Emphasized eyes, radiant lips and a perfect complexion - these are the beauty ideals to which e.l.f. Beauty has dedicated itself to. A claim that begins with the name of the US cosmetics manufacturer. "e.l.f." stands for "eyes lips face". With a wide range of products - from eye shadows and lipsticks to highlighters and foundations - the US company is vying for consumers' favor. Regardless of the cosmetics used, the shareholders of e.l.f. Beauty are likely to have lost a lot of their facial features recently. On February 6, the company shocked the markets with a profit warning. As a result, the share price of e.l.f. Beauty fell by almost 29%. The most recent sell-off took the second-line stock below the USD 70 mark, its lowest level since February 2023. Yet it has only been a year since shareholders were able to shine. At the beginning of March 2024, e.l.f. Beauty reached an all-time high of USD 221.04.
While the growth company has fallen out of favor on Wall Street, it is facing tougher competition than ever in the mass market of cosmetics. Here, e.l.f. is up against global giants such as L'Oréal, Estée Lauder, Unilever, LVMH, Beiersdorf and Procter & Gamble. The Oakland-based cosmetics specialist is countering their omnipresence with a sustainable and ecological approach. All products are vegan and developed and produced without animal testing. The most important sales market is the USA, where e.l.f. Beauty products are available from retailers Target, Walmart and Ulta Beauty. In the 2024 financial year (as at March 31, 2024), the company generated 85% of its revenue in the US. In addition to stationary retail - e.l.f. Beauty is also present at drugstores in Germany, Italy and the Netherlands - the e-commerce sales channel is playing an increasingly important role. From October to December 2024, the e.l.f. app was installed more than 3 million times. At the end of the year, 5.6 million members were taking part in the app's digital benefits program.
They made the cash register ring loudly during the Christmas holiday time. For the third quarter of the 2025 fiscal year, e.l.f. Beauty reported sales growth of 31% to USD 355.3 million. Analysts had expected an average of just under USD 330 million. However, business appears to have stumbled after the turn of the year. "In view of the weaker than expected trends in January, we are taking a cautious stance and lowering our forecast for the last quarter of our financial year," explained CFO Mandy Fields. She now expects sales growth of 27% to 28% for 2025. Previously, the target range was 28% to 30%. The operating result (adjusted EBITDA) is expected to be between USD 289 million and 293 million. Management had originally expected more than USD 300 million.
"We believe that we are still in our infancy," commented CEO Tarang Amin on the latest interim report. He based this assessment on the company's potential in digital sales, international business, color cosmetics and skincare. The optimism did not catch on Wall Street. Investors fear that e.l.f. Beauty is feeling the effects of the existing uncertainty among the important Generation Z consumer group in particular. The 10% tariffs imposed by US President Donald Trump on imports from China pose a further threat. Although the proportion has already fallen, the company still produces 80% of its products in China. According to the management, the tariffs will not affect the results for the fiscal year that is coming to an end. The CEO intends to present a forecast for the 2026 financial year in May.
The share price has recovered somewhat from the recent sell-off. In the USD 70 range, e.l.f. Beauty is working on bottoming out. Against this background and in view of its high volatility, the share is an interesting underlying for soft callable barrier reverse convertibles. Leonteq has launched two new variants of this structure. The coupon payment is conditional in each case. As soon as e.l.f. Beauty is above the coupon trigger level on the observation date, the distribution is due. The relevant threshold is 50.00% of the initial price. In the product currency CHF, the conditional coupon is 18.00% p.a. With an allocation in USD, a distribution of 24.00% p.a. is possible. If the underlying does not make it over the 50.00% hurdle, the outlined return is not necessarily lost. Thanks to a memory effect, lost coupons are paid as soon as e.l.f. Beauty is above the trigger on a later record date. There is partial protection for the nominal in the form of a barrier of a low 50.00% of the initial fixing. Please also note the soft callable function. It makes early termination and redemption of these issues possible.
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