e.l.f. Beauty Inc Earnings - Q1 2026 Analysis & Highlights
e.l.f. Beauty reported its seventh consecutive year of industry-leading growth with strong portfolio diversification, though the core e.l.f. brand faced spring innovation challenges that management is addressing through pricing adjustments, accelerated innovation, international expansion, and leadership changes. The company navigated significant tariff headwinds while maintaining market share gains and provided guidance for moderate growth in fiscal 2027 with margin expansion expected.
Key Financial Results
Net sales grew 25% year-over-year in fiscal 2026, with adjusted EBITDA increasing 13% and adjusted EBITDA margins reaching 20%.
Q4 net sales grew 35% year-over-year, with the rhode acquisition contributing approximately 34 percentage points to growth.
Organic net sales in Q4 (excluding rhode) were up approximately 1% year-over-year, within the company's provided range.
Q4 gross margin of 73% increased approximately 140 basis points compared to prior year, driven largely by pricing benefits partially offset by higher tariffs.
Adjusted SG&A as a percentage of net sales was 67% in Q4 compared to 52% in Q4 last year, primarily due to higher marketing and digital spend and continued investments in team and infrastructure.
Q4 adjusted EBITDA was $59 million compared to $81 million in Q4 last year, and adjusted net income was $19 million or $0.32 per diluted share compared to $45 million or $0.78 per diluted share a year ago.
Marketing and digital investment for Q4 was 31% of net sales, compared to 23% in Q4 last year, with full-year marketing and digital investment at 24% of net sales.
Business Segment Results
e.l.f. Cosmetics delivered approximately $1.8 billion in global retail sales in fiscal 2026 and increased US market share by 115 basis points, the largest share gain among nearly 1,000 cosmetics brands tracked by Nielsen.
e.l.f. Cosmetics achieved its 29th consecutive quarter of market share gains, representing a 920-basis point increase over the past 7 years, with the next highest brand gaining only 240 basis points during the same period.
e.l.f. Cosmetics holds 13% national share in mass color cosmetics but achieves 21% share at Target, indicating significant runway for growth at other retailers.
e.l.f. SKIN delivered approximately $200 million in global retail sales in fiscal 2026 and rose from the number 25 mass skincare brand in the US to number 11 over the past five years.
e.l.f. SKIN holds approximately 2% share of the mass skin category compared to the number one brand holding 13% share, indicating substantial growth opportunity.
Naturium delivered nearly $250 million in global retail sales in fiscal 2026, double its pre-acquisition levels, and was the fastest growing among the top 50 skincare brands in Q4.
rhode delivered over $500 million in global retail sales on an annualized basis in fiscal 2026 and approximately $390 million in net sales, growing net sales over 80% year-over-year.
rhode achieved the number one beauty brand ranking in Sephora North America in fiscal 2026 and executed record-breaking launches with Sephora in the UK and Mecca in Australia and New Zealand.
rhode is in less than 20% of Sephora's global stores, presenting tremendous opportunity for expansion.
e.l.f. brand's global consumption has moderated from high single digits in fiscal 2026 to low single digits in the last 12 weeks, with spring 2026 innovation off to a slower start than expected.
Capital Allocation
The company repurchased approximately $50 million of outstanding common stock in fiscal 2026 given the disconnect between e.l.f. Beauty's market valuation and the strength of its business fundamentals.
Approximately $400 million remained available for repurchase under the previously authorized $500 million repurchase program.
Cash on hand increased to $290 million at fiscal year-end compared to $149 million a year ago.
Net debt to adjusted EBITDA remained below 2 times, indicating a strong liquidity position.
Cash priorities for the year ahead include supporting brand growth, technology investment including AI and automation, and infrastructure investment to ensure brands perform well in retailers globally.
Industry Trends and Dynamics
Out of approximately 1,800 cosmetics and skincare brands tracked by Nielsen, only 14 have surpassed $200 million in retail sales, with e.l.f. Beauty having four brands that have surpassed this threshold.
e.l.f. Beauty is one of only 6 public consumer companies out of 546 that has grown for 29 straight quarters and averaged at least 20% sales growth per quarter.
International net sales grew 38% in fiscal 2026 behind the strength of the expanding brand portfolio.
The company launched in 8 international retail customers across 14 countries in fiscal 2026.
International drives approximately 20% of net sales compared to legacy peers having over 70% of their sales outside the US.
50% of e.l.f. brand's social followers are outside the US, and 74% of rhode's followers are outside the US, indicating significant pent-up global appetite for the brands.
Competitive Landscape
e.l.f. is the most purchased brand among Gen Z, Gen Alpha, and millennials, and continues to pick up additional households.
e.l.f. Beauty's marketing initiatives expanded unaided awareness from 13% in 2020 to 45% in 2025, supporting consistent market share gains year after year.
The company continues to pick up market share even after the price increase, with 115 basis points gained in fiscal 2026, indicating continued net gains across the category.
e.l.f. is dramatically under space relative to competitors when retailers compare sales productivity to space allocation, indicating significant opportunity for expansion.
rhode is dramatically under space in Sephora doors, with one bay compared to competitors having two or three different bays, presenting substantial opportunity for growth.
Macroeconomic Environment
The company navigated an average tariff rate of approximately 55% in fiscal 2026, more than double the 25% rate faced a year ago.
The company is currently facing tariff rates at the 35% level and assumes this rate will remain for fiscal 2027 outlook purposes.
The company is pursuing a refund on IEEPA tariffs paid last year, which stand at approximately $58.5 million.
Assuming oil prices remain around $100 per barrel on average, the company estimates it could face $15 million to $20 million of incremental cost headwinds in fiscal 2027 due to inflationary pressure on commodities and transportation costs.
The company took a dollar price increase across all e.l.f. brand SKUs in August 2025 in response to tariffs and inflation.
The company has recently seen a more pronounced decline in units following the price increase, prompting focus on delivering better value and improving unit velocity.
Growth Opportunities and Strategies
The company is taking targeted action to strengthen the e.l.f. brand across four key areas: value, innovation, international, and leadership.
The company reduced the price of e.l.f.'s Halo Glow Skin Tint from $18 to $14, with initial test results showing a 38% lift on Amazon and a 36% lift across all retailers, including triple-digit sales lift on TikTok Shop.
The company has fast-tracked innovation that was not part of the original fiscal 2027 plans and aims to have these in market before the holidays.
In fiscal 2027, the company is focused on growing share for the e.l.f. brand in its largest international markets—the UK, Canada, and Germany—by activating marketing efforts, with green shoots already visible in the UK and Germany as Q4 exited.
Kory Marchisotto was appointed President of e.l.f. brands, a newly created role focused on expanding the e.l.f. brand across categories and geographies.
Oshiya Savur was welcomed as Chief Marketing Officer, e.l.f. brands, bringing global perspective, omnichannel expertise, and proven ability to build brands across mass and prestige.
Ekta Chopra was appointed Chief Technology and AI Officer, a newly created role reflecting how the company sees technology and AI as core drivers of transformation and growth.
The company transferred the Keys Soulcare brand to Alicia Keys, allowing the team to better focus on the five brands that all grew in fiscal 2026.
e.l.f. Cosmetics and rhode took over the 2026 Coachella festival, creating an immersive brand experience and serving as a launch pad for trends across beauty, fashion, and social media.
e.l.f. was the first beauty brand to activate across all three weekends of Coachella and Stagecoach, a companion country music festival.
rhode drove momentum at Coachella by connecting headline talent Justin Bieber with a limited edition rhode x the biebers collaboration drop.
The company is expanding rhode's global presence, launching with Sephora in Europe across 19 countries in September.
The company took e.l.f.'s Power Grip to the haircare category for the first time in March, launching a limited edition Power Grip styling collection that sold out in 48 hours with 95% positive consumer sentiment and 65% new-to-e.l.f. consumers.
The company has three of the fastest growing skincare brands—rhode, Naturium, and e.l.f. SKIN—representing a core area of focus.
rhode's recent product launches in skincare, the caffeine reset mask and peptide lip boost, underscore the team's ability to translate product innovation into outsized consumer demand.
The company is leaning into its disruptive marketing engine to fuel brand awareness across the portfolio and deepen connection with the community.
The company is exploring other pricing opportunities beyond the Halo Glow Skin Tint to deliver value to its community.
The company plans to thoughtfully invest in team and infrastructure to go after the whitespace opportunity ahead.
Product Innovation and Portfolio Expansion
The company's community-led innovation model is a key competitive advantage, allowing the company to listen to the community and quickly translate requests into premium quality products at extraordinary prices.
Two of e.l.f.'s spring innovation launches are among the top 10 innovation launches so far this year, including lip oil sticks priced at $10 relative to prestige items at $48 and melting lip balms at $9 versus prestige at $24.
The company's fall innovation is planned to go out the door in the next month, with the company feeling particularly good about it.
The company is bringing additional innovation previously not planned for fiscal 2027 into the fiscal year, leveraging its ability to take signals from the community and quickly bring them to market.
The company did a collaboration with H&M in January in the fragrance category that was very well-received.
The company's brands across the portfolio are highly elastic, with consumer demands across multiple categories, though the company will use a disciplined rollout strategy.
The company has a big opportunity in color cosmetics and skincare, with three of the fastest-growing skincare brands, which will be the first focus while selectively looking at additional categories.
Financial Guidance and Outlook
For fiscal 2027, the company expects net sales growth of approximately 12% to 14% year-over-year.
For fiscal 2027, the company expects adjusted EBITDA between $379 million to $385 million, adjusted net income between $198 million to $201 million, and adjusted EPS of $3.27 to $3.32 per diluted share.
The company expects its fiscal 2027 adjusted tax rate to be approximately 25% to 26% and a fully diluted average share count of approximately 60.5 million shares.
The annualization of the rhode acquisition is expected to contribute approximately 9 percentage points to full-year net sales growth, with rhode adding approximately $140 million in net sales in the first four months of fiscal year 2027.
The company expects organic net sales in fiscal 2027 to be up approximately 4% to 5% year-over-year, including rhode contributing to organic net sales growth starting in August.
In Q1 fiscal 2027, the company expects organic net sales down high single-digits due to lapping a busy shipping period at the end of Q1 last year as the company prepared for its ERP cutover in Q2.
The company expects organic net sales growth to rebound strongly in Q2 in the mid-teens range, as it laps the acquisition of rhode and the decision to temporarily stop shipments in Q2 last year on orders that did not reflect the price increase.
In fiscal 2027, the company expects gross margin to be approximately flat year-over-year, with benefits from lower tariff costs and price increases offset by mix as rhode transitions further into retail.
The company expects to deliver leverage in adjusted SG&A in fiscal 2027, with marketing and digital spend at approximately 23% to 25% of net sales.
The company's full-year fiscal 2027 outlook implies adjusted EBITDA growth of approximately 13% to 15% versus prior year and adjusted EBITDA margins of approximately 21%, up about 20 basis points year-over-year.
The company expects high-teens adjusted EBITDA margins in the first half, with gross margin improvement offset by the timing of SG&A spend.
The company's outlook does not factor in the impact of oil prices or tariff refunds, given the situation remains fluid.
The company plans to invest tariff refunds in value and accelerating unit growth if refunds are received.
