Fairy BeautyThe growth story of 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 primary quarter, prompting the corporate to boost its full-year guidance. This increase follows a staggering 76% increase within the year-ago quarter.
CEO Tarang Amin told CNBC the corporate saw growth across all categories, adding that the Bronzing Drops Serum quickly became a best-seller on the corporate’s website following its launch within the quarter.
Here’s how the cosmetics company performed in comparison with 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, in comparison with $53 million, or 93 cents per share, a 12 months earlier.
Revenue increased to $324.5 million, a rise of roughly 50% over $216.3 million within the previous 12 months.
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 giant first-quarter success.
For the 2025 fiscal 12 months, Elf now expects revenue of between $1.28 billion and $1.3 billion, in comparison with the previous forecast of $1.23 billion to $1.25 billion. Analysts had expected revenue of $1.3 billion, in keeping with LSEG.
The company now expects adjusted net income of between $198 million and $201 million, in comparison with a previous forecast of $187 million to $191 million. Elf expects adjusted earnings per share of between $3.36 and $3.41, in comparison with a previous forecast of $3.20 to $3.25. Analysts had expected earnings of $3.42 per share, in keeping with LSEG.
Shares fell about 6% in prolonged trading.
When Elf announced fiscal 2024 leads to May, the corporate disenchanted investors with a lower-than-expected outlook. Sentiment later turned around after Chief Financial Officer Mandy Fields suggested the corporate tended to provide 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 on 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 fearful a couple of decline in consumption in the wonder sector and remained “optimistic” in regards to 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 recent relevance amongst Gen Z and Gen Alpha consumers through marketing that speaks to those younger shoppers and meets them where they’re, on platforms like TikTok and Roblox.
The company is understood for creating inexpensive versions of popular prestige products, comparable to the brand 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 doesn’t compare its products to specific brands, but leaves it to its fan base to fill within 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 corporate expanded its collaboration with Roblox, allowing users ages 13 and up to buy limited-edition products just like the “elf UP! Pets Hoodie” and classics like lip and sunscreen products.
During the Olympics, the corporate 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 recent Bronzing Drops.
However, all this marketing doesn’t come low-cost 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 ten percent decline in Elf’s net income.
Amin said the corporate is spending more on marketing this 12 months than last 12 months, but that is more a matter of timing. He added that Elf is working to make marketing spending “more consistent” as a percentage of revenue all year long.
“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.”
