00:00 Speaker A
The power of Haley Bieber to drive the cosmetics industry seemingly has no bounds. That’s one of my thoughts when running the numbers on Elf Beauty’s latest quarter, which was powered by the company spending a billion dollars to buy Bieber’s cosmetic cosmetics brand Rhode last August. Elf is out jacking up its top and bottom line outlooks for the year because of momentum with Rhode, but also because of uh new shelf space wins at Walmart and Dollar General. Tarang Amin has been uh in the CEO seat for Elf for 12 years. He joins me now for a segment brought to you by EY.
00:54 Speaker A
Tarang, good to see you uh as always. So take us through this quarter. I’m running down that earnings call that you guys had. I really think this was a road powered quarter. What are you seeing with that brand right now?
01:13 Tarang Amin
Well, our we delivered an amazing quarter. Our net sales were up 38%, our adjusted Ebitda was up 79%. And our namesake Elf brand uh continued to grow market here up 130 basis point. This marked our 28th consecutive quarter of both net sales and market share gains. And so we continue to have incredible momentum. And as you said, Rhode has been phenomenal. Uh Rhode launched back in August, September in Sephora North America was the biggest launch they ever saw. continues to be their number one brand. We more recently launched in uh Sephora, UK. That launch was five times bigger than any other launch Sephora had ever seen. And next week we’re entering Mecca in Australia, New Zealand. So the the brand has just unbelievable momentum and uh we’re really proud of it.
02:08 Speaker A
Why? Why that momentum?
02:11 Tarang Amin
Well, I think it’s uh, it really goes back to Haley Bieber and her founders and the vision they had of one of everything really good. So it’s an incredibly core curated lineup that really ties into her lifestyle. and consumers can’t get enough. I mean, I’ve never seen a brand that’s gone from zero to 212 million in net sales in less than three years, DTC only with only 10 products. And, you know, one of the things that I noticed when we were look doing our diligence on on the deal is consumers would be willing to wait out for one of their pop-up events 14 hours overnight uh for an event Haley’s not even at. They’re buying into the entire lifestyle and obviously they’re buying into the incredible quality of those products. So couldn’t be more excited about the momentum we have with Haley, but also across our entire brand. Uh, we have four of the fastest growing brands in color cosmetics and skincare and elf cosmetics, Elf skin, Naturium, a brand we acquired two years ago, the clinically effective biocompatible skincare brand and obviously Rhode. Um so we have great momentum across our entire portfolio.
03:17 Speaker A
Is it part uh the strength in that brand, Rhode brand, is it, does it reflect her social media following? What does she have? 56 million followers on Instagram alone? So if she puts something out to that following, they pop up wherever those products may be?
03:37 Tarang Amin
Well, certainly that’s part of it, but it goes much deeper than that. The quality of the products are just absolutely terrific. And so, you know, there are a lot of people that have a lot of followers that haven’t been able to translate that into a viable successful business. So, you know, I tell people all the time, Haley is certainly a celebrity, but she’s one of the most thoughtful founders I’ve ever met and every instinct that that team has had has been great. And our approach on acquisitions is we bring on the entire team. Uh we see what else they need help with and we continue to support them and that’s been a winning formula not only for Rhode, but also for Naturium and certainly we continue to propel our elf brands.
04:22 Speaker A
What is the what is the product roadmap look like for Rhode? Like three years from now, where, what categories are they in? I imagine you have to launch more categories to get value for for that investment that you made.
04:39 Tarang Amin
Well, I, I think there’s still a ton of potential in their core category of skincare. We now have three of the fastest growing skincare brands in Rhode, Naturium and Elf Skin. Uh, so we see a lot of potential there. But it also has these hybrid makeup products as well as accessories and lifestyle products. So the brand is very much a lifestyle brand. There are multiple categories available to it. But what I love most is just how disciplined and thoughtful uh the brand has been in terms of its product roll up. You do not, you do not see this proliferation of SKUs. It’s a very tight lineup. you’ll continue to see that. We most recently launched a face mask and a lip mask that’s off to an incredible start. So you’ll see a good cadence of innovation, certainly that’s something Elf is known for. Uh, but you’ll also see that same level of care and discipline in terms of what we roll out.
05:32 Speaker A
Love me a good face mask. Uh that is all true. Uh I want to I want you to react to this one, Tarang. This is a a report from JP Morgan this morning. They said this, quote, the much slower core business growth is concerning. How would you respond to that?
05:54 Tarang Amin
Well, I would say our core business is incredibly healthy. If you look at our consumption in color cosmetics, it was up 8%, double the category. If you look at Elf skin, it was up 16%, again, double the category. So this is just a question between shipments and consumption. Uh, last year at this time, we had a massive roll out in Dollar General, 11,000 Dollar General doors. We also picked up 50% more space at Target. We now have 20 ft at Target. And so we’re overcoming that pipeline shipment. So that’s the reason why our shipments are lower than our consumption, but you know, my experience is over time, shipments and consumption equal each other. So the more important thing is to continue to look at our strong consumption growth and market share gains. That’s a better indicator for the long term.
06:40 Speaker A
The pace that the core business is growing, uh coming out of this quarter, do you see that continuing into the second half of this year?
06:49 Tarang Amin
You know, I definitely, we haven’t given next year’s guidance, but we’ve, you know, this has been consistent. Uh, we’ve grown 28 consecutive quarters with industry leading consistent growth and I don’t see anything that would change that. We continue to build share, we continue to bring more consumers to the to our brands. Elf is the number one brand by far amongst Gen Z, Gen Alpha and millennials and we continue to pick up more consumers. So I, I just see the strengths that we have in terms of our value proposition, powerhouse innovation and disruptive marketing engine continuing.
07:31 Speaker A
Lastly, Tarang, I’ve talked to a lot of uh consumer CEOs this week. I had PepsiCo CEO to kick off the week, talking about affordability challenges, they’re cutting prices. You just mentioned those 11,000 Dollar General doors. What are you seeing in those Dollar General doors? Are you seeing fewer trips down the cosmetics aisle because that low-income shopper is still they’re really under a lot of pressure?
07:59 Tarang Amin
Well, I think, you know, the thesis for us going into Dollar uh General is they serve the underserved. Uh a lot of the places their stores are in a rural areas where the next store, mean less than 20,000 people in a particular market, uh 20 miles away from another store. And so our hope was that we bring the best of beauty to those consumers and that’s exactly what happened. Uh we’re the most productive brand by far that Dollar General carries. I think we brought, you know, people who bought Elf at Dollar General, 60% of them new are to buying cosmetics at Dollar General. and we’re also picking up a number of new consumers and we continue to see great momentum. So I think this ability for us to bring the best of beauty with our incredible values, uh really resonates across really all income groups.
08:52 Speaker A
Tarang Amin, always good to see you. Elf Beauty CEO. I’ll talk to you soon.
