Lip oils drive sales at Elf Beauty as consumers seek cheaper cosmetics – BNN Bloomberg

(Bloomberg) — Elf Beauty Inc. said strong demand for its lip oil and tanning drops helped boost revenue by 50% in the latest quarter from a year earlier, helping it grab market share from rivals.

The company has capitalized on shoppers’ demand for more affordable cosmetics by selling its lip oil at a much lower price point than some high-end brands. Elf’s costs eight dollars, while Dior’s costs $40 in the U.S.

“We are seeing comments that consumers are more selective, but they are choosing Elf,” Chief Executive Officer Tarang Amin told analysts on Thursday after the company released its quarterly earnings report.

The average price of Elf products is around $6.50, Amin added, while other mass cosmetics companies charge around $9.50 and more expensive brands charge over $20.

Despite better-than-expected revenue growth, the company’s shares fell sharply Friday in New York after the company forecast earnings before interest, taxes and other items for the current quarter that fell short of analysts’ estimates. Raymond James analyst Olivia Tong attributed the lower-than-expected quarterly guidance to “primarily increasing conservatism on the sales front.”

Lip Oil Trend

In addition to Elf, brands like Summer Fridays, Nyx Professional Makeup and Rare Beauty have all launched lip oil products in the past year. Many consumers now prefer a more natural look and less color in makeup, says Larissa Jensen, global beauty industry adviser at market research firm Circana. Lip oils are part of that trend because they’re lighter than gloss, tend to be less pigmented and provide more hydration.

The pace of lip oil sales has far outpaced that of balms, glosses and lipsticks over the past few years. Sales of high-end lip oils are expected to grow to nearly $130 million in the U.S. in 2023, according to Circan. That’s up from less than $18 million in 2021.

Although growth has slowed recently, so-called “prestige” lip oils continue to outsell lipsticks and glosses. Sales of higher-end lip oils rose 56 percent in the first six months of this year compared with a year earlier, Circan data shows. Lip glosses, on the other hand, saw a 5 percent increase, albeit in much larger volumes.

Circana doesn’t provide sales figures for its mass-market lip oils, but Jensen said demand for them is strong, too.

For companies, one reason lip oils are appealing is that consumers need to refill them relatively quickly, notes Jessica Ramírez, an analyst at Jane Hall & Associates. Most lip oils come in small vials, and many consumers reapply and repurchase frequently. That drives sales.

For consumers, lip oils are “a little way to pamper yourself,” Ramírez said. “Even in times when you’re strapped for cash, these kinds of luxuries,” she added, make “you feel like you’ve done something good for yourself.”

With the assistance of Jeannette Neumann.