the U.S. and internationally. Analysts predicted sales would hit $330 million.
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Adjusted net income inched up to $43 million from $42.8 million a year earlier. Adjusted diluted earnings per share were 74 cents, below Wall Street estimates of 76 cents.
“I’m proud of the E.l.f. Beauty team for delivering another quarter of consistent, category-leading growth,” said Tarang Amin, E.l.f. Beauty’s chairman and chief executive officer in a statement, which also indicated the company gained 220 basis points of market share in the U.S.
“We believe we are still in the early innings of unlocking the white space we see across digital, color cosmetics, skin care and international,” Amin said.
Nevertheless, the company lowered its annual forecast and now expects net sales of $1.3 billion to $1.31 billion, down from the previous forecast of $1.315 billion to $1.335 billion.
Adjusted net income is now forecast at a range of $193 to $196 million, down from prior estimate of $205 million to $208 million.
“Given softer than expected trends in January, we are taking a prudent approach and lowering our outlook for the final quarter of our fiscal year,” said Mandy Fields, E.l.f. Beauty’s chief financial officer.
In an interview with WWD, Amin elaborated on that softer start to 2025, saying that there were three factors at play.
“First, the category continued to be soft. The category in the mass side was down 5 percent,” he said. “Second, we’re lapping that massive viral launch we did last year of our lip oils. We could hardly keep them in stock. Then third, a couple of our new products this year are off to a little bit of a slower start. Now we are still in early days. The marketing activations haven’t completely started. We have resets coming, including space expansion at Target and Walgreens, but we always stay cautious until we see a change in trend.”
With President Donald Trump imposing 10 percent tariffs on Chinese imports this month, Amin plans to use the same playbook as he did during the last Trump presidency, only this time he has some additional tools in his toolbox.
“We’ve been subject to 25 percent tariffs since 2019 and we used a really balanced playbook to deal with them, between selective pricing, cost savings, supplier concessions. We use a similar playbook this time. Then we have two additional tools that we didn’t have in 2019. One is we’ve got further supplier diversification. We used to have almost 100 percent of our product coming from China. Now it’s a little bit less than 80 percent. We also have a bigger international business. We almost had no business internationally back in 2019.”
Over the past year, E.l.f. has expanded its footprint in Europe and in Mexico.
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