E.l.f. Beauty 'captures' consumers in ways rivals haven't

Piper Sandler senior research analyst Korinne Wolfmeyer joins Market Domination to discuss the state of beauty retail brands and some of her top picks in the cosmetics industry.

"If a brand doesn't have exposure to the retailers or the areas that are gaining share, then they are going to lose," Wolfmeyer says. She notes that many beauty companies are increasingly offering their products in high-growth avenues, like on Amazon's e-commerce site (AMZN). She adds, "We're seeing the brands shift where they're selling and really going after where those high growth categories and distributors are."

Wolfmeyer points to e.l.f. Beauty (ELF) as one of her top picks in the beauty industry, noting that the company has seen unprecedented growth and strong margins. She believes that investors are undervaluing the international opportunity for the company, as well as its ability to capture the consumer.

"The consumer is becoming less loyal and so they need that newness. They need something constantly innovating and hitting them and really targeting them through all facets of marketing tactics. And that's what e.l.f. does," She explains that the company has "heavy innovation" and "very agile marketing strategies" that make it stand out against its competitors.

E.l.f. Beauty is set to report earnings for its fiscal 2025 first quarter on Thursday, August 8.

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This post was written by Melanie Riehl

Video Transcript

I'm curious what the read three is for some of the other beauty type companies that you cover, right?

I mean, I guess they're sort of um venue or vendor agnostic.

You know, I'm looking at the likes of Estee Lauder and Elf that you cover Cody, um sort of when you look at that bigger makeup landscape, are they being affected by what's going on at the sellers to an extent?

II, I do think if it a brand doesn't have exposure to the retailers or the the the areas that are gaining share, then they are going to lose.

Fortunately for a lot of the companies I cover and I look at, they do have broad based um exposure and they do sell in a pretty diversified manner and we're even seeing them start to shift where they're offering their products and putting more of their products in those high growth avenues like Amazon, a good example is Estee Water that even just this morning announced another brand is going on to Amazon.

That's a very new thing we're seeing.

So we're seeing the brands shift where they're selling and really going after where those high growth categories and distributors are kin you we mentioned now if you do like that name, you got an overweight there stocks at a, a nice run already.

Corin, why, why is that name still a buy in your opinion?

E is, it's at a high valuation.

It, it's reached very high unprecedented growth, the margins are strong.

So why do we still like it now?

It, it really comes down to all the white space poten potential we really still see and, and that's both in the US and in international markets.

The main thing we really like here and we think is getting underappreciated investors right now is that international opportunity that's rolling out rapidly at Elf?

Um But also the way they capture their consumer is so unique.

And as I touched on earlier, the consumer is becoming less loyal and so they need that newness.

They need something constantly innovating and hitting them and, and really targeting them through all all facets of, of marketing tactics.

And that's what Elf does.

They have very heavy innovation, they have very agile marketing strategies, they're always experimenting, they're always trying out different things.

And so the way they've been able to capture and lock in that consumer is very unique to what we've seen in the rest of beauty, interesting stuff.

Corin, thanks so much.

Appreciate it.