Not everyone that sells stuff in traffic deprived malls or big box stores is getting crushed, just look no further than e.l.f. Beauty (ELF) for evidence of that.
The seller of cheaply priced makeup and face scrub in slick-looking packaging down the aisles of Target (TGT) and Walmart (WMT) blew Wall Street away with its fourth quarter results on Wednesday, sending shares surging about 12% to $28.42 in Thursday's trading. Fourth quarter sales skyrocketed 17% from the prior year to $76.4 million. Wall Street was looking for sales of $74 million. Earnings, adjusted for one-time items, rose 36% to 19 cents a share, trouncing consensus forecasts for 13 cents a share.
For this year, e.l.f. Beauty sees the good times continuing to roll. Sales and earnings per share are expected to increase as much as 28% and 19%, respectively, from last year.
The company's sexy outlook clearly took Wall Street by surprise in light of worrying traffic challenges at Target and tepid gains at Walmart. Target is e.l.f.'s longest standing national retail distribution partner, and represents about 23% of its sales. The company inked a deal to sell its offerings -- which mostly sell for $6 or less -- at Walmart in 2012, and the business has quickly grown to 28% of its annual business.
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"While the environment is tough for both retailers, one of the constants for them is that beauty is an area of focus," e.l.f. Beauty chairman and CEO Tarang Amin told TheStreet in an interview. "One of the big advantages for us is that we have this makeup enthusiast that is our core customer -- for her, makeup isn't a discretionary purchase, she loves everything about it from shopping for it to trying on new things." The company did its part to fuel that enthusiasm, as it launched more than 90 new products last year.
This was a "remarkably great quarter," TheStreet's Jim Cramer, manager of the Action Alerts PLUS portfolio, said on CNBC's "Mad Dash" segment Thursday.
You can't walk out of your house anymore without looking good, thanks to all the selfies and social media platforms that are out there, he reasoned. e.l.f.'s reasonably priced products ensure that consumers have easy access to the brand.
In effect, e.l.f. has become a go-to brand for a number of shoppers looking for a high quality product without dishing out a ton of cash. This company just keeps taking market share, Cramer concluded.
Although the likes of Macy's (M) has warned lately of weakness in the higher priced cosmetics it tends to sell, the long-term outlook for the space continues to be attractive in part due to deal-seeking millennials. After all, make-up has to be replenished much quicker than apparel. The U.S. make-up market is anticipated to grow by a compound annual growth rate of 3.8% from 2013 to 2018, reaching $8.4 billion, according to research firm MarketResearch.
"When I look at my 22-year old daughter vs. her mom -- her mom used to go to department stores and get makeovers and that's how she learned about cosmetics. My daughter is online all the time, sharing tips with friends and looking for the latest stuff," Amin explained.
Perhaps this was the quarter and outlook Amin needed to deliver to remind Wall Street e.l.f. Beauty its not a dying retailer or a fumbling consumer products giant such as Procter & Gamble (PG) -- before the stock's pop on Thursday, shares of e.l.f. Beauty were down roughly 4.7% since its closing price on the September 22 2016 IPO day. e.l.f. Beauty's offering price was $17.
Said Amin, "I think our model is different than the rest of retail and others in consumer products, and as long as we execute everything else will take care of itself."
Updated from 7:00 p.m. on Wednesday to include Jim Cramer's comments