Cosmetics retailer raises guidance after posting 40% sales gain, with e.l.f. leading the way.

• In the second fiscal quarter, E.l.f. Beauty experienced a 40% increase in sales, prompting it to revise its full year earnings and sales projections.
• According to CEO Tarang Amin, our brand is the most popular among Gen Z, Gen Alpha, and millennials, with a significant lead over other brands in the market.
• Under President-elect Donald Trump, the company is well-positioned to withstand increased tariffs.

On Wednesday, the company raised its full-year sales growth guidance to 40%.

Shares of the company rose nearly 20% in after-hours trading.

LSEG announced that the cosmetics retailer's earnings exceeded expectations on both the top and bottom lines, and now anticipates sales to be between $1.32 billion and $1.34 billion during fiscal 2025, surpassing the $1.30 billion analysts had predicted.

According to a survey of analysts by LSEG, how did E.l.f. perform in its second fiscal quarter compared to Wall Street's expectations?

• Earnings per share: 77 cents adjusted vs. 43 cents expected
• Revenue: $301 million vs. $286 million expected

The company's net income for the three-month period ending September 30 was $19 million, or 33 cents per share, compared to $33 million, or 58 cents per share, in the same period a year ago. However, excluding one-time items, E.l.f. reported earnings of $45 million, or 77 cents per share.

Sales increased by approximately 40% to $301 million from $216 million in the previous year.

E.l.f. has revised its full-year revenue guidance from $1.28 billion to $1.3 billion and also increased its adjusted earnings guidance. The retailer anticipates adjusted earnings to be between $3.47 to $3.53 per share, an improvement from its previous outlook of between $3.36 and $3.41 per share. Analysts had predicted earnings guidance of $3.51, according to LSEG.

Over the past couple of years, the cosmetics company has experienced significant growth due to its successful viral marketing and ability to appeal to young shoppers with affordable versions of high-end products.

"According to CEO Tarang Amin, E.l.f. is experiencing multi-generational appeal. The brand is the number one choice among Gen Z, with a significant lead, and also the most popular among Gen Alpha and millennials. This indicates that E.l.f. is attracting consumers across various age and income groups, which speaks to the effectiveness of its strategy and the quality of its products."

Both Amin and have planned to increase the retailer's shelf space allotment starting in the spring due to their success.

In the quarter, E.l.f.'s selling, general and administrative expenses increased by $74 million to $186.1 million, which was 62% of net sales. Despite this, the company still achieved a 71% gross margin, an improvement of 0.4 percentage points from the previous quarter.

Tang attributed the increase in margin to a combination of favorable foreign exchange rates, previously enacted price increases internationally, and its overall value proposition.

"Our success in providing high-end products at affordable prices has been our greatest strength, but most of our profit growth has come from our innovative approach," Amin stated. "With the launch of our latest product, we can increase our margins slightly while still providing exceptional value to our customers."

The company has been expanding its international sales, accounting for approximately 21% of its total revenue.

Exposure to foreign markets will help cushion the impact of any tariff increases under President-elect Donald Trump, as stated by Amin.