By Granth Vanaik
(Reuters) - Elf Beauty projected annual sales and profit below Wall Street expectations on Wednesday, in a sign that sticky inflation has left little room for Americans to spend on affordable luxuries such as cosmetic and skincare products.
However, the California-based firm topped estimates for fourth-quarter revenue and profit.
WHY IT'S IMPORTANT
While beauty companies such as Elf managed to sustain the post-pandemic demand boom, the forecast indicates that still-high food prices and interest rates have forced customers to prioritize needs-based goods over discretionary purchases.
CONTEXT
Last month, retailer Ulta Beauty (NASDAQ:ULTA) flagged a slowdown in demand across categories in the first quarter.
U.S. retail sales for cosmetics and beauty products are expected to grow by 6.9% in 2024, compared with 10.5% increase seen in 2023, according to data analytics firm Emarketer.
Analysts at UBS have also noted that Elf has a history of providing conservative full-year targets.
KEY QUOTE
"We do like to take things one quarter at a time ... it's very hard to kind of grow 80% on top of 80%," said CEO Tarang Amin in an interview with Reuters, adding that the first initial outlook is "very strong."
Amin also noted that Elf is seeing overall "good behavior" from a consumer standpoint.
BY THE NUMBERS
Elf expects 2025 sales to be between $1.23 billion and $1.25 billion, below expectations of about $1.27 billion, according to LSEG data.
The company expects annual adjusted profit to be between $3.20 and $3.25 per share, versus estimates of $3.51 apiece.
Net sales rose 71.4% to $321.1 million in the fourth quarter, beating estimates of about $292.6 million. In the previous quarter, sales grew by 84.9%.
It posted adjusted profit of 53 cents per share, topping expectations of 32 cents.
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