E.l.f Beauty experiences a 50% increase in sales due to the success of its color cosmetics and skincare products, as well as the launch of its Bronzing Drops serum.

• Wall Street's quarterly estimates were surpassed by E.l.f. Beauty as sales increased by 50%.
• The CEO of the cosmetics company, Tarang Amin, stated that the new "Bronzing Drops" have been immensely successful.
• Despite the big sales beat, the beauty retailer posted cautious guidance.

's growth story is still going.

Again, the cosmetics retailer exceeded quarterly estimates on Thursday, achieving a 50% increase in sales.

In the first quarter of the fiscal year, the beauty giant's sales increased to $324.5 million, surpassing its previous quarter's sales by 76%. This led to an increase in full-year guidance.

The company experienced growth in all categories, with Bronzing Drops becoming a best-seller on the website after its launch during the quarter, as CEO Tarang Amin told CNBC.

Based on a survey of analysts by LSEG, how did the cosmetics company perform compared with Wall Street's expectations?

• Earnings per share: $1.10 adjusted vs. 84 cents expected
• Revenue: $324 million vs. $305 million expected

The company's net income for the three-month period ending June 30 was $47.6 million, or 81 cents per share, compared to $53 million, or 93 cents per share, in the previous year.

Sales increased by approximately 50% to $324.5 million from $216.3 million in the previous year.

Despite raising its guidance, E.l.f. Beauty's outlook failed to meet expectations after a strong first quarter.

E.l.f. now anticipates sales between $1.28 billion and $1.3 billion for fiscal 2025, a slight increase from its previous outlook of $1.23 billion and $1.25 billion. Analysts had predicted sales guidance of $1.3 billion, according to LSEG.

E.l.f. now anticipates its adjusted net income to be between $198 million and $201 million, compared to a previous outlook of between $187 million and $191 million. The company expects adjusted earnings per share to be between $3.36 and $3.41, compared to previous guidance of $3.20 to $3.25. Analysts had expected earnings of $3.42 per share, according to LSEG.

Shares fell about 6% in extended trading.

E.l.f. disappointed investors in May with its fiscal 2024 outlook, which fell below expectations. However, sentiment improved after finance chief Mandy Fields suggested that the company tends to provide conservative guidance.

""Our guidance range for last year was between 22% and 24%, and we ended the year at 77%. While we cannot guarantee a 77% success rate this year, our guidance philosophy is reflected in this achievement," Fields stated to analysts."

On Thursday, Amin stated to CNBC that Fields adopts a "balanced" approach to guidance and prefers to tackle things sequentially, one quarter at a time.

"Amin stated that over the past five years, we have historically underperformed in the first quarter but have consistently outperformed in the final quarter. We strive to maintain a conservative approach and our strategy has been successful. We will provide a quarter-by-quarter analysis to demonstrate our progress and aim to continue to surpass our expectations."

He stated that he is not worried about a consumer pullback in the beauty industry and remains optimistic about the overall market.

"Amin stated, "We are hearing that consumers are becoming more selective in the macro level. If they are, they are choosing E.l.f. We are differently positioned, and despite the pandemic, inflationary pressures, and other factors, we have performed well in the last 22 quarters. Our fundamental business model and how we differ are the key factors.""

E.l.f., a beauty retailer founded in 2004, has gained popularity among Gen Z and Gen Alpha consumers through marketing that resonates with them on platforms like TikTok and Roblox.

E.l.f.'s Bronzing Drops are compared to Drunk Elephant's "Sunshine Drops" by customers, but the prestige skincare line offers its product for $38 while E.l.f.'s retails for $12.

"Our community requested bronzing drops as the top item, and they came to us saying, 'Hey, there's a prestige item there. We love them, but E.l.f., help us out. We can't afford $38 for bronzing drops,'" said Amin. "We'll study it and put our own E.l.f. twist on it, introducing ours at $12. It immediately went to number one on Elfcosmetics.com."

The company refrains from comparing its products to any particular brands and instead allows its customers to make their own comparisons.

Amin stated that even though they don't make the comparison themselves, there are numerous TikTok videos comparing their product to others after its launch. These videos show people doing side-by-side comparisons and stating that the E.l.f. product is better, with a higher quality.

The company's collaboration with Roblox was expanded in July, allowing users aged 13 and above to purchase limited edition products such as its "e.l.f. UP! Pets Hoodie" and popular lip and SPF items.

The Olympics featured marketing campaigns with gymnast Gabby Douglas, a three-time gold medalist, and blind swimmer Anastasia "Tas" Pagonis. Additionally, the Olympics collaborated with Alicia Keys and Jameela Jamil.

E.l.f.'s net income decreased by 10% due to a 56% increase in selling, general and administrative expenses, which totaled $180.6 million during the quarter. The increase in marketing expenses was a significant factor in this decline.

Amin stated that the company is allocating more funds towards marketing this year compared to the previous year. However, he clarified that this was mainly due to timing rather than a deliberate increase in marketing expenditure. Furthermore, he mentioned that E.l.f. is striving to maintain a more consistent marketing spend as a proportion of sales throughout the year.

"Amin stated that we continue to invest more in marketing because it's effective. Our marketing ROIs are significantly higher than the industry average, and we are experiencing strong growth in our top line. We are also increasing brand awareness."