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Growth driver Elf Beauty (ELF) continued to gain market share in 2023.
A year ago, the Oakland, Calif.-based company was ranked No. 5 in the U.S. among mass-market cosmetics brands, according to Nielsen data. After 19 consecutive quarters of net sales growth, by August 2023, Elf had gained 9.5% market share, emerging as the third-largest brand behind L’Oréal and Maybelline.
It also benefited investors. Over the past year, Elf Beauty stock has increased his 216%.
“The company is rapidly gaining market share in the consumer cosmetics space in the U.S. and around the world,” said Linda Bolton Weiser, senior analyst at DA Davidson. Speaking on Yahoo Finance Live (video above). “I think there is still room for growth for elves.”
The company ended the year on a strong note, with “sequential sales growth” in December ahead of the holiday season, Canaccord Genuity analyst Susan Anderson said in a note. Anderson maintains a buy rating with a price target of $169, and Elf (short for EyesLipsFace) is estimated to further surpass the top line in the second quarter of the next fiscal year.
Founded in 2004 and now known for its affordable prices, the brand has benefited from a shift in consumer values, especially among Gen Z and Millennial shoppers. It also gained share in major retail channels such as Target (TGT) and Ulta Beauty (ULTA).
“We’re very bullish on the stock price growth that we’ve been able to sustain,” Elf CEO Taran Amin said at an earnings call last August. “We overtook Covergirl and Revlon to emerge as number 3 in color cosmetics with a 9.5% share. But if you look at Target, our oldest national retailer, we have an 18% share. We are clearly the No. 1 brand in market share. Therefore, we feel that we have an opportunity to double our market share in color cosmetics over the next few years.”
Amin believes that “white space” is increasing in skin care as well. The company has been expanding its presence in the space, announcing last fall an agreement to acquire skincare brand Naturium for $355 million.
Meanwhile, the overall consumer cosmetics category is seeing momentum, even as economists predict a slowdown in consumer spending.
L’Oréal continues to lead the U.S. cosmetics market, valued at more than $87 billion. The French conglomerate showed little sign of slowing down last year, completing the $2.5 billion acquisition of Aesop to add to its portfolio.
Still, Amin is undaunted by the competition, saying Elf Beauty is “maximizing the potential of our brand early on.” And many Wall Street analysts are optimistic, too.
“They want to be No. 1,” Bolton-Weiser said.
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