Higher inventory is always considered as a negative for any company, but e.l.f. Beauty Inc ELF’s heavier than expected inventory at the end of its fourth quarter is good.
The cosmetics firm said it was a calculated move to increase supply of its fastest moving items, and should help with out-of-stocks at retailers, which has led to lost sales in the past.
e.l.f. Beauty delivered a strong fourth quarter EPS print, beating consensus by $0.06 driven by higher-than-expected top-line growth and gross margin expansion.
“We remain Outperform rated based on ELF's unmatched 20% sales growth algorithm, value proposition (retail for <$6), loyal and attractive consumer base, and considerable white space in existing and new account,” analyst BMO Capital analyst Shannon Coyne wrote in a note.
Coyne is also positive on the expanded shelf space at Target Corporation TGT at over 50 percent as it sets the stage for further sales growth. The company also expanded its international presence in the fourth quarter, adding 150 new Wal-Mart Stores Inc WMT locations in Mexico, as well as opened four new retail stores, including its first LA store.
Meanwhile, e.l.f. Beauty provided initial guidance for FY2017 ahead of consensus expectations, with a top line of $285-$295 million (vs. $281 million consensus estimate), and adj. EPS of $0.40-0.43 (vs. $0.36 consensus).
“After introducing 90 new products in FY2016, innovation should remain key to further GM expansion, with a strong product pipeline projected in FY2017,” Coyne added.
At last check, shares of e.l.f. Beauty climbed 14.23 percent to $28.90. Coyne raised the price target by $2 to $38.
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