E.l.f. Facing Off Against Beauty Giants: Third Among Mass Market Brands As Sales Jump 78%

E.l.f. cosmetics climbed to No. 3 brand in US mass market cosmetics, up two slots from a year ago as it surpassed Revlon and CoverGirl. In its recent sales and earnings presentation, it announced sales in its fiscal 2023 fourth quarter jumped 78%.

E.l.f. Beauty Inc.’s 78% sales growth in its latest quarter helped it climb in one year from fifth to third among US mass market cosmetic brands, according to the firm.

Net sales for the January-March period, the firm’s fiscal year 2023 fourth quarter, reached $187.4m on strength across store and e-commerce channels, marking the 17th straight quarter of growth. The results contributed to 48% growth in sales for its full FY2023 to $578.8m.

“We’re encouraged by the continued strength we’re seeing across the [mass] color cosmetics category,” said CEO Tarang Amin in a 24 May earnings briefing.

He noted e.l.f. color cosmetics sales grew 64% across tracked channels compared to 18% industry-wide category growth; the brand was number one or two in 16 segments of the category.

“We grew our market share by 270 basis points, increasing our rank from number five a year ago to the number three brand for the first time,” said Amin, referencing data from market research firm Nielsen which included sales in grocery, drug, mass merchandisers, select dollar stores, select warehouse clubs and military commissaries.

E.l.f. surpassed both Revlon Inc.’s Revlon brand and Coty Inc.’s CoverGirl during the year, according to Amin, who didn’t identify the top two brands, though reportedly L’Oréal SA’s L’Oréal and Maybelline brands fill those spots.

“We continue to be the fastest growth top-five brand by a wide margin,” Amin said

With “better-than-expected” top line trends, e.l.f. increased marketing and digital investments in the quarter to account for 22% of net sales, higher than its earlier projection of 17% to 19%.

“We have very strong [returns on investment] on that marketing support and a lot of it does bring consumers onto our digital channels as well, particularly given our approach that’s digital first,” said Amin.

The Oakland, CA-based firm started as a “digital-first” company and has built its digital marketing engine across multiple social platforms, he said. “We’re a pioneer on TikTok and are now a four-time TikTok billionaire, with our last hashtag challenge garnering nearly 15 billion views.”

E.l.f. was the first major beauty company to launch a branded channel on Twitch, elfYou, aimed at rising women gamers and content creators. (Also see "E.l.f. Has A Go At Twitch Crowd, Hitching Wagon To #Loserfruit" - HBW Insight, 23 Nov, 2020.)

E.l.f.’s Beauty Squad Loyalty membership, the largest driver to its digital business, is up 25% from a year ago to 3.7m, Amin said. The firm previously noted its loyalty members drive almost 70% of sales on elfcosmetics.com, have higher average orders and purchase more frequently.

Enhancements to its loyalty program should further accelerate digital product consumption, which represented 17% of total consumption compared to 14% a year ago.

“We’re seeing strength across every one of our core marketing vehicles. So I think starting with our digital advertising, the work we do with influencers, our public relations, even the first time that we did our TV ad, we’ve seen strong results against each of them,” Amin said.

E.l.f. also reported “phenomenal” consumer response for its comical, 30-second TV spot for the NFL Super Bowl game in February featuring actress Jennifer Coolidge, who demonstrated the effectiveness of the brand’s Power Grip Primer.

In the weeks following the Super Bowl, e.l.f. aired the spot across 78 national TV networks and “lit up our social channels with additional exclusive content featuring” Coolidge.

“We saw a 64% increase in our purchase consideration and a lift in Power Grip’s sales and we continue to keep the buzz going,” said Amin.

White Spaces Abound

During e.l.f.’s earnings briefing in February, Amin discussed the potential for white space opportunities in innovation, retail and geographic distribution. (Also see "E.l.f. Beauty’s Q3 Sales Jump 49% With ‘A Lot’ Of Runway Ahead, CEO Says" - HBW Insight, 3 Feb, 2023.)

While e.l.f. is the No. 3 cosmetics brand in the US, it’s seventh in both Canada and the UK.

“We were the fastest-growing top ten brand in both of these countries and still see a lot of runway ahead,” Amin said in the latest earnings briefing. In the US, the brand is No. 1 Target with an 18% share and grew its sales in ULTA by 70% during the firm’s FY2023 without any additional shelf space.

The company is building out its skin care segment it launched in 2015. E.l.f. skin care is No. 19 among US brands with more than 1% market share; among teens, it is a top 10 brand.

“Our focus in skin care is bring[ing] new consumers into the fold, as we go after segments like makeup removal, sun care and anti-aging,” Amin said.

Expansion also extends to demographics. Initially targeted to young consumers, e.l.f. is resonating with older shoppers as well.

While “strong” with Gen Z, and “increasingly focused” on Gen Alpha – born around 2010 and after –  e.l.f. also is attracting teens’ moms, including Gen Xers.

“I’m particularly excited about our efforts against Hispanics. We over-deliver, over-indexed among Hispanics and we have a number of different initiatives to even bring more of them in,” Amin said.

Net income for the firm’s fourth quarter was $16.2m, up from $1.56m in the year-ago period; net income for the year reached $61.5m, up from $21.7m.

E.l.f. is projecting its FY 2024 sales will increase 22% to 24%.

In a 25 May report, Raymond James & Associates analyst Olivia Tong echoed Amin’s sentiments on the brand’s potential, noting the likely positive impact of additional distribution in ULTA, CVS and in the Walgreens Boots Alliance with their shelf resets later in the year.

“We believe ELF can sustain its growth momentum, particularly with legacy players still holding a disproportionate share of the beauty shelf and ELF having just begun its expansion into large beauty categories like mascara, foundation, and skin care,” Tong said.

In their report published the same day, William Blair equity research analysts also noted e.l.f.’s growing distribution and presence on store shelves. They said “e.l.f.’s relevance with young, diverse makeup enthusiasts, its omnichannel go-to-market capabilities, significant distribution white space, and highly profitable business model support attractive multiyear growth prospects.”

E.l.f.’s stock price jumped 17% in the days following the earnings report to close at $101.28 on 26 May.