(Bloomberg) -- Elf Beauty Inc. said robust demand for its lip oil and bronzing drops helped boost revenue 50 per cent in the most recent quarter versus a year ago, allowing the company to take market share from rivals.
The company has seized on shoppers’ demand for cheaper cosmetics, selling its lip oil at a much lower price than some high-end brands. Elf’s costs eight dollars while Dior’s is $40 in the U.S.
“We are seeing some commentary of consumers being more choosy, but they’re choosing Elf,” Chief Executive Officer Tarang Amin told analysts Thursday after the company reported quarterly earnings.
The average price point for Elf’s products is around US$6.50 compared with nearly $9.50 at other mass market cosmetics companies and over $20 for higher-end brands, Amin added.
Despite the better-than-expected revenue growth, the companies’ shares were down sharply Friday in New York trading after the company forecast earnings before interest, taxes and other items for the current quarter that were below analysts’ projections. Raymond James analyst Olivia Tong attributed the lower-than-expected quarterly guidance “mostly to incremental conservatism on sales.”
Lip Oil Trend
In addition to Elf, brands such as Summer Fridays, Nyx Professional Makeup and Rare Beauty have launched lip oil products in the past year or so. Many consumers are favoring a more natural look and less color in makeup now, says Larissa Jensen, global beauty industry adviser at market research firm Circana. Lip oils fit that trend since they are lighter than a lip gloss, tend to be less pigmented and claim to offer more hydration.
The pace of lip oil sales has far outpaced balms, glosses and lipstick during the past couple of years. Higher-end lip oil sales grew to nearly $130 million in the US in 2023, according to Circana. That’s up from less than $18 million in 2021.
While that rate of growth has slowed recently, so-called “prestige” lip oils are still selling faster than lipsticks and glosses. Sales of higher-end lip oils increased 56 per cent in the first six months of this year versus the previous year, the Circana data show. Lip gloss, by contrast, saw a fiver per cent rise, albeit at much higher volumes.
Circana doesn’t provide figures on the sales of mass-market lip oils, but Jensen said demand for those has also been robust.
For companies, one reason lip oils are attractive is that consumers need to replenish them relatively quickly, notes Jessica Ramírez, an analyst at Jane Hali & Associates. Most lip oils are packaged in small vials, and many consumers reapply frequently and repurchase. That drives sales.
For consumers, lip oils are “a small way to treat yourself,” Ramírez said. “Even at a time when you’re strapped for cash, these sorts of luxuries,” she added, make “you feel like you did something good for yourself.”
With assistance from Jeannette Neumann.
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