Key Takeaways
- E.l.f. Beauty exceeded Q4 projections with $449M in revenue versus the anticipated $423M and adjusted EPS of 32 cents compared to 29 cents expected.
- Following successful testing that showed a $4 price reduction on its Halo Glow tint generated nearly 40% higher sales, the company intends to explore lower pricing on additional items.
- Shares of ELF jumped approximately 7-8% during extended trading hours after earnings were announced.
- Fiscal 2027 projections fell short of analyst predictions for both revenue and earnings metrics.
- Management warned of a possible $15M–$20M negative impact from elevated oil costs related to the Iran conflict, which isn’t reflected in existing guidance.
E.l.f. Beauty delivered impressive fiscal fourth-quarter results on Wednesday, reporting $449 million in revenue that surpassed Wall Street’s $423 million projection. The company’s adjusted earnings per share reached 32 cents, exceeding the analyst consensus of 29 cents.
Shares of ELF climbed approximately 8% during after-hours trading following the announcement.
However, investor enthusiasm was somewhat dampened by the company’s fiscal 2027 forecast, which underperformed expectations across both revenue and profit metrics.
E.l.f. projects annual sales between $1.84 billion and $1.87 billion for the full year. The middle of this range trails the $1.87 billion that Wall Street analysts had anticipated. Meanwhile, adjusted EPS guidance ranging from $3.27 to $3.32 significantly missed the $3.61 consensus estimate.
The quarter included a notable complication: a $57.6 million charge related to the Rhode acquisition, reflecting the brand’s better-than-anticipated results. This expense contributed to a GAAP net loss of $49.4 million for the period. Excluding this charge, the company recorded net income of $19.4 million.
Strategic Pricing Adjustments on the Horizon
CEO Tarang Amin shared with CNBC that consumer spending has weakened as elevated gasoline prices and general economic pressures impact purchasing behavior. Unit sales volume has declined more significantly than anticipated in recent periods.
“We’ve seen units drop off a bit more in the last few months as consumers have particularly been suffering with higher costs,” Amin said.
The company recently experimented with reducing the price of its $18 Halo Glow skin tint by $4, which resulted in a remarkable nearly 40% increase in sales. This experiment demonstrated the current level of price sensitivity among beauty shoppers.
Consequently, E.l.f. intends to reverse certain price increases implemented last August, when it raised prices by $1 across its primary product range to compensate for tariff expenses. The company will continue testing lower price points on select items moving forward.
The cosmetics maker paid approximately $58.5 million in tariffs and is currently pursuing refunds following the Supreme Court’s decision striking down the tariffs. CFO Mandy Fields indicated that these refunds, combined with cost-reduction initiatives, might help counterbalance the margin pressure from price reductions.
The quarter’s gross margin expanded by 1.4 percentage points to reach 73%, partially supported by those price increases that are now being reconsidered.
Rhode Brand Powers Growth Momentum
Rhode has emerged as E.l.f.’s primary growth driver throughout the past year. The celebrity-backed brand saw sales surge 80%, fueled by its expansion into Sephora North America, Sephora UK, and Mecca, where it currently holds the top brand position at all three retailers.
This autumn, Rhode is scheduled to debut across 19 European markets through Sephora.
E.l.f. also identified a potential $15 million to $20 million challenge in fiscal 2027 stemming from increased oil prices connected to the U.S.-Israeli conflict with Iran. This potential impact has not been incorporated into current guidance figures.
Fields noted that approximately 75% of E.l.f.’s manufacturing takes place in China. The company reported it hasn’t observed trading-down patterns among consumers thus far, with customers maintaining their beauty product spending levels.
Amin indicated that mergers and acquisitions remain in the company’s strategic roadmap for the long term, though current priorities center on driving organic expansion within its existing brand portfolio.
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