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Feb 27, 2019
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E.L.F. sees sales slip; announces store closures and CFO transition

Feb 27, 2019

NYC-based beauty company E.L.F. Cosmetics posted a slight decline in Q4 net sales on Tuesday, as it reported the closure of its store network to refocus its efforts online and announced the start of its hunt for a new CFO.

E.L.F. reported a 4% decline in sales in Q4 - Instagram: @elfcosmetics

E.L.F.’s net sales in the fourth quarter ended December 31, 2018, totaled $78.6 million down 4% from the $81.6 million reported in Q4 2017. According to the company, this decrease was largely due to declining trends at some national retailers, falling holiday program sales and lower pipeline shipments.
Net income for the quarter was $9.7 million, or $0.20 per diluted share, compared to $21.5 million, or $0.44 per diluted share, in the prior-year period. As pointed out by E.L.F., aside from falling sales, part of this large disparity can be attributed to the fact that net income in the fourth quarter of 2017 included a non-cash tax benefit of $11.6 million.

Full-year net sales for fiscal 2018 fell 1% to $267.4 million, compared to $269.9 million in 2017, principally due to declining trends at national retailers and a $4.9 million decrease in sales in the company’s discount channel.

Annual net income was $15.5 million, or $0.32 per diluted share, down from $33.5 million, or $0.68 per diluted share in fiscal 2017, when the figure was boosted by the aforementioned non-cash tax benefit.
E.L.F. further announced the departure of President and CFO John Bailey, who will be stepping down from his role on March 31, 2019. The company has already begun its hunt for a new CFO with the support of a national search firm and explained that Bailey’s responsibilities as president will be taken over by E.L.F. Chairman and CEO Tarang Amin along with other members of the executive team.

“John has been a terrific strategic partner to me and the entire executive team from inception through the IPO and to this stage in the Company’s journey,” commented Amin in a release. “I thank him for his service and wish him the very best as he returns to the investment world.”
The executive’s exit is not the only change afoot at E.L.F., as the company has also announced that it is shuttering its network of 22 stores, seeking to prioritize distribution through its digital channel and national retailers. The company’s store network contributed 5% of overall net sales in 2018.
As it moves forward with these initiatives, E.L.F. expects to see net revenue of between $55 million and $58 million in the first quarter ended March 31, 2019, and adjusted net income in the range of $2 million to $3 million.
“Going forward, we will be laser-focused on reasserting E.L.F.’s core advantage to delight beauty enthusiasts with prestige-quality cosmetics and skin care at an extraordinary value,” explained Amin in a release. “We intend to do this by driving demand in our brand, focusing on key, first-to-mass products, getting the right assortment and placement on-shelf and on-line and generating the cost savings to help pay for these investments.”

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