Key Takeaways ELF delivered 14% y/y net sales growth in 2Q26 despite significant tariff headwinds.ELF raised prices by $1 across its portfolio, with about 75% of products still under $10.ELF expects the gross margin to improve later in fiscal 2026 from pricing and product mix.Pricing discipline is emerging as a critical lever in e.l.f. Beauty Inc.’s (ELF) strategy to navigate elevated tariff pressures through fiscal 2026, allowing the company to protect margins while sustaining consumer demand in a value-co ...

Core Insights - E.l.f. Beauty has experienced a significant decline in stock value, down 42% over the past year, despite gaining market share from traditional cosmetics leaders [1] - The company faces challenges due to high inflation and tariffs affecting its supply chain, particularly since 75% of its products are manufactured in China [3][5] - E.l.f. is capturing market share as consumers shift from luxury to mass brands, and it recently launched the luxury brand Rhode at Sephora, marking a successful entry [4] Financial Performance - In the fiscal second quarter of 2026, E.l.f. reported a 14% year-over-year increase in sales, but gross margin decreased by 1.65 percentage points to 69%, and adjusted EPS fell from $0.77 to $0.68 [5] - Management's guidance for full-year sales was below analyst expectations, indicating potential challenges ahead [5] Market Position and Future Outlook - E.l.f. has a market capitalization of $5 billion and trades at a price-to-earnings (P/E) ratio of 58, reflecting market confidence but also a premium valuation given its current performance [7][9] - For improvement in 2026, the company needs to enhance its supply chain and potentially localize production to mitigate tariff impacts, alongside benefiting from lower inflation [7] - There is potential for stock price recovery if E.l.f. exceeds expectations, but volatility may persist until market conditions stabilize [10]

Core Insights - The Rhode acquisition is a significant growth catalyst for e.l.f. Beauty Inc. in fiscal 2026, contributing $52 million to net sales in Q2 and setting a record for the largest launch in Sephora North America's history, surpassing the previous record by 2.5 times [1][9] - Management anticipates Rhode will contribute 22 percentage points to net sales growth in the second half of fiscal 2026, enhancing the company's overall revenue trajectory [2] - Rhode is projected to generate $200 million in revenues over the eight months post-acquisition and approximately $300 million on a 12-month annualized basis, reflecting a 40% year-over-year growth rate [3] Expansion and Strategy - The acquisition enhances e.l.f. Beauty's international opportunities, with nearly 20% of Rhode's direct-to-consumer sales coming from outside the U.S. Recent launches in Sephora U.K. and other global markets aim to expand reach [4] - e.l.f. Beauty is investing in brand-building, digital engagement, and retailer partnerships to support Rhode's growth, enhancing visibility across direct-to-consumer and wholesale channels while maintaining long-term margin improvement [5] Financial Performance - e.l.f. Beauty's shares have declined 34.5% over the past six months, contrasting with the industry's growth of 18.1%, while competitors Nu Skin and Coty have seen mixed performance [6] - The forward 12-month price-to-earnings ratio for e.l.f. Beauty is 22.16, lower than the industry average of 28.20, indicating a premium valuation compared to Nu Skin and Coty [8] - The Zacks Consensus Estimate for e.l.f. Beauty's fiscal 2026 earnings indicates a year-over-year decline of 13.6%, with a projected growth of 27.3% for fiscal 2027 [11]

Summary of e.l.f. Beauty Conference Call Company Overview - **Company**: e.l.f. Beauty (NYSE: ELF) - **Date**: December 03, 2025 - **Speakers**: Tarang Amin (Chairman and CEO), Mandy Fields (Senior VP and CFO) Key Points Industry and Market Outlook - **Growth Expectations**: e.l.f. anticipates organic growth of 2%-5% in the second half of the fiscal year, with a strong consumption rate of 12% in the U.S. [5][6][15] - **Market Share**: The company gained 90 basis points of market share in October, continuing a trend of gaining share for 27 consecutive quarters [5][16]. - **International Performance**: International consumption is down mid-single digits, particularly in the U.K. due to high promotional activity and the comparison to the launch of Rossmann in Germany [9][10]. Financial Performance - **Q3 vs. Q4 Expectations**: Q3 is expected to perform at or above the 2%-5% growth range, while Q4 may see a negative impact due to shipment comparisons from the previous year, potentially resulting in a double-digit decline in net sales [7][8]. - **Pipeline Impact**: The pipeline impact is quantified at about 4 points for the second half, affecting overall growth expectations [6]. Retail Strategy - **Shelf Space Gains**: e.l.f. has consistently gained shelf space across retailers, with a focus on productivity driving these gains. The brand remains the most productive in terms of dollar per linear foot [23][24]. - **Retail Partnerships**: The company has expanded its presence in major retailers like Target, Walmart, and Ulta, with Target being the largest partner [19][20][26]. Innovation and Product Development - **Innovation Strategy**: e.l.f. focuses on community-driven innovation, launching products based on consumer demand and maintaining a three-year pipeline for new products [36][38]. - **Upcoming Innovations**: The company is optimistic about its spring innovation pipeline, which includes several highly anticipated products [31][32]. Acquisition and Growth Potential - **Rhode Acquisition**: e.l.f. views the acquisition of Rhode as a significant growth opportunity, with Rhode achieving $212 million in net sales with just 10 products. The brand is expected to expand its distribution and innovation pipeline [40][48]. - **Skincare Market**: e.l.f. sees a massive opportunity in the skincare market, with Naturium and e.l.f. Skin complementing each other. The skincare segment is projected to be a key driver of growth [57][59]. Capital Allocation and Financial Health - **Stock Repurchase**: e.l.f. recently repurchased $50 million of stock, indicating confidence in the company's long-term potential despite market volatility [30]. - **SG&A Expenses**: The company expects a significant increase in SG&A expenses, primarily due to investments in marketing and infrastructure to support growth [66][70]. Consumer Behavior and Market Conditions - **Consumer Spending**: Despite macroeconomic concerns, e.l.f. has seen strong consumer spending during the holiday season, indicating resilience in its value proposition [80]. Conclusion - e.l.f. Beauty is positioned for continued growth through strategic retail partnerships, innovative product development, and a strong focus on consumer engagement. The company remains optimistic about its market share potential and the impact of its recent acquisitions on future performance.

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Core Viewpoint - The market's reaction to e.l.f. Beauty's management guidance appears overly harsh, despite a significant drop in stock value following the fiscal Q2 report [1][11]. Financial Performance - e.l.f. Beauty reported a 14% year-over-year sales increase to $344 million in fiscal Q2, missing analysts' consensus of $366 million [6]. - Adjusted EPS decreased from $0.77 to $0.68, surpassing the consensus estimate of $0.57 [7]. - Adjusted EBITDA fell by 4% to $146.8 million [7]. - Revenue guidance for the fiscal year is projected to grow by 18% to 20%, reaching $1.55 billion to $1.57 billion, with adjusted EPS expected between $2.80 and $2.85, down from $3.39 the previous year [4]. Market Dynamics - The company expects Rhode to contribute $200 million in revenue this fiscal year, with a $300 million annual revenue run rate, indicating a potential 40% growth [5]. - Organic sales are projected to rise by 3% to 4%, although shipments are expected to be lower than consumption due to previous shelf space gains [5]. Cost and Margin Analysis - Tariffs have significantly impacted profits, with about 75% of products made in China facing an average tariff of 60%, leading to a 165 basis point decline in gross margins to 69% [8]. - Selling, general, and administrative expenses increased to 56% of revenues, up from 53% the previous year, as the company invests in employees and infrastructure [8]. Strategic Outlook - Management plans to increase marketing spending to 27%-29% of net sales in the second half of fiscal 2026, up from 23% in the first half [9]. - e.l.f. Beauty has been a strong growth player in the cosmetics sector, with opportunities for innovation and expansion, particularly with the Rhode brand [12][13]. - The stock trades at a forward P/E ratio of 17.5 and a PEG ratio of 0.3, suggesting it may be undervalued [13].

We were uh talking about ELF in the uh morning meeting, the editorial meeting, and most of our time was devoted to Haley Bieber. Um uh most of our conversation that is. What can you tell us about um how hands-on Haley has been and um how promising this this brand is for you.>> Road is an incredible brand and Haley is continued to be involved. In fact, November is her birthday month. And uh if you're following her or wrote on social media, you can see that next week on the 12th, she's going to be dropping li ...

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Core Viewpoint - E.l.f. Beauty's stock plummeted over 29% after the company provided a full-year revenue guidance that fell short of market expectations, despite the anticipated $200 million sales contribution from the newly acquired beauty brand Rhode [1] Financial Performance - E.l.f. expects full-year revenue between $1.55 billion and $1.57 billion, representing a sales growth of 18% to 20%, but this is below analysts' expectations of $1.65 billion [1] - For the second fiscal quarter, E.l.f. reported a net profit of $3 million, or $0.05 per share, significantly down from $19 million, or $0.33 per share, in the same period last year [2] - Quarterly revenue increased from $301 million to $344 million year-over-year, a growth of approximately 14%, but still below the analyst forecast of $366 million [3] Impact of Tariffs - The company's profitability has been severely impacted by new tariff policies, leading to an 84% drop in net profit and a 1.65 percentage point decline in gross margin [3] - To mitigate tariff impacts, E.l.f. raised product prices by $1 starting August 1, which will not be reflected in the current quarter's financials [4] Rhode Brand Acquisition - The Rhode brand, acquired for $1 billion, is expected to contribute $200 million in sales this fiscal year, highlighting its importance for E.l.f.'s future growth amid slowing organic growth [1] - Rhode's business is currently growing at approximately 40% year-over-year and had a significant launch in Sephora stores, marking the largest brand debut in North America [4]

Financial Data and Key Metrics Changes - In Q2, net sales increased by 14% year-over-year, reaching $344 million, following a 40% growth in the same quarter last year [20][22] - Adjusted EBITDA for Q2 was $66 million, down 4% compared to the previous year [22] - Adjusted net income was $41 million, or 68 cents per diluted share, compared to $45 million, or 77 cents per diluted share a year ago [22] - Gross margin for Q2 was 69%, down approximately 165 basis points year-over-year, primarily due to increased tariff costs [21][22] Business Line Data and Key Metrics Changes - The acquisition of Rhode contributed $52 million, or approximately 17 percentage points, to net sales in Q2 [20][22] - Organic net sales, excluding Rhode, were down approximately 3% this quarter [3][20] - e.l.f. brand grew 7% in Q2, significantly outpacing the overall category growth of approximately 2% [2][3] Market Data and Key Metrics Changes - U.S. net sales grew 18% year-over-year in Q2, while international net sales grew 2% [20][21] - e.l.f. Beauty gained 140 basis points of market share in Q2, marking the 27th consecutive quarter of market share gains [2][3] Company Strategy and Development Direction - The company aims for full-year net sales growth of 18%-20% year-over-year, building on the 28% growth achieved in fiscal 2025 [4][25] - The addition of Rhode is expected to enhance long-term growth, with projected contributions of about $200 million in net sales for fiscal 2026 [5][26] - The company is focused on expanding its international presence, with launches planned in Poland and the Gulf Cooperation Council [13][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing strength of consumption trends and market share gains, indicating a positive outlook for fiscal 2026 [4][27] - The company anticipates that shipments will remain below consumption in fiscal 2026, particularly as they cycle through significant distribution gains from the previous year [4][27] - Management noted that the pricing strategy is designed to maintain price sanctity across retailers, which has been successfully resolved after initial delays [38] Other Important Information - The company has successfully transitioned to SAP for its ERP system, marking a significant milestone in its operational capabilities [23] - The marketing and digital investment for Q2 was 23% of net sales, slightly down from 24% in the previous year [22] Q&A Session Summary Question: Can you provide more insight into the corporate top-line guidance and the impact of shipments versus underlying consumption? - Management noted that consumption outperformed category growth, with e.l.f. brand growing 7% compared to the category's 2% [34] - The disconnect between consumption and shipments was primarily due to pricing issues, which are expected to normalize in the second half [34][35] Question: What are the expectations for organic growth in the second half? - Management expects organic growth of 2%-5% in the second half, driven by strong consumption trends [35][36] Question: How does the company view tariffs and their impact on inventory? - Management indicated that tariffs have been reduced to 45%, which is expected to improve gross margins in the second half [44][45] Question: What is the strategy for Rhode's distribution between wholesale and DTC? - The company plans to focus on both wholesale and DTC channels, with exclusive drops on their DTC site to drive sales [57] Question: Can you elaborate on the expected slowdown in organic growth for the core business? - Management highlighted that while consumption remains strong, the expected slowdown is due to cycling space expansions from the previous year [72][74]