E.l.f. Beauty posts 51% net sales growth, lifts guidance

By Grace Kim

E.l.f. Beauty reported net sales of $520.8 million for its fiscal second quarter ended Sept. 30, up 51% from a year earlier and above the $470.3 million expected in an LSEG analyst survey. Adjusted earnings per share reached $1.21, more than twice the 60 cents expected in the same survey.

The company reported net income of $30.03 million, or 50 cents per share, up from roughly $3 million, or 5 cents, a year earlier. E.l.f. said Wednesday's result marked its 31st consecutive quarter of net sales growth.

Higher revenue, sharply higher reported profit and a stronger gross margin came together in the quarter. The beat was not confined to a single sales channel or brand.

How did E.l.f. generate that growth?

The company attributed the revenue increase to strong performance across its portfolio, including retail and e-commerce channels in the U.S. and internationally. It also reported strong results for Rhode, the skincare brand it acquired last year.

CEO Tarang Amin told CNBC: "The thing I'm most pleased about is we saw strength across our entire portfolio." He added: "Every one of our brands contributed strong growth this quarter."

Amin said E.l.f. was the most-searched brand on TikTok Shop and the No. 2 brand in cosmetics on the platform. E.l.f. did not rely on one channel, brand or market to deliver the quarter.

What does the raised outlook include?

E.l.f. raised its full fiscal-year guidance after the better-than-expected quarter. It now expects net sales of $2 billion to $2.03 billion, compared with the previous $1.94 billion to $1.97 billion.

The company also lifted three earnings estimates:

• Adjusted EBITDA: $421 million to $427 million, up from $401 million to $407 million.
• Adjusted earnings per share: $3.82 to $3.86, up from $3.50 to $3.55.
• Net income: $231 million to $233 million, up from $212 million to $215 million.

The revision spans sales, adjusted EBITDA, adjusted earnings per share and reported net income. E.l.f. had already raised its guidance in the previous quarter after outperforming expectations.

Every major annual forecast moved higher.

How did international sales and tariffs perform?

International business grew 165% in the quarter. Amin said only 25% of E.l.f.'s business was outside the U.S. and saw a tremendous opportunity to build on that momentum.

The overseas business grew more than twice as fast as E.l.f.'s overall sales increase. Even so, the U.S. still accounts for most of the company's business, leaving international expansion as the next major opportunity.

Gross margin increased 1.6% during the quarter, including a 0.3% benefit from tariff refunds. E.l.f. received most refunds in its first fiscal quarter, while some of the money flowed through the second quarter.

The company expects tariff refunds totaling about $55 million for the year. Amin previously said E.l.f. planned to fully reinvest the money in pricing and marketing to continue driving growth. On Wednesday, he said the company had lowered the price of about 10% of its units by $1 because of the tariff benefits.

"We're seeing great unit momentum based on that," he said.

The move tied tariff savings to shelf prices and unit demand, consistent with Amin's earlier promise to reinvest the refunds. Tariff refunds supported margins and made a $1 price cut possible on about 10% of units.

What does Amin expect for the holidays?

Amin said he was bullish on the holiday season and expected high sales through the end of the year. His forecast places the holiday stretch at the center of the revised annual plan.

Amin's holiday forecast and the durability of overseas momentum are the next tests for E.l.f.'s raised $2 billion-to-$2.03 billion sales target.