ELF Beauty sees sales soar 50% but warns of potential Trump presidency price impact

12 Aug 2024 --- ELF Beauty reports a 50% jump in net sales to US$324.5 million compared to the previous year, thanks to strength in its retail and e-commerce channels.

The brand’s gross margin increased by approximately 80 basis points to 71%, driven mainly by favorable foreign exchange impacts, lower transportation costs and price increases in its international markets.

“We are off to a strong start this fiscal year, delivering 50% net sales growth and 260 basis points of market share gains in Q1,” says Tarang Amin, ELF Beauty’s chairman and CEO.

“This marked our 22nd consecutive quarter of net sales growth and market share gains — putting [us] in a rarified group of high-growth consumer companies. We continue to make progress across color cosmetics, skin care and international and believe our unique areas of advantage will fuel our ability to win in fiscal 2025 and beyond.”

However, ELF Beauty warns of price increases if presidential candidate Donald Trump wins the US general election this November. Amin believes Trump’s planned taxes on goods imported from China into the US would impact the company’s finances next year.

Strong financials

Compared to 2023, selling, general and administrative (SG&A) expenses increased from US$88.6 million to US$180.6 million, or 56% of net sales. Adjusted SG&A increased from US$80.0 million to US$164.4 million, or 51% of net sales.

ELF partnered with blind swimmer Anastasia Pagonis to make its products more accessible.ELF Beauty attributes the increase in SG&A dollars to a rise in marketing and digital spending, compensation and benefits, operations costs, retail fixturing and visual merchandising costs, professional fees, depreciation and amortization.

Net income was US$47.6 million on a generally accepted accounting principles (GAAP) basis. Adjusted net income was US$64.3 million. Diluted earnings per share were US$0.81 on a GAAP basis. Adjusted diluted earnings per share were US$1.10.

Adjusted EBITDA was US$77.4 million, or 24% of net sales, up 4% yearly. Additionally, ELF Cosmetics gained 260 basis points of market share.

ELF warnings and launches

While approximately 80% of ELF Beauty products are currently made in China, Amin says the company will soon reduce production there.

In 2019, under the Trump presidency, ELF Beauty also faced 25% tariffs and addressed the issue through select price increases, help from FX and supplier concessions.

“As we look forward, we’ve heard rumors as high as 60% tariffs, so if we look at how we would solve that additional 35 points of tariff, we feel pretty confident in terms of that same balanced approach,” Amin said on a call to analysts.

The beauty brand also recently teamed up with world champion blind swimmer Anastasia Pagonis to serve the broader community. ELF and Pagonis worked to make beauty products more accessible for the blind and low-vision community.

ELF and Pagonis developed the “Beauty For Every Eye” bundle, which features three of Pagonis’ favorite ELF products. Each product has a scannable QR code that links to an audio recording by Pagonis describing the product, including finish and application tips.

By Sabine Waldeck