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As Project Unicorn Takes Hold, E.l.f. Beauty Posts Sales Uptick

"The big shift has been this focus on some of the bigger hitters."

E.l.f. Beauty’s turnaround plan seems to be working.

The beauty company revised its strategy earlier this year — shuttering all stores, revamping shelf space and refocusing on core categories.

Those efforts are helping the business to improve its numbers. E.l.f. posted a 6 percent uptick in net sales for the quarter ended Sept. 30, to $67.6 million. Net income was $6.5 million, up from $3.9 million in the prior-year period.

The gains were driven by increased productivity across retail channels and product price increases in response to tariffs, the company said. E.l.f. also said marketing and digital activations are helping, as well as timing — E.l.f. is keeping the marketing going even after it releases products these days, according to chief executive officer Tarang Amin.

“The big shift has been this focus on some of the bigger hitters,” he said. “Historically we kind of launched things and then as soon as they got on site we never did anything with them again. So [with] this approach you’re seeing with us leaning in on some of these holy grail products, like the Poreless Putty Primer or Camo Concealer, or even our eye shadow palettes and our brow products.”

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Marketing spend was up for the quarter, to 14 percent of sales. Digital campaigns include YouTube ads and TikTok initiatives.

E.l.f. created 175 different digital ads and creative pieces that have resonated with the watchers of YouTube, Amin said. “They’re getting strong response from consumers. We did a study with YouTube and we saw that the skippable ads were having video completion rates of around 50 percent, which is more than double the benchmark that they have, and more importantly, ad recall was around 60 percent, which is more than three times their relevant benchmark,” Amin said.

E.l.f.’s “eyes, lips, face” campaign on TikTok is also getting attention, he noted.

“I just got an update this morning, we’re now up to 2 million videos for that challenge have been created, which kind of boggles my mind a bit, and I think it’s up to like 3.2 billion views. I don’t know how to fully attribute, but I do know it’s got to make an impact to awareness…particularly among Gen Z,” Amin said.

All that digital marketing is driving sales to E.l.f.’s web site and retail partners web sites, Amin said, which are growing at faster rates than stores. Though stores are benefiting from an uptick after Project Unicorn, E.l.f.’s name for the project where it revamped shelf space.

“We are still the most productive brand on a dollar-per-foot basis at Walmart and Target, and we’re seeing really strong productivity growth at Ulta Beauty and our other customers as well,” Amin said. Phase three of Project Unicorn is slated for spring 2020, he noted. “It really is aimed at bringing even better visual merchandising to our key innovations,” Amin said.

While the makeup dip in the U.S. “affects everyone,” Amin said, E.l.f. is still gaining share. E.l.f. is also benefiting from skin care’s resurgence. “Our skin-care business as measured by Neilsen was up 39 percent,” Amin said, quoting data for a 12-week period ended in early October.

Brow pencil, 18-piece eye shadow palettes and face sponge are growing products. While E.l.f., an early player in fast beauty, is still launching quickly and frequently, its pace has moderated to about 80 launches per year, Amin said, with more marketing backing up those new products.

For the six-month period ended Sept. 30, E.l.f. posted $127.4 million in net sales, a 4 percent uptick. Net income was $10.2 million, up from $5.2 million in the prior-year period.

E.l.f. raised its guidance to reflect sales momentum, and is projecting sales of $265 million to $272 million for fiscal 2020, with adjusted net income between $23 million and $25 million.

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