Key Takeaways
- E.l.f Beauty, which prices 75% of its products under $10, says consumers tend to maintain their self-care routines during times of uncertainty.
- For now, however, investors are dumping the shares after the company’s full-year revenue outlook came in lower than expected.
A big beauty brand thinks uncertain consumers won’t abandon their self-care routines this holiday season—and they might even step them up.
That’s a trend that E.l.f Beauty (ELF), which prices 75% of its products under $10, has seen in previous cycles of macroeconomic uncertainty, CFO Mandy Fields told Investopedia on Wednesday. In the meantime, however, investors are concerned about the company’s outlook, sending the stock sharply lower in after-hours trading after its latest quarterly results arrived.
“A lot of things are going on in the economy right now,” Fields said. “You have a government shutdown, SNAP benefits not going to folks who need them, layoffs and tariffs.” The company in August raised prices on some products by $1, citing higher business costs due to tariffs and inflation.
Why This Matters to Consumers
Ever heard of the lipstick effect? It’s the idea that when they’re under stress, consumers tend to seek out small splurges—which, if you’re a company like E.l.f. Beauty, could be good news, since it sells a lot of comparatively low-priced cosmetics. But when people are talking about it, it’s also a sign that consumers might not be feeling great economically.
Shoppers are being “choiceful,” said Fields. “They have a finite amount of money.” And when budgets are tight, Fields said, consumers often seek out affordable indulgences, such as cosmetics–or what’s sometimes called the “lipstick effect.”
“We represent that value,” she said. “You can buy a couple of lipsticks or our lip balms and still have money left in your pocketbook.”
Heading into the holiday shopping season, Fields said the company’s portfolio of brands—including its flagship lower-priced e.l.f. Cosmetics and skincare line and higher-priced brands such as Keys Soulcare and Hailey Bieber’s brand Rhode—allows it to cover a spectrum of price points.
California-based e.l.f. Beauty on Wednesday reported its fiscal second-quarter (ended Sept. 30) financial results. Sales rose 14% year-over-year to $344 million from $301 million a year earlier, climbing 12% for the first six months of the fiscal year but substantially missing the Visible Alpha analyst consensus. Adjusted net income of $40 million, or 68 cents per share, compared with $45 million, or 77 cents a share, a year earlier, but beat estimates.
E.l.f. predicts full-year fiscal 2026 revenue in the range of $1.55 to $1.57 billion, suggesting an 18% to 20% increase year-over-year but coming in lower than Wall Street expected. That weighed on the stock, which was already in the red for 2025, in after-hours trading, sending it more than 20% lower in recent action.
“We remain confident in our strategy to grow market share,” CEO Tarang Amin said in a statement.
“The latest numbers show a serious weakening of the bottom line,” said Neil Saunders, managing director at GlobalData Retail. “That said, maintaining its value position even at the expense of short-term profit is the right move.”