Cosmetics company e.l.f. Beauty, Inc. (NYSE:ELF) reported its 1Q earnings after the bell Wednesday, revealing an impressive financial performance that outstripped market forecasts.
The company reported revenues of $321 million, surpassing the estimated $294 million, while earnings per share (EPS) stood at $0.53, significantly higher than the estimated $0.34.
The company's gross margin improved by approximately 180 basis points to 71%, benefiting from favorable foreign exchange impacts, international price increases, reduced retailer costs, cost savings, improved transportation costs, and product mix. These gains were partially offset by inventory adjustments.
Despite these positive results, the company's stock experienced a sharp decline during after-hours trading on account of a more cautious guidance outlook.
For the fiscal year, elf provided revenue guidance in the range of $1.23 billion to $1.25 billion, falling short of the estimated $1.28 billion. Similarly, the company's EPS forecast of $3.20 to $3.25 was lower than the estimated $3.60.
Shares of elf initially plummeted by 12% before settling around 5% lower aftermarket at around US$155.63.
CEO Tarang Amin expressed confidence in the company's growth trajectory, highlighting strong net sales growth and market share expansion in the fourth quarter.
“Fiscal 2024 marked our strongest year of net sales growth on record, a continuation of the exceptional, consistent, category-leading growth we’ve delivered,” the CEO said.
But the discrepancy between elf's strong quarterly performance and its tempered fiscal outlook has sparked discussions among analysts, with some attributing the stock's decline to the unexpected downgrade in earnings expectations for the coming year.