Things are looking up at E.l.f. Beauty, though the company has had to raise prices on about one-third of its products because of tariffs.
Chief executive officer Tarang Amin said the brand, which does a large part of its manufacturing in China, was about to skirt around price increases last year when tariffs were 10 percent, but that the hike to 25 percent has led to the company taking a “balanced approach” to price increases. That means that instead of the “peanut butter” approach, E.l.f. is selectively raising prices on items where it makes sense. Prices have already increased on the brand’s website, he said, and will increase across retail partners over the course of the next month.
“It’s not [by] 25 percent, it’s less than that,” Amin said, noting that price increases have also taken into account what products competing brands are manufacturing in China, where price increases would also be likely.
“We focused on the places where we had the greatest value — in those [stockkeeping units] we may go up more than 25 percent. We love the simplicity of an even dollar price point,” Amin said.
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That means that some of E.l.f.’s products may go from $3 to $4, but others will stay at their current prices.
“We’re also making investments in certain products that we want to really make price statements with,” Amin said. “We have the number-one primers in America, and we kept our core primers at $6 even though they’re affected by tariffs.”
Consumers have taken notice of the price hikes, Amin said, but E.l.f. has responded transparently, talking about the tariffs, he said. “We led with our own site…we led in some respects, before any retailer went, and some consumers noticed and we responded and they understood,” Amin said.
Further price increases are not anticipated at this point, Amin said.
Tariffs are affecting E.l.f.’s products just as the company is starting to get back on track in terms of sales.
The business ended its first quarter with a 1 percent net sales increase to $59.8 million for the three months ended June 30. The sales gain was driven by increases at national retailers. Numbers also reflect $3.2 million in net sales related to E.l.f.’s own stores, which closed in February. Net income was $3.7 million, up from $1.2 million in the prior-year period.
“We’re focused on recharging the brand and highlighting our key first to mass products through increased marketing and digital activations. We are encouraged by the early progress of our strategic imperatives, which have driven improvements in productivity within our national retail partners, as well as on elfcosmetics.com,” Amin said in a statement.
The business recently revamped its strategy, focusing on its wholesale partners and closing its own stores. Inside stores like Target and Walmart, E.l.f. has also revised its strategy for the shelf, changing outer packaging and focusing at-shelf messaging on hero categories, like primers and brow pencils. Currently, E.l.f. is resetting its brush displays. The next phase of the plan, which is called Project Unicorn, is slated for early 2020 and will include putting more new products on store shelves and further modifications to visual merchandising, the company said on its earnings call Thursday.
E.l.f. has also been ramping up mailings to influencers, and mailed 500 influencer packages related to its Jelly Pop launch during the quarter. The strategy appears to be working, and E.l.f. said engagement related to Jelly Pop has been seven times higher than on average.
The brand has seen continued success of its Poreless Putty Primer and 16-Hour Camo Concealer, which is now displayed in 1,500 Walmart stores.
Poreless Putty Primer, which is credited with being a mass-market version of Tatcha’s $52 Silk Canvas primer, is now E.l.f’s number-one product, Amin said. “Poreless Putty Primer is a beast.…It’s our number-one item across every one of our national retail partners that it’s in, as well as elfcosmetics.com…and we were out of stock for a good portion of the quarter.”