e.l.f. Beauty reports Q3 earnings growth but lowers net sales outlook for final quarter

From Nasdaq: 2025-02-07 02:30:16

e.l.f. Beauty held their Q3 2025 Earnings Call, reporting 31% net sales growth and $69 million in adjusted EBITDA. Despite strong performance, they are lowering their net sales outlook for the final quarter due to softer consumption trends. They remain confident in their ability to deliver market-leading growth and are focusing on digital, color cosmetics, skincare, and international expansion. The company continues to outperform the category in color cosmetics, with a strong digital presence and loyalty program. With ongoing enhancements, e.l.f. Beauty is poised for continued success in the beauty market. e.l.f. cosmetics has achieved significant market share growth in major retailers like Target and Walmart, with a focus on expanding its presence and productivity in the beauty industry. The brand is also making strides in the skincare market, doubling its penetration with the acquisition of Naturium and launching new products in Ulta Beauty. Internationally, e.l.f. has seen success in new markets and is leveraging its disruptive marketing strategies to engage global audiences. The brand’s innovative products and marketing approach have contributed to its industry-leading growth and competitive advantage, with plans for continued expansion and innovation in the future. E.l.f. recently debuted a U.S. commercial spot during Thanksgiving, receiving high community engagement and increased site traffic. Their campaign with Meghan Trainor aims to expand the Halo Glow franchise, targeting Gen Z and Millennials. Unaided brand awareness has grown from 13% in 2020 to 33% in 2024.

With 31% year-over-year sales growth in Q3, e.l.f. continues to see success in both U.S. and global markets. Gross margin increased by 40 basis points, driven by favorable foreign exchange rates and cost savings. Adjusted EBITDA was up 16% at $59 million, impacted by a $7 million foreign currency loss.

Looking ahead to fiscal ’25, e.l.f. expects 27-28% net sales growth, with a focus on investing in growth initiatives and strategic extensions. Gross margin is projected to increase by approximately 40 basis points, excluding impacts from recently announced tariffs. Adjusted EBITDA is expected to be between $289 million to $293 million for the year. The company reported a change in outlook due to a $7 million FX loss and a lowered top-line forecast. Fiscal ’25 now projects adjusted EBITDA growth of 23% to 25% on top of the strong 101% growth in fiscal ’24. The CEO expressed confidence in their winning strategy and potential for brand growth, despite recent challenges. Analysts raised questions about the impact on sales from recent trends and international expansion progress, with a focus on U.S. consumption and future outlook. The company remains optimistic about international growth and plans to expand into new markets. The Q3 consumption numbers for a popular brand saw a 12% increase in tracked channels, despite a slight slowdown in January. The company is confident in their 14% to 16% growth projection for the second half of the year, especially after gaining 90 basis points of market share in January. They attribute their success to strong marketing activations and a focus on new products. While some retailers experienced softness in January, overall, there are no warning signs for the company moving forward. Adjustments to marketing strategies and innovation activations are expected to boost performance in the coming months. The CEO of e.l.f. Beauty discusses the impact of consumer caution on marketing spend and ROI. Analysts inquire about the slowdown in the mass cosmetics industry and e.l.f.’s outperformance. The CFO highlights the company’s strong second-half growth and international business. The CEO emphasizes transparency and the company’s ability to capitalize on market opportunities. Questions arise about e.l.f.’s digital channels and momentum online, particularly with Amazon. E.l.f. Beauty remains optimistic about its value proposition and share-building strategies amidst a challenging consumer macro environment. Amin — Chairman and Chief Executive Officer

Yes, thank you for the question. So, in terms of growth profile, we believe the 4Q run rate is not indicative of our overall growth trajectory. As for fiscal ’26 guidance, it’s still a few months away. But we see a strong growth trajectory ahead. Market share performance has been solid, with a 90 basis point increase in January. While there may be some fluctuations, we are confident in our market position. We anticipate continued growth and are optimistic about our future performance.

Overall, our digital business saw a 30% increase in Q3, with Amazon performing even higher. Our partnership with Amazon is strong, with opportunities for growth domestically and internationally. While there may be some cannibalization with retail customers, we see it as additive to our overall portfolio. Our gross margin guidance has been raised, showing strength even with the expansion of Naturium. We remain optimistic about our future prospects and growth potential.

Tarang Amin, Chairman and CEO, discusses the company’s growth rate and market share progress. With a strong white space opportunity, the company is confident in sustaining growth. Market share has increased, with Target seeing 20% share and Walmart moving to the No. 2 position. Skincare presents a bigger opportunity with only a 2% share currently. The company has a strong innovation pipeline with products like Halo Glow Powder and Power Grip Matte in the works. Marketing and digital leverage in Q4 are driving SG&A improvements, allowing for continued investment in the business. E.l.f. Beauty emphasizes innovation with a unique twist on products, resulting in increased market share and growth in categories like lip products.

Naturium performs well, showing growth in Ulta and other retailers, with significant white space opportunity for expansion.

Competitive landscape discussion highlights e.l.f. Beauty’s unique competitive advantages, including prestige quality at affordable prices and strong marketing strategies, leading to market share growth. e.l.f. Beauty has more than doubled its market share in the last three years, showcasing significant momentum that competitors have not been able to replicate. The company reported broad strength across all segments in color cosmetics and skincare in Q3, with significant share gains in each core segment. Despite softer consumption trends, e.l.f. Beauty remains the most productive brand for its retailers. The company’s flexible cost structure allows for adjustments to capitalize on growth opportunities. Chairman and CEO Tarang Amin expressed pride in the team’s industry-leading results and dedication to the company’s vision. 1. In a landmark decision, the Supreme Court ruled in favor of protecting LGBTQ workers from job discrimination, stating that the Civil Rights Act of 1964 prohibits discrimination based on sexual orientation and gender identity.

2. The World Health Organization reported a record daily increase of COVID-19 cases, with over 183,000 new infections worldwide. The Americas have seen the highest number of cases, with Brazil and the United States being the worst affected countries.

3. Tesla’s stock price surged to over $1,000 per share, making it the most valuable automaker in the world. The electric car company’s market cap now exceeds that of Toyota, Volkswagen, and General Motors combined.

4. The United States officially entered a recession in February, marking the end of the longest economic expansion in the country’s history. The COVID-19 pandemic has led to widespread job losses and economic uncertainty across the nation.



Read more at Nasdaq: e.l.f. Beauty (ELF) Q3 2025 Earnings Call Transcript