e.l.f. Beauty results radiate, thanks to virality and loyalty

Marketing: Viral brands and sustained investment

The brand prides itself on marketing that is both bold and pioneering on emerging channels.

One example came in the form of a holiday kickoff with the singer Meghan Trainor delivering a Weather Channel-informed report on social channels to celebrate the restock of the brand’s Halo Glow Liquid Filter, which was a viral sensation.

“The trifecta of e.l.f., The Weather Channel and Meghan Trainor helped us reach new audiences and entertain our community,” Amin said. “The campaign generated over five billion press impressions, exceeding last year's holiday campaign by a wide margin.”

The combination of innovation on product and virality in marketing helps attract a new audience for the brand.

“They see the viral buzz,” Amin said. “They see other people talking about this prestige quality, these great prices and particularly these days with platforms like TikTok, we get consumers doing their own demonstrations and comparisons.”

When it comes to metrics, Amin said the brand explores, “What percent behind each product are we pulling in new users?”

It's often up more than 50%, and attracts the core consumer in Gen Z as well as millennials and Gen X.

“I think the quality of these products at the prices we have and our ability to engage them really are attracting even more consumers to our franchise,” Amin said.

e.l.f. also deepened its marketing investment. The overall share of marketing is now 16%, as compared to 7% three years ago. It will increase to 17-19% this fiscal year.

“We recently completed our annual Nielsen marketing mix analysis and again saw exceptional ROI results, giving us further confidence that our marketing and digital initiatives are driving brand demand and delivering profitable growth,” Amin said.

Strong ROIs were observed across digital advertising and influencer marketing, while PR was “off the charts,” Amin said. Experimentation also plays a key role in developing these channels.

“The other thing about us is, we're not afraid to test and learn our new platforms. So we were one of the first beauty brands on TikTok. In the early days, it was hard to get attribution on TikTok. We now can see almost immediately when something goes viral on TikTok, the impact it has on our business and our ability to be able to attract that,” Amin said.

Ecommerce: Growing the squad

When it comes to ecommerce, Q3 digital consumption trends were up over 75% year-over-year, said CFO Mandy Fields. Digital channels drove 17% of total consumption in Q3, up from 14% a year ago. In the quarter that includes the holidays, digital channels were particularly strong through Black Friday and Cyber Monday.

A big point of emphasis for digital growth is the company’s Beauty Squad loyalty program, which provides early access, exclusives, free gifts and bonus points. The program grew enrollment 25% year-over-year to 3.5 million members. The loyalty program helps to boost the value of individual customers.

“Our loyalty members drive almost 70% of our sales on elfcosmetics.com have higher average order values, purchase more frequently, have stronger retention rates and are a rich source of first-party data,” CFO Mandy Fields said.

No slowdown in sight

Plenty of brands and retailers reporting earnings over this week are speaking of a slowdown in demand as a result of inflation and cooling demand in the economy. They also talk of consumers trading down to more affordable and smaller products that challenge margins. Amin batted away that kind of talk.

“No, we've not seen any slowdown in demand,” Amin said.

The response spoke to the unique place that beauty sits in this moment.

“What I'd tell you is, historically, mass color cosmetics, mass skin care has fared really well in…recessionary environments,” he said, referring to the Lipstick Index that posits beauty sales rise during economic downturns as people seek the small joys when they have less to spend on bigger items.

But there’s also a timing factor coming out of the pandemic.

“This is a category that really did suffer during the pandemic when people were restricted from their normal behavior,” Amin said. “So I've long felt there's a lot of pent-up consumer demand for the categories in which we compete, and we very much are seeing that.”