Elf Beauty Raises Sales and Profit Forecasts

By Anuja Bharat Mistry

(Reuters) – Elf Beauty raised its forecasts for annual sales and profit on Wednesday, betting on its efforts to sell cosmetics such as lip oil and liquid blush at affordable price points in the U.S. and abroad, sending the company's shares up 9% in extended trading.

Customers, who have been hunting for lower-priced makeup and skincare products, have helped in boosting Elf's sales in a challenging market where major beauty brands like Estee Lauder (NYSE:EL) and L'Oreal have been wrestling to lift demand.

Elf expects net sales in the range of $1.32 billion to $1.34 billion, compared with its prior forecast of $1.28 billion to $1.30 billion.

The company's strategy of introducing "dupes" of luxury cosmetics and pricing its products between $2 and $10 has further bolstered demand.

The California-based company has expanded product offerings to mass retailers such as Walmart (NYSE:WMT), Target (NYSE:TGT) and Amazon.com (NASDAQ:AMZN), helping it reach a wider customer base in the United States.

Elf is expanding into a subset of Dollar General (NYSE:DG) stores in November, CEO Tarang Amin said on a post-earnings call, adding that it helps to tap a consumer base that only has access to some legacy mass brands.

Net sales rose 40% to $301.1 million for the quarter ended Sept. 30, compared with analysts' average estimates of $285.8 million, as per data compiled by LSEG.

On an adjusted basis, it earned a profit of 77 cents per share, beating analysts' estimates of 43 cents per share.

It expects annual adjusted earnings per share between $3.47 and $3.53, up from its prior range of $3.36 to $3.41.

Price increases in international markets such as India and Germany and cost-saving measures helped Elf grow its second-quarter gross margin by 40 basis points to 71%.

Elf has a broad appeal across all income groups, Amin told Reuters, adding that the company's "strategy is to have the highest quality at an accessible price or at an extraordinary price."