E.l.f. Beauty Shares Drop After Sales Disappoint
Strong demand for Rhode boosted E.l.f. Beauty’s growth to 14 percent in the latest quarter. However, a sales outlook below forecasts caused shares to fall by as much as 29 percent in after-hours trading.
Rhode Acquisition and Growth Projections
In its first earnings report after acquiring Rhode, E.l.f. Beauty predicted that the Hailey Bieber-founded brand would grow by 40 percent in 2025 and add $200 million to the combined company’s sales this fiscal year. Despite Rhode's solid results, it wasn't enough to offset slower growth at E.l.f.
Quarterly Sales and Forecast
- Second-quarter sales rose 14 percent to $344 million.
- The full-year growth forecast was 18 to 20 percent, targeting $1.57 billion in sales.
- This forecast fell short of analysts' average expectation of $1.65 billion.
Rhode's Sephora Launch Success
"Rhode’s Sephora launch on Sept. 4 was by far the biggest launch Sephora North America has ever seen," said E.l.f. Beauty CEO Tarang Amin.
The launch more than doubled the initial sales of the previous record holder. According to TD Cowen, Rhode made $15 million in sales within its first two days at Sephora.
Rhode Sales Trend and Forecast
Before the Sephora launch, SEC filings showed Rhode had $40 million in quarterly sales through June 30, indicating a slowdown. The company projects Rhode will reach $300 million in sales for the calendar year, reflecting 40 percent growth.
Author's summary: Despite strong demand for Rhode and a record-breaking Sephora launch, E.l.f. Beauty’s overall slower growth and conservative sales forecast caused a sharp drop in share price.