Wall Street and Gen Z don’t often find common ground, but there is one thing they seem to agree on: Both sides love E.l.f. Beauty.
The company, which is celebrating its 20th anniversary this year, is the number-one beauty brand among young consumers, according to Piper Sandler’s 2024 Taking Stock With Teens Survey. It’s also one of the top-performing companies on the New York Stock Exchange, notching its 22nd consecutive quarter of growth and surpassing $1 billion in sales for the first time in its history.
And while the recent downturn in the overall beauty market has dampened the enthusiasm slightly, under the aegis of chairman and chief executive officer Tarang Amin, E.l.f. is on a giant winning streak.
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To wit: Its share price has risen from $139 at the beginning of the year to around $177 at press time. It’s the second largest makeup brand in mass, just behind Maybelline New York, for the year-to-date ending in May, according to Circana, and is the top share gainer. Piper Sandler reported E.l.f. is a top 10 skin care brand for teens, too, as well as one of the most desired beauty retailers.
Not bad for a company founded 20 years ago by father-son entrepreneurs Alan and Joseph Shamah (with help from makeup artist Scott Vincent Borba), who saw space in the market to provide high-quality cosmetics at a value-driven price.
Since then, E.l.f. Beauty has seen many iterations, including being acquired by private equity firm TPG in 2014, which brought on Tarang Amin, a coinvestor, as chief executive officer.
An industry veteran with experience at P&G and Clorox, Amin’s vision was to create a different kind of beauty company by building brands that disrupt norms, shape culture and connect communities through positivity, inclusivity and accessibility.
That mission has not changed. “There’s a lot in there, but we believe in every word of that vision,” he said, during a wide-ranging interview with WWD Beauty Inc in which he shared how the company plans on not just maintaining the momentum — but accelerating it.
First up: World domination. Over the last year, E.l.f has doubled down on pursuing international expansion. “International is a huge opportunity for us,” said chief financial officer Mandy Fields, noting that international represents about 15 percent of E.l.f.’s overall business. “Currently, our international business is largely concentrated to the U.K. and Canada so really,” she said, “we have the rest of the world open to us.”
Recently, in Europe, E.l.f. rolled out in Etos and Douglas in the Netherlands and at Douglas in Italy. To mark E.l.f.’s physical expansion in the latter, in true E.l.f. fashion the brand took over the streets of key cities with subway and tram takeovers, bus wraps and digital screen ads.
So far, the expansion is paying off.
“When we went into Douglas Italy, we quickly became their number-one brand. We went to Etos in the Netherlands. We became their number-one brand,” said Amin. “There’s a lot of pent-up demand for E.l.f. across the world, and we’re excited to really go after all three of the areas.”
Amin stressed that with so much white space opportunity, the challenge is execution. That’s why the company has been building out an international team, including opening an international office in London.
In a note to investors, Ashley Helgans, an analyst at Jefferies, noted the potential impact of E.l.f.’s launch in the Netherlands, writing, “The footprint of these two retailers is significant. The Netherlands mass color cosmetics market in 2022 was worth $394 million and mass skin $547 million.”
Next on the agenda is Germany via drug store chain Rossmann’s 1,200 doors, its biggest international expansion to date.
“Germany’s the largest cosmetics and market in in Europe,” said Amin. “For us, I’d say the approach is more than what country you pick. It’s do we feel we have the right partner? One of the things that made us successful in Italy is that Douglass gave us a lot of support, the same with Etos in the Netherlands. They really got behind the brand. We feel Rossmann is going to be a terrific partner for us to get the brand into Germany.”
Then there’s Mexico, which the brand is entering via Sephora in the fall, marking its first time in that country and in that retailer. According to data from Euromonitor, Mexico was the ninth-largest beauty and personal care market in 2023 at just over $15 billion, sandwiched between France and Italy. In 2018, it stood at around $10 billion.
On the decision to enter Mexico via Sephora, traditionally home to prestige beauty, Amin said that the lines between mass and prestige are becoming increasingly blurred.
“If you looked at the makeup bag of an E.l.f. consumer, she’ll have E.l.f., but she might even have a Chanel product in there,” he said.
At the same time, he also pointed to the fact that outside of the U.S., Sephora often has a greater mix of both prestige and mass brands. “That’s one of the reasons why they’re so keen on having E.l.f.,” he said. “They feel like E.l.f. really bridges the entire market. And it’s something that their shoppers have been asking for.”
As for what E.l.f. has learned from the recent geographical expansion, while every market is different to some degree, Amin believes there are more similarities than dissimilarities.
“When we entered Douglas Italy, we asked them, ‘How much do you want us to customize this brand for the Italian consumer?’ They told us, ‘not much. Italians love hot American brands,’ and that’s exactly what we found. By the day we launched, there were lines all the way down the block.”
It turns out that also extended to primers, despite Douglas’ initial doubts. Executives told Amin and the team that Italian consumers don’t use primer. His response?
“We said, ‘But, you know, Power Grip is the number-one stock keeping unit in all of the U.S. so we’re going to put it in. If it doesn’t do well, we can always pivot,’” he recalled. “Sure enough, the number one sku for Douglas Italy, is our Power Grip Primer. So apparently, Italians do use primer. They just didn’t know it,” added Amin.
He is equally as bullish on the company’s skin care offerings. E.l.f. acquired masstige brand Naturium from The Center in October for $333 million, stating at the time that the acquisition furthered the company’s mission to make the best of beauty accessible to every eye, lip, face and skin concern.
With the acquisition, it doubled its penetration within skin care to 20 percent and wasted no time in expanding Naturium’s footprint into Ulta Beauty in the U.S. and Shopper’s Drug Mart in Canada.
“Skin care is a bigger category globally than color cosmetics so we see that as huge potential for us as we continue to expand the E.l.f. Skin portfolio, as well as continue to roll out Naturium globally,” said Amin.
E.l.f. Skin is also growing rapidly, and has cracked the ranks of the leading players for the first time. “We’re now the number-nine skin care brand in the U.S., with about a 2 percent share,” said Amin. “Last year, we were only at a 1.4 percent share, so we continue to grow share, but we still have a tremendous amount of potential.”
Having both brands as part of the portfolio has enabled each to draw from the other. For example, Naturium’s success in body is a likely path forward for E.l.f., while E.l.f.’s relationship with key retailers is helpful to expanding Naturium’s footprint.
“Being able to leverage the capabilities we have, particularly from a distribution standpoint, is key” said Amin.
As for whether E.l.f. is up for making any more acquisitions, the company is game, but would need to find a target with the same caliber as Naturium, which was profitable from Day One.
“We believe acquisitions can play a role as we move forward,” said Fields. “The great thing is we have so much organic growth that we have the luxury of being able to be very choiceful and take our time with what we want to bring into our portfolio. Naturium was just straight down the fairway for us. It really checked all of the boxes — high growth, lots of white space, profitable values aligned. That’s really what we’re looking for in an acquisition.”
In her role as CFO, Fields sees brands that are high growth, but not profitable, or others that are profitable, but the growth has slowed.
As for categories, she is open. “We’re very much open to exploring other things and looking at capabilities that other brands could bring to us. It’s not just color cosmetics and skin in particular.”
That doesn’t mean that incubation is off the table, though, with E.l.f. previously incubating Keys Soulcare with singer Alicia Keys. But for now, acquisition looks like the more attractive option.
“We’re open to both approaches, but there’s an advantage sometimes in acquisition, where you already have the scale that gives you a starting point and that we can grow from there,” said Amin. “One of the things we get with acquisition is greater scale right away. What we get with something like a Naturium is they went from zero to over 90 million in sales in three years. We liked the fact that it already had a good sales basis and a fully developed team that we could continue to build. We’ve been investing in the brand, we’ve been investing in the team, and we continue to see incredible results from it.”
On color cosmetics, the biggest part of the business, E.l.f. recently surpassed L’Oréal Paris to become the second largest color cosmetics brand in the U.S. with about a 12 percent share.
Amin pointed to Target Corp. to show how much further potential there is for the brand in that category. Target was E.l.f.’s first retail partner — and is still growing. “We’re highly confident that over the next few years, we can again double our market share in color cosmetics. We have that confidence based on what we’ve been able to do at Target,” he said. “We’re their number-one brand with over 20 percent of their entire category so we have a high degree of conviction as others replicate the success of Target that we can get clear market leadership and be the number-one brand.”
Analysts have also stated that there is much opportunity at other retailers in the U.S., too, with shelf space gains at Walmart and CVS, where the brand is under-penetrated.
Fields credited E.l.f.’s success in makeup to its innovation engine and relationship with its community. “We listen to our community, and we bring items to life that they ask us for,” she said. “Our Bronzing Drops, for example, that launched this summer, is an item that our community has been asking for.”
An equally innovative approach to marketing has also been key to its success, and E.l.f. has notched a number of firsts. It’s been among the earliest of adopters of social media platforms like TikTok, Be Real and Roblox. It made news with its first Super Bowl commercial in 2023 starring Jennifer Coolidge and followed with another this year starring some of the “Suits” cast alongside singer Meghan Trainor. Its beauty collabs are among the buzziest, like a recent one with the popular water brand Liquid Death to create the Corpse Paint Vault for a heavy metal-inspired makeup collection. All these helped bring new eyes to the brand, with it reporting that 68 percent of consumers who shopped E.l.f.’s Liquid Death collaboration were first-time E.l.f. shoppers.
Another area that holds opportunity for the company is wellness, with Keys Soulcare prime for this. “We fundamentally believe in Alicia Keys, and we know wellness is going to become increasingly important. That brand is still pretty small in our overall portfolio,” said Amin.
However, as with everything there are always challenges on the horizon. With the upcoming U.S. election, the prospect of more tariffs on China looms heavy, which would impact E.l.f., where much of its products are made.
“We’ve heard in this election cycle that tariffs might be something that comes up. We are already exposed at a 25 percent level on a lot of our items, and so an increase in tariffs is something that we’re keeping our ears open for,” said Fields. “We certainly take that very seriously, and want to make sure that we’re prepared in the event that you have to take on additional costs from that standpoint.”
Nevertheless, both Amin and Fields are confident about what the future holds for E.l.f.
“You’re going to continue to see us disrupt the marketplace and continue to see very strong growth,” said Amin. “If I look at what the opportunities and challenges are, we have three massive areas of white space in color cosmetics, skin care and international.”
“We’re in the early innings of what we believe could be possible for E.l.f,” added Fields. “If you think about others in the beauty space, we are amongst the youngest, at 20 years old, versus 100 years old for some brands. There is still a lot more potential ahead for us. We are continuing to chip away to become the number-one brand in beauty.”
