e.l.f. BeautyELF

The company reported about 479 million dollars in sales for the quarter, well ahead of the 430 million dollars analysts expected. Profits were also much higher than anticipated, coming in at 1.75 dollars per share compared to the 71 cents analysts were looking for. This marks seven years of continuous growth for the brand, which has found success by selling high-end-style makeup at much lower prices than traditional luxury brands.

Because of this momentum, management raised its sales growth target for the full year to about 19 percent, up from its previous goal of 13 percent. The results show that the company is still taking market share even as shoppers become more careful with their spending. By offering affordable alternatives to expensive products, the company is proving it can grow in a difficult economy where people are looking for ways to save money without giving up their beauty routines.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

The company is set to share its latest results today. Analysts are looking for earnings of about 71 cents per share. Beyond the numbers, the focus is on whether the brand is still winning over younger shoppers and if its newer skincare lines are gaining traction.

This business has a strong track record, having beaten analyst expectations in seven of the last eight quarters. We will be looking for updates on its international growth and whether it can maintain its momentum in a crowded beauty market.

See the full quarter, and how our tracked metrics did

Key highlights

• Sales outlook raised: Management raised its full year revenue growth forecast to a range of 18% to 20% from its earlier target of 12% to 14%. This higher bar shows the company is seeing stronger demand for its brands than it initially expected just a few months ago.
• Profit margins surge: Gross margin, which is the percentage of sales left after making products, jumped to 83% compared to 69% a year ago. A one-time refund for international trade taxes made up most of this gain, but the company also benefited from higher prices and lower shipping costs.
• Rhode brand outperforming: The company recorded a $16.1 million charge because its newly acquired brand, Rhode, performed better than the levels required for its payout agreement. While this is an expense, it marks a win for the long-term strategy of buying and growing smaller, high-demand beauty brands.
• Marketing spending climbs: Operating expenses rose by $84.5 million to $280.3 million as the company spent more on ads, shipping, and higher pay for its staff. This shows the company is still spending heavily to maintain its growth streak, which has now lasted for 30 quarters in a row.
• Cash position strengthens: The company ended the quarter with $344.2 million in cash, which is more than double the $170 million it had a year ago. Having more cash on hand gives the business more flexibility to buy other brands or invest in new products as it tries to keep taking market share.

Our take: A very strong quarter that shows this growth story is still in high gear. The massive jump in profit margins and the raised full year sales forecast prove that the company can still find new customers even in a crowded market. It reinforces our view that this is a top tier brand in its category.