2023-05-24 16:15:24 ET
e.l.f. Beauty ( NYSE: ELF ) shrugged off concerns about a pullback in consumer spending on cosmetics after its Q4 earnings print crushed expectations.
The Oakland-based cosmetics and skin care producer posted a 78% jump in net sales year over year to $187.4M, cruising past the $156.12M consensus expectation for the quarter. Meanwhile, $0.42 in adjusted earnings per share for the quarter more than doubled the $0.20 consensus expectation. A 470 basis point expansion in gross margin to 69% significantly outpaced the 65.25% consensus estimate.
In an interview with Seeking Alpha discussing the quarterly update, CFO Mandy Fields highlighted pricing actions as a key driver of the margin expansion, but also noted supply chain improvements and negotiations with suppliers as well as lower transportation costs as contributing factors. These dynamics aided continued profitability improvement in the quarter even as SG&A spending was more than doubled from the prior year quarter, from $55.7M to $121.1M.
“In Q4 we did out first ever TV commercial for the [Super Bowl] and we partnered with Jennifer Coolidge and it drew an enormous amount of eyeballs onto the brand,” Fields noted. “We saw57B impressions from that advertisement and we have been really impressed with the engagement that we saw across the board. Our ability to engage our consumers through marketing really sets us apart.”
However, Fields indicated that while the increased marketing spend has indeed helped sales growth, an increased consumer focus on value in beauty products has no doubt aided the surge in customer attention. In particular, e.l.f is able to appeal to typical prestige beauty customers while also offering attractive price points to both younger and lower income consumers.
“Instead of paying close to $40 for a prestige item, you can come to e.l.f. and get it for $10. That opens up a whole other consumer cohort,” she told Seeking Alpha. “Both in prestige and on the mass side, we’ve seen growth, so that gives us confidence that we are bringing in a new consumer.”
In particular, Fields pointed to the company’s position as the favorite cosmetics brand for Generation Z. She expects that the growth among younger consumers will also allow the company to continue picking up market share, as evidenced by its move from the number 5 brand in color cosmetics at the start of fiscal 2023 to number 3 at its close.
“We made tremendous progress this year in increasing our market share…certainly we have our eye on becoming the number one brand in mass color cosmetics and we’ve already done that at our largest retailer, Target ( TGT ),” Fields said. “Now we already have a proof point of what that could look like over time and are now just working with other retailers to pave the path forward for that.”
CEO Tarang Amin echoed that sentiment in prepared remarks on the results, highlighting the pace of market share gains to start the calendar year.
“We gained 270 basis points of market share in the quarter and increased our ranking to the number three U.S. Mass Cosmetics brand for the first time, according to Nielsen,” he said. “As we look ahead, we believe we are still in the early innings of unlocking the full potential we see for e.l.f. Beauty.”
Moving into fiscal year 2024, the company is expecting between $705M and 720M in sales, well above the $637.72M consensus expectation. Meanwhile, a forecast of between $1.73 and $1.76 in earnings per share also came in well above the $1.64 Street consensus as well.
Shares of e.l.f Beauty rose sharply after the print, adding to an over 300% gain in the past year.
More on e.l.f. Beauty:
e.l.f. Beauty: Solid Fundamentals Inspire Bullish Trend
e.l.f. Beauty attracts overweight rating from Morgan Stanley
e.l.f. Beauty upgraded at Truist on value proposition
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e.l.f. Beauty CFO outlines resilient beauty demand after Q4 earnings beat