Oakland, California-based cruelty-free cosmetics company E.L.F. Beauty, Inc. announced an increase of 3% in its third-quarter sales on Wednesday but saw a dip in its profits as restructuring costs took their toll on its bottom line.
For the third quarter ended December 31, 2019, E.L.F. reported net sales of $80.8 million, compared to $78.6 million in the prior-year period.
This growth was driven by increased productivity across the company’s channels, as well as progress against its strategic imperatives, partially offset by the closure of all 22 E.L.F. retail stores in February 2019. Disregarding the contribution of these stores, which generated $3.7 million in sales in the previous year’s third quarter, net sales increased 8%.
Quarterly net income at the company, however, was $8.0 million, or $0.16 per diluted share, down from $9.7 million, or $0.20 per diluted share, in the prior-year period.
The decline reflected the impact of expenses related to the closure of E.L.F.’s stores, as well as increased selling, general and administrative expenses related to a rise in spending on marketing and digital.
Despite the decrease, E.L.F.’s profit still beat the expectations of Wall Street analysts, who had predicted that the company would report EPS of $0.15 on sales of $77 million.
Year to date, the company’s net sales increased 3% to $208.1 million, up from $201.5 million in the same nine-month period in the previous year, while net income totaled $18.2 million, or $0.36 per diluted share, up from $14.8 million, or $0.30 per diluted share.
“Our team is executing well against our five strategic imperatives and E.L.F. is gaining market share,” said E.L.F. chairman and CEO Tarang Amin in a release. “Our marketing and digital initiatives continue to bring heightened awareness to the brand, particularly among Gen Z and Millennial consumers. Given our momentum, we are raising our fiscal 2020 guidance.”
Looking forward, E.L.F. now expects its full-year net sales to total between $274 million and $277 million, compared to a previous guidance of between $265 million and $272 million.
Adjusted net income is now predicted to be in the range of $28 million to $30 million, or $0.55 to $0.59 per diluted share. The company’s prior outlook had predicted adjusted net income in the range of $23 million to $25 million, and adjusted diluted EPS between $0.44 and $0.48.
Following the reporting of the company’s results, E.L.F.’s shares were up 1.2% at the closing bell on Wednesday.