Key Takeaways e.l.f. Beauty's Q2 gross margin fell 165 bps y/y to 69%.ELF said tariff rates moderated after peaking, with every 10-point change affecting costs by about $17M.ELF expects a 71% gross margin in 2H26, supported by pricing and accretive mix.Gross margin recovery is emerging as a key focus for e.l.f. Beauty, Inc. (ELF) as the company navigates elevated tariff pressures while continuing to invest in growth in fiscal 2026. Although the fiscal second quarter reflected notable cost headwinds, managem ...

Core Viewpoint - The retail analyst Matthew Boss of JP Morgan has raised the price target for Nike, indicating a positive outlook based on recent performance and strategic changes within the company [1][3]. Company Performance - After 2.5 years, the analyst believes Nike's financial metrics have bottomed out, with improvements in the income statement and gross margin [2]. - Nike's recent shift to a more offensive strategy is attributed to new leadership and proactive inventory management, which is expected to drive future growth [2][7]. - The company has achieved a significant recovery in gross margins, beating street expectations by 100 basis points, largely due to effective inventory cleanup [8]. Market Dynamics - Nike is facing increased competition from brands like Hoka, but the company is adapting by enhancing its merchandising strategies and engaging more closely with partners [3][4]. - The analyst notes that Nike's stock is currently trading at a valuation significantly lower than historical levels, suggesting potential for upside as the company recovers [6]. Consumer Behavior - Recent data indicates that consumer spending remains resilient, with a two-year stack showing a 400 basis point increase compared to the trailing 12 months [10][11]. - The upcoming holiday season is expected to provide additional catalysts for consumer spending, particularly for higher and middle-income consumers [12]. Investment Opportunities - The analyst identifies Nike as a turnaround opportunity alongside other brands like Ralph Lauren and Tapestry, suggesting that Nike's strategic changes position it well for future growth [13].

Financial Data and Key Metrics Changes - The company reported a record quarterly revenue of $6.2 million for Q4 of fiscal 2025, compared to $4.2 million in the previous quarter and $4.7 million in Q4 of fiscal 2024, leading to an annualized run rate of approximately $25 million [5][23] - Gross margins for Q4 were 13%, up from 10% in the prior quarter but down from 22% in the same quarter last year, with annual gross margins at 18% compared to 30% in the prior year [25][28] - The company expects fiscal 2026 revenue to reach approximately $25 million, an increase of over 30% from $19 million in fiscal 2025, with gross margins projected to improve to around 30% [21][25] Business Line Data and Key Metrics Changes - Production revenue for Q4 was $5.1 million, up from $3.3 million in the previous quarter and $2.8 million in the year-ago quarter, while engineering revenue was $1.1 million, down from $1.9 million year-over-year [23] - The systems manufacturing business is expected to grow at least 75% in fiscal 2026, driven by the expansion of two major production programs [14][21] - Revenue from the micro-optics lab is projected to decline from $2.1 million in fiscal 2025 to $1.3 million in fiscal 2026 due to timing of a large defense customer reorder [24] Market Data and Key Metrics Changes - The company has seen a significant increase in production demand from its aerospace and surgical robotics customers, with a backlog for the aerospace program reaching nearly $9 million [10][24] - The transition of two major programs from development to production has provided increased visibility and confidence in future revenue growth [6][7] Company Strategy and Development Direction - The company is focusing on expanding its production capabilities and has invested in new facilities to support growth, including a move to a new headquarters in Littleton, Massachusetts [7][8] - The management is optimistic about the future, citing a strong backlog and the potential for substantial growth as production programs expand [30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges with gross margins in Q3 and Q4 of fiscal 2025 but expressed confidence in recovery and improvement in fiscal 2026 [15][21] - The company is taking steps to address production yield issues and has renegotiated pricing with customers to improve profitability [12][13] Other Important Information - The company has hired new manufacturing and quality engineers to strengthen its operations team and improve manufacturing efficiency [19][20] - The company expects to recover positive adjusted EBITDA in the range of half a million dollars for fiscal 2026 [21] Q&A Session Summary Question: Guidance on revenue for 2026 - Management acknowledged being conservative in their guidance, noting a decline in revenue from the micro-optics lab but expecting higher margin production revenue to replace lower margin tooling and fixturing revenue [35][37] Question: Medical program pricing adjustments - Management explained that they have negotiated higher costs with their medical program customer to cover initial production difficulties, with a plan to ramp down prices as issues are resolved [40][41] Question: Tariff reimbursements - Management confirmed they are in verbal agreements for tariff reimbursements and are finalizing documentation [42][43] Question: Engineering resources and project pipeline - Management indicated that engineering resources will be progressively filled throughout 2026, with multiple programs lined up for production [49][50] Question: Challenges with the second single-use program - Management reported that the second single-use program is progressing well, learning from challenges faced in the cystoscope program, and expects a smoother ramp-up [62]