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E.l.f. Beauty posts first $1 billion year, buts shares fall on weaker than expected guidance

In Business
May 23, 2024

e.l.f Beauty products. 

Courtesy: e.l.f Beauty

So much for a beauty slowdown

E.l.f. Beauty posted its first billion-dollar fiscal year on Wednesday, growing sales by 77% and further disputing warnings from Ulta that retail’s most resilient category is losing steam. 

The eyes, lip, face company, known for its viral marketing and prowess in winning over younger consumers, blew past Wall Street’s estimates on the top and bottom line. However, its guidance came in lower than expected, indicating it anticipates its growth will begin to taper. 

Here’s how E.l.f. Beauty did in its fourth fiscal quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

  • Earnings per share: 53 cents adjusted vs. 32 cents expected
  • Revenue: $321.1 million vs. $292.6 million expected

The company reported net income for the three-month period that ended March 31 was $14.53 million, or 25 cents per share, compared with $16.25 million, or 29 cents per share, a year earlier. Excluding one-time items, E.l.f. posted earnings of 53 cents per share. 

Sales rose to $321.1 million, up about 71% from $187.4 million a year earlier.

For the full year, the company’s sales grew to $1.02 billion, an increase of 77% from the year-ago period.

E.l.f. Beauty has been on a tear over the last year, posting sales gains in the high double digit percentages quarter after quarter as consumers flock to its low-priced beauty products either through its own website or at retailers like Walmart and Target

In a statement, E.l.f. CEO Tarang Amin said he believes the company is still in the “early innings” of its growth story and expects more to come in cosmetics, skin care and in international markets. Its guidance reflects that sentiment, but even so, the company expects to grow at a slower pace than Wall Street anticipated. 

E.l.f. expects net sales to be between $1.23 billion and $1.25 billion, which would be an increase of 20% to 22%. That’s below the $1.27 billion, or 27.4% uptick, that analysts had expected.

The company is forecasting adjusted net income to be between $187 million and $191 million, and adjusted earnings to be between $3.20 and $3.25 per share. That’s below the $3.51 that analysts had expected, according to LSEG. 

Last month, Ulta Beauty CEO Dave Kimbell threw cold water on the red-hot beauty category when he warned that demand for cosmetics was cooling, sending its stock down 15% that day and hitting shares of E.l.f, Estée Lauder and Coty.

“We have seen a slowdown in the total category,” Kimbell said at an investor conference hosted by JPMorgan Chase. “We came into the year — and we talked about this on our [earnings] call a few weeks ago — expecting the category to moderate. It has [had], as I said, several years of strong growth. We did not anticipate it would continue at the rate that it’s been growing.”

He added that the slowdown has been “a bit earlier” and a “bit bigger than we thought.” 

Just how much Ulta’s sales have slowed down remains to be seen. The beauty giant reports earnings next week. 

Read E.l.f.’s full earnings release here

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