E. l.f. Considers M& A, Brand Incubation
E.l.f. is thinking about M&A again, now that the business is back on track.
Chief executive officer Tarang Amin said E.l.f. is considering “strategic extensions” — either “small, tuck-in acquisitions” or launching another brand.
Without a major shift, E.l.f. is projecting low- to midsingle-digit growth over the next three years. But, with either more shelf space, or a “strategic extension” the company projects growth in the mid- to high-single digits.
“We’re really interested in small, tuck-in acquisitions, using some of that cash that we’re siting on either in a brand that brings us in an adjacent space or a capability we don’t have that could leverage all of the investments we’ve made in our team and infrastructure, particularly when it comes to customer relationships, our supply chain, our innovation model — we could see that be accretive to our business — or, introduce a new brand,” Amin said.
“Both are interesting to us in that strategic extension bucket,” he added.
Amin gave an interview surrounding the company’s earnings for the quarter ending Dec. 31.
For the quarter, E.l.f.’s net sales were $80.7 million, up from $78.6 million in the prior-year period. Net income was $8 million, down from $9.67 million in the prior-year period. The prior-year period included E.l.f.’s 22 retail stores, which the brand has since closed.
Excluding sales from those stores, E.l.f.’s net sales were up 8 percent, Amin said.
In addition to weighing M&A or brand launch possibilities, E.l.f. is thinking about further growth in China, where much of the company’s manufacturing operation is based.
“We have very little business in China… [but] we do have quite a bit of our supply chain there,” Amin said, noting that E.l.f.’s facilities are each more than 500 miles away from Wuhan and that right now, employees are healthy. “Our main thought is with our employees and our supplier base, who we work very closely with… none of our employees, their immediate families or our suppliers have reported any illnesses.”
During the quarter, E.l.f. pulled its business back from a distributor in order to regain control of marketing, new products and pricing, Amin said. Despite the public health crisis, he said he sees “huge potential” for E.l.f.’s e-commerce business in China, which currently consists of sales on third-party sites like Tmall and JD.com.
On the product side, E.l.f. has been able to build franchises around hit products, like Poreless Putty Primer and Camo Concealer — there is now a Hydrating
Camo Concealer and matte and luminous versions of Putty Primer, he said.
Another big standout of the quarter was the Liquid Glitter Eyeshadows. “We’re now seeing strength on it well beyond the holiday time,” Amin said. “It’s classic E.l.f. Our liquid glitter eye shadows are $5, versus the prestige equivalent at $24.”
They generated “buzz,” Amin said, as did the company’s Eyes Lips Face TikTok challenge, which resulted in three million user-generated videos that have gotten 4.4. billion views.
Skin care is also doing well, Amin said, noting that it was up 35 percent in tracked channels during the quarter, not counting the full-chain expansion into Ulta Beauty.
”We’re really interested in small, tuck-in acquisitions,” said chief executive officer Tarang Amin.