Will Trump Tariffs Kill e.l.f. Beauty (ELF) Momentum?
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e.l.f. Beauty (ELF) just delivered its 23rd consecutive quarter of growth, a feat achieved by only six public consumer companies out of 546. Even more impressive, the company grew net sales 40% year-over-year while other beauty brands struggled with slowing consumer spending. Our TrackStar data shows financial professionals are taking notice. Search volume for ELF surged above competitors, generating more than 1,150 searches compared to 141 for Coty (COTY) and just 36 for Nu Skin (NUS). With international sales soaring 91% and ambitious expansion plans, e.l.f. Beauty shows no signs of slowing down. Yet, with a new administration looking to tariff Chinese imports, e.l.f., which sources its products from China, faces a serious headwind. Here’s how we see things playing out. e.l.f. Beauty’s Business e.l.f. Beauty has transformed from a budget cosmetics brand into a multi-brand powerhouse focused on making premium beauty accessible to everyone. The company operates through five brands: e.l.f. Cosmetics, e.l.f. SKIN, Keys Soulcare, Well People, and NATURIUM, serving customers across price points and categories. All products are cruelty-free and vegan, with operations run through Fair Trade Certified facilities. e.l.f. Beauty segments its business into the following areas:
In Q2 2025, net sales increased 40% to $301.1 million, driven by strength in both retailer and e-commerce channels domestically and internationally. The company gained 195 basis points of U.S. market share. The company’s Beauty Squad Loyalty Program now has 5.3 million members, with enrollment growing about 30% year-over-year. |
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e.l.f. continues expanding its retail presence, announcing entry into Dollar General stores and increased space in Target and Walgreens for spring 2025. Internationally, the company launched in 1,600 Rossmann stores in Germany and entered Sephora Mexico. e.l.f. ranks as the #1 teen cosmetics brand for the sixth consecutive season in Piper Sandler’s teen survey, with 35% mind share – 3.5x higher than the second-place brand. All that being said, the possibility of a 60% across the board tariff would severely hamper U.S. sales. But, it would likely hit all cosmetics brands the same as the majority source from China. Financials
Source: Stock Analysis The numbers tell a compelling growth story. Revenue grew from $392 million in FY2021 to over $1.2 billion in the trailing twelve months, representing a 48.7% three-year compound annual growth rate. Gross margins expanded 40 basis points to 71% in the latest quarter, driven by cost savings, favorable foreign exchange impacts, and international price increases. Operating income remains strong at $127.5 million for the trailing twelve months, though slightly lower than the previous year due to increased marketing investments and the NATURIUM acquisition. The balance sheet shows $96.8 million in cash against $156.6 million in long-term debt. While debt increased from the NATURIUM acquisition, the company maintains less than 1x leverage in terms of net debt to adjusted EBITDA. Free cash flow generation hit $22.7 million in the trailing twelve months, supporting continued investments in growth initiatives. Valuation
Source: Seeking Alpha e.l.f. trades at a premium to peers, reflecting its superior growth profile. The stock carries a forward P/E of 48.5x compared to 24.2x for Inter Parfums (IPAR) and 21.0x for Coty. However, this premium appears justified given e.l.f.’s exceptional growth rates and market share gains. Yet, at 80.1x forward operating cash flow, all it would take is one mishap to send shares lower. Growth
Source: Seeking Alpha e.l.f.’s growth metrics stand out dramatically against competitors. Revenue grew 59.0% year-over-year compared to -0.3% for Estee Lauder (EL) and 5.9% for Coty. The three-year revenue CAGR of 48.7% dwarfs the industry average. The company recently raised its fiscal 2025 outlook, now expecting 28-30% revenue growth compared to 25-27% previously. International expansion provides another growth lever, with international sales surging 91% in Q2 and now representing 21% of total sales. Profitability
Source: Seeking Alpha e.l.f.’s profitability metrics showcase operational excellence. Gross margins of 71.0% exceed most competitors except Estee Lauder at 72.4% and Nu Skin at 74.4%. EBITDA margins of 13.5% trail some larger peers but show consistent improvement as the company scales. Return on equity of 17.4% and return on assets of 13.7% demonstrate efficient capital allocation, particularly impressive given the company’s high growth rate.
Our Opinion 6/10 e.l.f. Beauty has built a formidable business with multiple growth drivers. The company’s ability to consistently gain market share while expanding internationally speaks to the strength of its business model and execution capabilities. With significant white space in international markets, ongoing retail expansion, and a proven ability to innovate, e.l.f. appears poised for continued outperformance. However, we won’t know whether the company will face higher tariffs, and if they do, be able to pass the costs along to customers. We believe the rich valuation only accounts for the company’s historical performance and needs to come in further to account for future uncertainty. |
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Proprietary Data Insights Financial Pros’ Top Beauty Stock Searches in the Last Month
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