Hailey Bieber’s cosmetics line ‘Lord’ is expected to increase elf beauty‘s annual sales rose $200 million this fiscal year, but the new parent’s full-year outlook remained below expectations, and the company’s stock plunged 29% on Wednesday.
Elf declined to release full-year guidance last quarter, but it expects full-year sales to be between $1.55 billion and $1.57 billion, implying sales growth of 18% to 20%. That’s far below the $1.65 billion that analysts had expected, according to LSEG.
CEO Taran Amin said in an interview with CNBC that Lord, which was acquired in a blockbuster $1 billion deal earlier this year, is expected to increase annual revenue by $200 million this fiscal year and $300 million on an annual run rate basis.
Lord’s expected sales contribution represents about 13% of revenue forecasts, underscoring how important the deal is to Elf’s future as significant growth continues to slow. This indicates that Elf needs loads to support growth in the coming quarters, and without the acquisition, the potential for revenue growth may have been much slimmer.
On the earnings front, Elf expects full-year adjusted earnings per share to be in the range of $2.80 to $2.85, well below expectations of $3.58, according to LSEG.
In addition to the outlook, Elf missed revenue expectations in its second quarter results, but beat profits.
Here’s how the beauty company performed compared to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: 68 cents adjusted vs. 57 cents expected Earnings: $344 million vs. $366 million expected
The company reported net income of $3 million, or 5 cents per share, for the three months ended Sept. 30, compared with $19 million, or 33 cents per share, in the year-ago period. Excluding one-time items related to stock-based compensation and other non-recurring expenses, Elf’s earnings were 68 cents per share.
Sales were $344 million, an increase of approximately 14% from $301 million in the same period last year.
Amin attributed the revenue and guidance misses to the company’s failure to issue guidance last quarter, which could impact consensus estimates.
“In fact, we believe that both the sales and net sales expectations that we have achieved are very strong,” he said.
Elf primarily sources its cosmetics from China, but President Donald Trump’s new tariffs have squeezed profitability. Net profit for the quarter fell by a staggering 84%, with the company announcing a 1.65 percentage point decline in gross profit, mainly due to higher tariff costs.
Amin said the biggest hit from the tariffs is expected in the second quarter, with the impact expected to ease gradually from there.
“In response to the tariffs, we increased our prices by $1 starting August 1, so we are seeing the impact of the tariffs this quarter even without pricing,” Amin said. “Gross margins will actually improve sequentially in the second half of this year.
Amin said there have been no major product launches from the namesake brand, which are currently in development, but Lorde is Elf’s main growth driver, with the business growing about 40% year-on-year so far, he said.
It went on sale in Sephora stores nationwide in September, making it the largest North American brand launch in the company’s history, Amin said.
“It was 2.5 times the size of[Sephora’s]second-largest launch in history, Unit 2, so it did really well,” Amin said. “We continue to see incredible growth potential, not just in North America where we’ve just launched and the UK where we’re about to launch, but also internationally. … We definitely see global potential for the brand and we see it being much bigger than it is now.”
