e.l.f. Beauty has reported a quarter of growth, with net sales rising 31% to US$355.3m for the third quarter of fiscal 2025, marking its 24th consecutive quarter of sales gains.
But despite surpassing analysts’ expectations, the company has cut its full year outlook.
This, it said, was due to softer demand in the mass beauty category leading to a 20% drop in share value in extended trading.
Tarang Amin, Chairman and CEO of e.l.f. Beauty, highlighted the brand’s continued momentum, across digital, colour cosmetics, skin care and international markets.
“I’m proud of the e.l.f. Beauty team for delivering another quarter of consistent, category-leading growth.
“In Q3, we grew net sales 31% and gained 220 basis points of market share in the US,” he said.
“We believe we are still in the early innings of unlocking the whitespace we see across these areas.”
However, he acknowledged that demand in the mass beauty channel softened in January, and some newer product launches had a slower than expected start.
For the nine months ended 31 December 2024, e.l.f. Beauty saw net sales climb 40% to $980.9m, which the drug store company said was driven by strong performance in retail and e-commerce channels worldwide.
Gross margin improved by 40 basis points to 71%, supported by foreign exchange rates and cost efficiencies, while adjusted net income reached $43m for the quarter.
Despite its strong results, the company revised its fiscal 2025 outlook downward, citing economic uncertainty and weaker than expected demand.
Net sales are now expected to reach between $1.3bn and $1.31bn, down from the previous forecast of up to $1.335bn.
Profit expectations have also been lowered, with adjusted diluted earnings per share now projected at $3.27 to $3.32, compared with the earlier estimate of $3.47 to $3.53.
e.l.f. Beauty faces several issues which have impacted its forecast.
Gen Z consumers, the brand’s core demographic, are grappling with economic and political uncertainty, as well as concerns over the future of TikTok in the US.
TikTok is said to be an essential platform for e.l.f. 's digital engagement.
The implementation of a 10% tariff on imports from China may also lead to price increases, as 80% of the brand’s products are manufactured there.
While these challenges have prompted a more cautious outlook, e.l.f. Beauty continues to outperform much of the beauty industry.
The company gained 220 basis points of US market share in Q3 and still advocates for accessible beauty, due to its affordable pricing and the brand's commitment to clean, vegan and cruelty free formulations.
With a portfolio that includes e.l.f. Cosmetics, e.l.f. Skin, Keys Soulcare, Well People and Naturium, the brand owner says it remains focused on expanding its international presence and solidifying its position in the beauty space.
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