e.l.f. Beauty, Inc. Q1 FY2026 earnings call

Management Statement and Operational Highlights

• Net Sales Growth: Q1 net sales grew 9% to $354 million, following 50% growth in Q1 last year.
• Market Share: Gained 210 basis points of market share, marking 26 consecutive quarters of net sales growth and market share gains.
• Pricing: Took a dollar price increase on all products effective August 1, the third price increase in 21 years; 75% of product portfolio remains under $10 post-increase.
• Innovation: Launched successful products like Halo Glow Skin Tint and Bright Icon Serum; accelerated launches like melting lip balms based on consumer demand.
• Acquisition: Closed acquisition of Rhode, focusing on accelerating brand awareness and expanding distribution with Sephora.

Segment Performance

• Color Cosmetics: Nationally, e.l.f. is the #1 unit share brand with ~15% share and #2 dollar share with ~13% share. In Target, it's the #1 cosmetics brand with ~21% share, growing 190 basis points in Q1. Average price point is ~$6.50, with 75% of product portfolio remaining under $10 post-August 1 price increase. Had triple-digit share gains with major retail partners and success with Dollar General.
• Skin Care: Skin care drives nearly 20% of global consumption. Launched products like Bright Icon Vitamin C + E + Ferulic Serum (best-selling skincare on elfcosmetics.com in Q1) and initiatives like Sunhinged to cultivate cultural relevance.
• International: Net sales grew 30% in Q1. In the U.K., outpaced category growth 3x, moving from #4 to #3. Launched in over 1,200 stores of Kruidvat in the Netherlands and Belgium, becoming #1 in Belgium and #2 in the Netherlands. Plans to launch with Rossmann in Poland and Sephora in GCC countries. Internationally, sales were $266 million in 2025, 20% of total sales.

Guidance

• Net Sales: Expect first half of fiscal '26 net sales growth above 9% seen in Q1, with incremental Rhode contribution for ~2 months of Q2.
• EBITDA Margins: First half EBITDA margin expected to be ~20%, driven by tariff flow-through, marketing spend shift, and Rhode inclusion without Sephora sell-in benefits.
• Tariffs: Waiting for clarity on tariffs to issue full-year fiscal '26 outlook; estimates $50 million annualized gross impact if tariffs remain at 30% incremental level.

Risks

• Tariffs: Incremental tariff costs impact gross margin; mix of inventory at different tariff rates, with more 170% tariff inventory expected to flow through in Q2.
• Consumer Elasticity: Uncertainty around consumer response to price increases and overall spending behavior.

Question and Answer

Q: Talk about inventory trapped at 170% vs 55% tariffs and Q2 gross margin flow-through A: Mandy Fields said inventory has a mix of 170%, 55%, and 25% tariffs, with more 170% expected to flow through in Q2, leading to lower gross margin.

Q: First half EBITDA margin guide and drivers A: Mandy Fields said it's driven by gross margin flow-through of tariffs, marketing spend shift, and inclusion of Rhode without Sephora sell-in.

Q: U.S. business growth and price increase elasticity A: Mandy Fields said U.S. business grew 5% in Q1, with uncertainty on consumer response to price increase, but past price increases have been better than modeled.

Q: Rhode's revenue contribution and Q2 margins A: Mandy Fields said detail not provided, but Rhode is expected to be accretive long-term, with SG&A included in Q2 without Sephora sell-in benefits.

Q: International momentum and Q2 expectations A: Mandy Fields said international continues to perform well with launches planned, but first half had more international activity sell-in than Q2.

Q: Q2 gross margin puts and takes A: Mandy Fields said includes tariff flow-through, pricing benefits, and Rhode inclusion, but uncertain due to tariff scenarios.

Q: Innovation cadence and impact of pulled-forward products A: Tarang Amin said pulled-forward products didn't create a hole in innovation calendar, with fall innovation stronger than previous years.

Q: Digital sales growth and international aspirations A: Mandy Fields said digital sales grew ~20%, representing 20% of total business. Tarang Amin said high aspirations for international growth, expecting international business to more than double.