e.l.f Beauty (ELF +18%) is experiencing a significant stock surge following a robust Q4 earnings report. Revenue climbed 71.4% year-over-year to $321.1 million, surpassing analyst expectations. Initially, shares dipped due to lower-than-expected FY25 EPS and revenue guidance, but bullish commentary and new retail wins have driven the stock back up.
- ELF finalized its acquisition of Naturium on October 4, 2023, contributing to the strong sales growth. Growth is expected to slow in the December quarter as ELF laps this deal. FY24 marked the first year ELF surpassed $1 billion in annual sales, an important milestone aided by the Naturium acquisition, which bolstered its skin care segment.
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The company is focusing on three key growth areas: color cosmetics, skin care, and international markets.
- In color cosmetics, ELF outperformed the category, growing 30% in Q4 compared to a category decline of 3%. ELF ended FY24 with a 10.5% market share, more than double from four years ago, and ranked #2 in Q4 with a 12.8% share. At Target, ELF is the #1 brand with over a 19% share.
- In skin care, ELF also outperformed the category, with e.l.f. SKIN growing 38% in Q4 versus category growth of 2%. It climbed to the #11 brand position from #14 a year ago. Growth from Naturium has been promising.
- International sales jumped 115% year-over-year in Q4, driven by strong performance in Canada and the UK. International sales accounted for 16% of total Q4 sales, up from 13% a year ago.
- Looking ahead, ELF aims to double its market share in color cosmetics over the next few years by replicating its Target success across other key retailers. ELF expanded its Target market share to 23% in Q4, growing its business by over 70% for the year. ELF announced new shelf space expansions at CVS and Walmart for 2024.
- In skin care, ELF is excited about its innovation pipeline, including the in-store launch of Bronzing Drops this summer. The Naturium acquisition means ELF now has two of the fastest-growing mass skin care brands. Naturium is available at Target, Amazon, and naturium.com, with plans to launch at Ulta Beauty in summer 2024.
Overall, investors are focusing on the strong Q4 performance and bullish outlook. ELF is well-positioned for growth in color cosmetics, skin care, and international markets. With consumers seeking affordable high-performance cosmetics, ELF fits the current market well. In contrast, Estee Lauder (EL, Financial) recently announced restructuring and layoffs. ELF's popularity with young people and savvy use of online media like TikTok are strengths, although potential TikTok bans and online privacy legislation are concerns.
