• by Sarah Mahoney , August 5, 2023

By now, observers expect E.L.F. Beauty to post picture-pretty financial results. But sales in its first quarter blasted past expectations, rising 76% to $216.3 million and marking its 18^th straight quarter of consecutive sales gains.

Net income also beat forecasts, rising to $52.9 million from $14.5 million in the comparable period last year.

The gains came as the company poured on the ad spending. Its selling, general and administrative expenses added almost $30 million, to $84.4 million. Those gains primarily came from increases in marketing and digital spending.

Sales in its digital channels rose by triple digits, driven by strong digital marketing, especially in social platforms.

On a conference call discussing results, E.L.F. executives also credited its Beauty Squad Loyalty Program, with 3.9 million members. That group has been growing by about 25% a year.

In a conference call webcast for investors, the company said this is also its 18^th consecutive quarter of gaining market share. E.L.F. has built its fan base with its combo of low-priced “dupes,” products that duplicate pricier competitors and still offer the quality its young followers demand: E.L.F. products are vegan, cruelty-free, clean and fair-trade certified. They’re also cheap, costing an average of $6, compared to $9 for legacy brands and $20 for premium products.

With its TikTok-fueled marketing and strong influencer network, the company is nipping at the heels of giants L’Oréal and Estee Lauder. It’s the best-selling brand at Target, with an 18% share.

While E.L.F. is the industry’s star, the entire category is performing well. Market research company Circana says beauty sales in the U.S. are up in the first half. Mass beauty sales, which includes E.L.F., rose 9% to $28 million. And the prestige beauty market, including products sold in department stores, jumped 15% to $14 billion.

Circana says that makes beauty the only CPG or general merchandise category to grow in unit sales.

“The beauty industry is hitting the right notes, meeting consumers’ emotional needs through new and existing products, which is especially welcomed when spending power continues to be squeezed,” says Larissa Jensen, Circana’s beauty industry advisor.

Makeup is the fastest-growing category. Overall facial skincare usage is flat, as more consumers trade down to mass and drugstore brands from premium products.