e.l.f. Beauty mascara and liquid eyeliner are arranged in Germantown, New York, US, on July 17, 2023. e.l.f. Beauty, Inc. is scheduled to release earnings figures on August 1. Photo Credit: Gabby Jones/Bloomberg
Elf Beauty Inc. reported a significant 50% increase in revenue for the latest quarter compared to the same period last year, driven by strong demand for its lip oil and bronzing drops. This growth has allowed the company to capture a larger market share from its competitors.
Elf has capitalized on consumers' preference for affordable cosmetics, offering its lip oil at a fraction of the cost of luxury brands. Elf's product is priced at $8, whereas Dior's equivalent costs $40 in the U.S. market. "We’ve noticed that consumers are becoming more selective, but they’re choosing Elf," CEO Tarang Amin said during a Thursday earnings call.
The average price of Elf's products is about $6.50, significantly lower than the nearly $9.50 average for other mass-market cosmetics and over $20 for high-end brands, Amin added.
However, despite the impressive revenue growth, Elf's stock fell sharply on Friday following a forecast for the current quarter that missed analysts’ expectations for earnings before interest, taxes, and other items. Raymond James analyst Olivia Tong attributed the lower-than-expected guidance to "incremental conservatism on sales."
Growing Popularity of Lip Oil
The popularity of lip oils has been on the rise, with brands like Summer Fridays, Nyx Professional Makeup, and Rare Beauty also launching similar products recently. According to Larissa Jensen, a global beauty industry adviser at Circana, many consumers are leaning towards a more natural look, with lip oils fitting this trend. Lip oils are lighter than glosses, less pigmented, and often marketed as more hydrating.
Over the past two years, the growth in lip oil sales has far surpassed that of balms, glosses, and lipsticks. In the U.S., sales of high-end lip oils surged to nearly $130 million in 2023, up from under $18 million in 2021, according to Circana. Although this growth has recently slowed, high-end lip oils continue to outsell lipsticks and glosses. Sales of luxury lip oils increased by 56% in the first half of this year compared to the previous year, while lip gloss sales rose by 5%, though at higher volumes.
While specific figures for mass-market lip oils aren't available, Jensen noted that demand remains strong in this category as well. Jessica Ramírez, an analyst at Jane Hali & Associates, pointed out that lip oils are appealing to companies because they are often used quickly, leading to frequent repurchases.
For consumers, lip oils represent an affordable luxury. "Even when money is tight, these small indulgences can make you feel good about yourself," Ramírez said.
