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e.l.f. Beauty Secures Top Spot at Walmart, Eyes Global Expansion

e.l.f. Beauty has climbed to No. 1 at Walmart, improving from its previous position of No. 4 last year. The company is also succeeding with emerging retailers like Dollar General, where e.l.f. launched its products in select stores. Results from this new channel have surpassed expectations, prompting plans for further expansion at Dollar General this spring.

Aligned with Dollar General’s mission, e.l.f. aims to make quality beauty products accessible, particularly in underserved rural areas traditionally dominated by established brands. Following a strategic focus on productivity, e.l.f. has become the most efficient cosmetics brand in terms of revenue per linear foot with major global retailers.

The brand’s remarkable achievement of 24 consecutive quarters of gaining market share highlights the effectiveness of its productivity strategies. e.l.f. is poised for continued growth and retail expansion in the coming years. In just five years since its inception, e.l.f. skin has emerged as a top 10 skincare brand, competing against well-established brands that have existed for decades.

For perspective, the average age of the other top 10 skincare brands is 63 years. In the third quarter, e.l.f. skin significantly outperformed the category, growing market share. Currently, e.l.f. skin holds about a 2% share of the market, while the leading brand commands nearly 14%. The acquisition of Naturium has expanded e.l.f.’s skincare sales to 18% of total retail sales.

With two of the fastest-growing mass skincare brands, e.l.f. now caters to varied price points and target audiences. The launch of Naturium at Ulta Beauty has shown promising performance, with additional opportunities for growth ahead. Looking at international sales, e.l.f. saw a growth of 66% in Q3, driven by advancements in existing markets and expansion into new territories.

International sales contributed to 20% of the company’s total net sales in Q3, up from 15% the previous year. e.l.f. identifies significant opportunity in international markets, where global competitors derive over 70% of their revenue from outside the U.S. The brand has effectively engaged consumers through social platforms, creating demand prior to entry in new countries.

Today, e.l.f. operates in 15 countries, with recent launches in Rossmann, Germany; Etos, Netherlands; Douglas, Italy; and Sephora, Mexico. e.l.f. has secured a top three ranking in each of these newly entered markets, indicating strong global brand appeal. The company plans to utilize its distinctive marketing techniques tailored to cultural nuances in each area. In Germany, for instance, the latest marketing campaign is titled “e.l.f. von zehn,” translating to 11 of 10, reflecting the local appreciation for high quality ratings.

In Mexico, the company is launching a campaign themed around popular telenovelas entitled “Descubre el efecto,” encouraging consumers to “discover the e.l.f. effect.” e.l.f.’s successful outreach to a global audience affirms its potential for continued growth. The brand’s unique advantages stem from five areas: a committed workforce, a strong value proposition with an efficient supply chain, innovative product offerings, effective marketing strategies, and a robust retail productivity model.

All these aspects work together to fortify e.l.f.’s competitive edge. In Q3, the brand demonstrated exceptional innovation, revealing several standout products inspired by community feedback and successful prestige items. The “Holy Grail” innovation strategy has been particularly effective, helping e.l.f. dominate the mass cosmetics market in 2024 with six of the top ten new product launches.

In three critical makeup segments—face, lip, and eye—e.l.f. has achieved significant market share growth, with an ambition to capture larger portions of these categories. Notably, the company holds over 20% share and ranks No. 1 in face products, while securing an 11% share in lip products and an 8% share in eye products. The potential for further market conquest in these segments appears promising.

Many of e.l.f.’s upcoming products for Spring 2025 will expand existing product lines, including the launch of the new Power Grip Matte Primer, the matte version of the highly acclaimed original Power Grip Primer, which is recognized as the leading cosmetics SKU across both mass and prestige markets.

Last quarter, the company also initiated the “eyes, lips, face fandom” campaign. The advertisement premiered on Thanksgiving Day and enjoyed extensive visibility during the playoff season, achieving a community engagement metric of 95% positive sentiment and lifting site traffic and sales for Power Grip products.

Notably, the marketing campaign featuring Meghan Trainor highlights e.l.f.’s popular Halo Glow franchise. e.l.f. has emerged as a favorite brand among Gen Z and ranks highly for purchases among Millennials and Gen Alpha. The increased investment in marketing has raised e.l.f.’s unaided brand awareness from 13% in 2020 to 33% in 2024. Considering the leading U.S. mass cosmetics brand possesses 55% awareness, e.l.f. has ample growth potential ahead.

In closing, the five core advantages of e.l.f. are expected to propel continued success in fiscal ’25 and beyond. With confidence in the ability to gain further market share and achieve industry-leading growth in the beauty sector, I will now pass the call to Mandy.

Mandy Fields — Senior Vice President, Chief Financial Officer

Thank you, Tarang. I will now discuss the key insights from our third quarter results and the updated outlook for fiscal ’25. In Q3, net sales rose by 31% year-over-year, following 85% growth in Q3 of the previous year. Our growth has been driven by international retailers, digital commerce, and national retailers, benefiting from earlier product pipeline shipping than last year.

The sales momentum throughout fiscal ’25 is supported by continued strong performance in our product categories, alongside market share gains both domestically and internationally. The growth in Q3 was bolstered by higher unit volume contributing approximately 30 percentage points, along with an additional point from product mix. Gross margin reached 71%, up about 40 basis points compared to the prior year, primarily due to favorable foreign exchange conditions.

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Strong Q3 Results Show Resilience Amid Challenges for Naturium

Insights into Q3 Performance and Future Outlook

The latest financial update from Naturium reveals a blend of cost savings and inventory management, slightly offset by the impacts of its wholesale expansion and rising transportation costs. For the third quarter, selling, general, and administrative (SG&A) expenses stood at 54% of net sales, consistent with the previous year. Marketing and digital spending was 27% of net sales, compared to 26% last year, aligning with expectations.

Adjusted EBITDA was reported at $59 million, marking a 16% increase from last year. Adjusted net income remained steady at $43 million, translating to $0.74 per diluted share, unchanged compared to a year ago. However, both adjusted EBITDA and net income saw a hit from an unexpected foreign currency loss of about $7 million, stemming from fluctuations between the British pound and the U.S. dollar.

Financial Health and Strategic Growth Initiatives

Turning to the company’s balance sheet and cash flow, Naturium ended the quarter with $74 million in cash—up from around $73 million a year prior. Ending inventory stood at $215 million, up from $205 million, showcasing strategic inventory alignment with operational goals.

Liquidity remains robust, with net debt to adjusted EBITDA leverage below one-time levels. The company’s cash priorities focus on investing in growth and infrastructure, specifically moving its Enterprise Resource Planning (ERP) system to SAP and boosting distribution capacity to meet global consumer demand.

Revised Sales and Margin Projections for Fiscal ’25

Naturium has updated its fiscal ’25 outlook, predicting net sales growth of approximately 27% to 28%, a slight decrease from the earlier estimate of 28% to 30%. Q3 sales growth outperformed expectations, benefitting from pipeline shipments. However, Q4 has started with softer consumption trends, largely due to factors mentioned in earlier discussions.

Looking ahead to the second half, the revised guidance indicates a 14% to 16% net sales increase, following impressive 77% growth during the latter half of last fiscal year. Despite challenges in the mass cosmetics sector, Naturium is optimistic about gaining market share domestically and expanding internationally.

Gross Margin Forecast and Tariff Impact Considerations

For fiscal ’25, Naturium anticipates an improvement in gross margin, now expected to rise by approximately 40 basis points year-over-year, up from a previous forecast of 30 basis points. This projection does not account for the recently announced tariffs, which include an additional 10% on imports from China. Notably, these tariff hikes are not expected to affect the current fiscal year’s results.

In May, the company plans to address its strategy for these new tariffs and its fiscal 2026 outlook. Naturium draws on past experiences from 2019, when a similar issue emerged with 25% tariff levels, to create a responsive strategy that included negotiating supplier concessions and implementing selective price adjustments.

With a diversified supplier network outside of China and a growing international presence, Naturium is well-positioned to manage the potential impacts of these tariffs. The aim is to maintain marketing and digital expenditures around 24% to 26% of net sales in fiscal ’25, slightly below the 25% in fiscal ’24.

Outlook for Adjusted EBITDA and Continued Growth

The company now anticipates adjusted EBITDA to fall between $289 million to $293 million, a downward revision from the previous range of $304 million to $308 million. This change primarily results from the earlier mentioned foreign currency loss and lowered revenue expectations. The adjusted EBITDA forecast now implies a growth of approximately 23% to 25% on top of an impressive 101% growth achieved in fiscal ’24.

To summarize, Naturium’s Q3 results highlight their capacity for strong sales growth and market share expansion. The management is confident in their strategic initiatives and remains committed to maximizing the potential of their brands.

Questions & Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] Today’s first question comes from Bill Chappell with Truist Securities. Please go ahead.

Bill Chappell — Analyst

Thanks. Good afternoon. Hey, Mandy. Tarang, I guess my key question relates to the guidance and the situation you encountered in January. Can you help me understand how long you think these influences will last? I know the tougher comparisons on the lip oil were anticipated, but I am curious about the other two areas. Do you believe the comparisons will improve as we enter February through April? Or do you see signs of a prolonged slowdown? Any insights you can provide, Tarang, would be appreciated.

Tarang P. Amin — Chairman and Chief Executive Officer

Hi, Bill. I’ll start by emphasizing our cautious approach during slow months. January saw a category downturn of 5%, alongside challenges with our key lip oil product. This was our major launch for 2024, and we initially limited its release to Ulta, with wider availability only starting in January. Understanding this backlog helps provide context. Additionally, some of our new items have not gained traction as fast as we’d hoped.

Addressing the category specifically, we recognize that consumer sentiment feels affected post the heavy promotions of December; while we did not participate, the broader industry certainly engaged heavily in promotions, leading to this drop-off.

Moreover, there was a significant decline—over 20%—in social conversation in January, attributed to factors like the wildfires in L.A. raising sensitivity around communication and uncertainty surrounding TikTok’s operational status. We believe these dynamics could improve over time. As we ramp up our marketing activities and as new products hit the shelves, especially due to the expanded space we’re securing at Target and Walgreens, we expect trends to shift positively, but we opted to be conservative in our Q4 projections.

Bill Chappell — Analyst

Understood. Could you provide an update on your international ventures? Have you expanded into any new countries this quarter? Are you noticing any similarities in category performance or potential slowdowns abroad, or is growth continuing robustly?

Tarang…

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e.l.f. Beauty Sees Strong International Growth Despite U.S. Slowdown

P. Amin — Chairman and Chief Executive Officer

We’re very satisfied with our progress in the international market. In the third quarter (Q3), we reported a 66% growth in our International business. While we’re encountering some challenges in the U.S., conditions internationally are showing improvement, thanks largely to our strong execution.

Since launching in Rossmann, Germany, Etos in the Netherlands, and Douglas in Italy last year, we’ve consistently ranked among the top three retailers in these markets. Consumer demand remains robust, and we are actively engaging with a variety of retailers keen to carry e.l.f. products, which speaks volumes about our potential growth. We anticipate expanding into additional countries soon.

Bill Chappell — Analyst

Great, thanks for the insights.

Operator

Thank you. Our next question comes from Andrea Teixeira with J.P. Morgan. Please go ahead.

Andrea Teixeira — Analyst

Thanks, operator, and good afternoon, everyone. Could you provide more detail on U.S. consumption as we exit the quarter? You mentioned earlier the upcoming innovations for spring. Additionally, I recall hearing from Mandy that there was a pull forward in Q3. Can you explain what this means for our understanding of U.S. consumption and future growth? With a projected growth of approximately 7% for Q4, this suggests a potential downturn in U.S. sales, despite strong international performance.

Tarang P. Amin — Chairman and Chief Executive Officer

Hello, Andrea. In Q3, we ended with a solid U.S. consumption growth of about 12% in tracked channels. However, we did observe a decline in January, which we need to address. Despite a couple of weeks marked by negative scanner data, we are preparing our strategy in case the trend continues. The pull forward phenomenon relates to our pipeline where we dispatched more products in Q3 than we will in Q4, suggesting a broader perspective on second-half growth. Our new guidance indicates a growth of 14% to 16%, which we feel confident about despite category setbacks. Remarkably, even in January, a tough month, we managed to increase our market share by 90 basis points.

Andrea Teixeira — Analyst

Is there any distinction between sales channels? You’ve referenced trends related to social media, like TikTok, which affect consumer sentiment. How does the current newness of products play into this? Looking ahead, how does this influence your strategy for executing in the market?

Tarang P. Amin — Chairman and Chief Executive Officer

We remain optimistic about our spring product launches. While January saw some weakness, primarily due to reduced social media buzz, we continue to implement marketing campaigns to support our new items. The spring season will enhance visibility for these products, with significant promotional efforts planned. In Q3, our sales showed strength across nearly all channels. Although Ulta had exclusive lip oils during that time, we managed to outperform expectations there. Currently, Amazon remains strong, and Walmart is doing well too, although Ulta and Target have shown slight declines. It’s common to see some drops prior to resets, particularly at Target as we prepare for a space expansion.

Andrea Teixeira — Analyst

Thank you. I will pass it on.

Operator

Thank you. Our next question comes from Dara Mohsenian with Morgan Stanley. Please go ahead.

Dara Mohsenian — Analyst

Good afternoon, everyone. Your insights on January’s weaknesses were helpful. Can you elaborate on strategic adjustments you’re considering in response to changes in the market environment? Specifically, how do you plan to modify your marketing approach to ensure sustainability amid a softer industry outlook?

Tarang P. Amin — Chairman and Chief Executive Officer

For this quarter, our main focus remains on marketing activations tied to our innovations. We’re seeing social media conversations beginning to stabilize, which should support our upcoming campaigns. Additionally, we’ve prepared favorable resets with our retail partners. While our marketing strategy won’t experience significant shifts, we’re committed to supporting both new products and core franchise brands. A notable aspect of this season’s launches is that many of them build on successful existing lines, like Power Grip Matte and Halo Glow powder, helping to strengthen our overall brand presence.

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e.l.f. Beauty Navigates Consumer Caution While Maintaining Growth

In a recent discussion regarding the brand’s strategies, e.l.f. Beauty executives shared insights about their marketing direction amidst consumer hesitance. They have decided against increasing spending in the light of current economic conditions, focusing instead on effective returns on investment (ROIs).

Dara Mohsenian — Analyst

Thanks, team.

Operator

Next, we have a question from Ashley Helgans of Jefferies. Please proceed.

Ashley Helgans — Jefferies — Analyst

Hello, thank you for taking my question. Tarang, you mentioned a slowdown in mass beauty during January. However, despite a general decline in the mass cosmetics sector over the last six months, e.l.f. has outperformed its peers. Could you elaborate on consumer trends in this sector, perhaps looking at an extended timeframe? Thanks.

Tarang P. Amin — Chairman and Chief Executive Officer

When reflecting on the mass cosmetics industry over the past six months, two main issues stand out. Firstly, there’s significant consumer uncertainty due to factors like election tensions and ongoing concerns regarding inflation and the economy. These factors have contributed to the overall dip in the mass cosmetics category.

Secondly, we’ve managed to remain on an upward trajectory concerning marketing spend, consumer engagement, and product innovation amidst this economic backdrop. While the industry as a whole has faced softness, history shows that these cycles of decline are often followed by rebounds. For example, after a weak period in 2018, the sector experienced robust recovery in the subsequent years. Consequently, I’m optimistic about the category’s long-term potential.

Additionally, e.l.f. has achieved 24 consecutive quarters of net sales growth, averaging over 20%. This success validates our strategy while we continuously adapt to market trends, focusing on balancing our established franchises with new products while enhancing in-store visibility.

Ashley Helgans — Jefferies — Analyst

Thanks for the insight.

Operator

Thank you. Our next question is from Olivia Tong of Raymond James. Please go ahead.

Olivia Tong — Analyst

Thank you, and good afternoon. I would like to discuss Q4. Although recent challenges have been noted, e.l.f. typically surpasses scanner trends, thanks to digital and international sales. Why did this trend not continue this quarter, and what are your thoughts on this? Additionally, how do you plan to attract customers looking for cheaper options during this slowdown? Thank you.

Mandy Fields — Senior Vice President, Chief Financial Officer

Hi, Olivia. Thank you for your question. We feel positive about Q4, projecting growth of 14% to 16% for the second half of the year. Some pipeline shipments were moved up to Q3, which altered our usual performance metrics.

Regarding scanner trends, e.l.f. has seen better performance in digital and international markets, even amidst domestic declines. This gives us confidence in our second-half projections.

Tarang P. Amin — Chairman and Chief Executive Officer

To add, we are taking a cautious stance given the current consumer landscape’s challenges. Transparency with our stakeholders has been our priority, and we will call out trends when we encounter them. Despite a muted January, we’ve gained 90 basis points of market share—more than any competitor. We’ll continue to showcase our value proposition and highlight our affordable products, which appeal to cost-conscious shoppers.

Olivia Tong — Analyst

Thank you for your insights.

Operator

Next, we have Patty Kanada from Goldman Sachs. Please proceed.

Patty Kanada — Goldman Sachs — Analyst

Thank you for taking my question. I’d like to hear more about e.l.f.’s digital strategy, especially regarding Amazon. Can you detail the partnership’s contribution, particularly in attracting new customers? Furthermore, how are you managing potential cannibalization with in-store sales? Thank you.

Tarang P. Amin — Chairman and Chief Executive Officer

Our digital business showed strong results in Q3, with a 30% increase overall and even higher growth on Amazon. This platform is crucial for product discovery and consumer convenience. As a top-performing brand, we view this partnership as a key driver for future growth, not only in the U.S. but also as we expand into international markets like the U.K., Germany, and Italy.

In terms of consumer demographics, we’ve noticed a diverse range of shoppers utilizing Amazon. The convenience and discovery features afforded by the platform enhance our visibility and appeal significantly.

e.l.f. Beauty Discusses Growth and Strategic Outlook in Recent Earnings Call

Overview of Company Performance and Market Trends

(Newswire) – During the recent earnings call, e.l.f. Beauty executives addressed questions about the company’s current performance, particularly around retail dynamics and international growth trends. Executives acknowledged some level of cannibalization among retail customers, particularly with sales on Amazon, yet maintained confidence in their overall portfolio strength.

International Growth Projections for Fiscal Q4

Analyst Korinne Wolfmeyer from Piper Sandler raised inquiries about the international performance forecast for fiscal Q4. Company executives noted that international operations usually exceed expectations; however, guidance suggests a slowdown this quarter compared to previous results. Senior Vice President Mandy Fields emphasized that while overall run rates for new retailer launches may decrease, robust growth in existing markets is expected to continue.

CEO Tarang P. Amin added that the company has rolled out several significant launches, specifically mentioning Etos in the Netherlands, contributing to the expected Q4 performance. While acknowledging a slight dip in retailer launches, the overall growth remains solid.

Impact of Naturium on Gross Margin

Wolfmeyer also inquired about gross margin expectations as Naturium expands its wholesale distribution. Mandy Fields reassured stakeholders about the strategic planning behind this expansion. With an adjustment in gross margin guidance for the year from 30 basis points to 40 basis points, the company anticipates maintaining robust margins despite the mix impact from Naturium.

Market Share Performance and Growth Rate Insights

Peter Grom from UBS raised a question regarding the growth profile for fiscal ’26 and market share trends. Amin expressed that a better understanding would emerge in the upcoming months, with Q4 expected to be an anomaly. He mentioned that e.l.f. will see a gradual upward trend in growth due to existing opportunities in the market. With an impressive run rate of 14% to 16%, Amin noted the need for context, especially considering they lapped a staggering 77% growth the year prior.

Encouraged by a marked 90-basis-point increase in market share during January, Amin pointed out that even amid challenging circumstances, e.l.f. demonstrated resilience. Notably, the company’s share at Target is over 20%, compared to around 12% with other retailers. The growth trajectory remains strong, particularly following their ascension from the No. 4 position to No. 2 at Walmart.

Looking forward, Amin sees the potential for significant share growth in the skincare segment as well, where opportunities to expand from their current 2% share exist.

Understanding SG&A Leverage in Q4 Guidance

As the discussion moved towards operational costs, Grom questioned the implications of e.l.f.’s fiscal Q4 implied guidance and the significance of SG&A leverage, particularly focusing on marketing and digital expenditure. Mandy Fields was prepared to break down these components in greater detail during the call.

This round of inquiries offered illuminating insights into e.l.f. Beauty’s strategy and market presence as they navigate growth opportunities while managing their distribution effectively.

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e.l.f. Beauty Discusses Innovation and Growth Strategies in Q4 Earnings Call

Financial Insights and Strategic Investments

Mandy Fields — Senior Vice President, Chief Financial Officer

In Q4, we observed significant leverage in our SG&A expenses, attributed mainly to marketing and digital investments, which were at 34% last year. Moving forward, we expect this to range from 24% to 26% for the upcoming year. Continued investment in our team and infrastructure has been essential to achieve this leverage.

Tarang P. Amin — Chairman and Chief Executive Officer

On the topic of SG&A, we are committed to investing in our brands as well as adopting SAP later this year and expanding our international presence. Alongside our enhancements in distribution centers, these strategic moves support our growth in both the U.S. and globally. I believe we are striking a solid balance between leveraging resources and investing in essential growth initiatives.

Product Innovation: Keeping Pace with the Market

Peter Grom — Analyst

Thanks very much. I’ll pass it on.

Operator

Thank you. Our next question comes from Linda Bolton-Weiser with D.A. Davidson. Please go ahead.

Linda Bolton-Weiser — D.A. Davidson — Analyst

Hello. I’d like to discuss your product launches and innovation. I’ve noticed some interesting products in the prestige sector, such as jelly tints and the Cloud Glow foam primer. Can you share your plans for keeping up with these innovations? Additionally, how are you addressing low market shares in categories like Foundations and Mascara?

Tarang P. Amin — Chairman and Chief Executive Officer

Hi Linda. We have a robust innovation pipeline. While we experienced a slower start in January, our Halo Glow Powder has received positive feedback, and our Power Grip Matte stands out as a unique offering. We continuously draw inspiration from both our community and the prestige sector, ensuring that our products always reflect our e.l.f. brand identity. We’re excited about the imminent product launches planned for this fall and beyond.

Mandy Fields — Senior Vice President, Chief Financial Officer

Adding to Tarang’s point, we’ve made considerable strides in what we term Conquest categories. For instance, our market share in Lips has increased by over 800 basis points this year, indicating that our innovations are indeed helping us capture a larger market share, extending across Mascara and Foundation as well.

Performance of Naturium and Competitive Landscape

Operator

Next, we have a question from Susan Anderson at Canaccord Genuity. Please go ahead.

Susan Anderson — Canaccord Genuity — Analyst

Good evening. I’d like to ask about Naturium. Can you provide insights on its performance this quarter and its rollout to Ulta? Are you attracting new customers, and what expansion opportunities do you see in the U.S. and globally?

Mandy Fields — Senior Vice President, Chief Financial Officer

We’re pleased with Naturium’s performance, especially in Q3. Their growth at Ulta is strong, with continuous week-over-week improvements. The brand’s expansion opportunities are significant, especially since their current distribution is limited to Target and Ulta, along with online sales. Furthermore, Naturium has recently expanded into select Boots locations, and we expect this momentum to continue.

Tarang P. Amin — Chairman and Chief Executive Officer

Indeed, we see exciting growth potential for Naturium. Its clinically effective, biocompatible skincare line resonates well with consumers and positions us favorably for continued expansion.

Susan Anderson — Canaccord Genuity — Analyst

Great, thank you. One last question on the competitive landscape. Do you feel that some legacy brands are starting to emulate aspects of your strategy, particularly regarding launching similar products?

Tarang P. Amin — Chairman and Chief Executive Officer

The beauty industry has always been competitive. Nielsen tracks about 1,900 cosmetics and skincare brands. However, few achieve significant scale, with e.l.f. being one of only four brands surpassing $850 million in retail sales. While brands may attempt to imitate certain elements, we consistently innovate and pivot ahead, ensuring our competitive advantage remains strong.

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e.l.f. Beauty Continues Competitive Edge with Unique Campaigns and Market Share Growth

In the past year, e.l.f. Beauty has stood out with its unique approach to engaging and entertaining its community. The company has launched 20 distinctive campaigns, while its competitors struggle to produce even one or two. This dynamic pace gives e.l.f. a significant advantage in the beauty industry.

One of e.l.f.’s most notable strengths lies in offering high-quality products at accessible price points. This factor has created a competitive edge that no legacy player has matched. While traditional brands might introduce a couple of popular items every few years, e.l.f. has already unveiled numerous celebrated products, with expectations to release more upcoming hits in the fall.

Market share is a telling indicator of e.l.f.’s success. The company has more than doubled its market share over the past three years, a clear sign of momentum that competitors are struggling to replicate.

Susan Anderson — Canaccord Genuity — Analyst

OK, great. Thanks so much. Good luck the rest of the year.

Operator

Thank you, and our next question comes from Anna Lizzul with Bank of America. Please go ahead.

Anna Lizzul — Analyst

Hi, good afternoon and thank you so much for the question. Can you provide a breakdown of performance by category during the quarter and in January? I believe lip products continued to do well during that time. Additionally, how is e.l.f. skin performing compared to Naturium?

Tarang P. Amin — Chairman and Chief Executive Officer

Sure, let’s break it down. In Q3, every segment, both color cosmetics and skincare, showcased solid performance, with significant share gains noted in core segments. The lip category remained strong, while the collection segment faced some challenges, although we do not anticipate long-term issues. Skincare growth is also accelerating.

Overall, our strategy focuses on product innovation and engaging consumers, providing a roadmap for continued market share growth across all segments, including skincare.

Anna Lizzul — Analyst

Great. Thank you very much.

Operator

Thank you. Our next question comes from Mark Altschwager with Baird. Please go ahead.

Mark Altschwager — Analyst

Good afternoon. Thank you for taking my question. Has your updated guidance considered expectations around retailer destocking? Are major retailers discussing this trend against a backdrop of softer consumption?

Mandy Fields — Senior Vice President, Chief Financial Officer

Hello, Mark. Currently, we have not received feedback regarding destocking from our retailers. Despite decreased consumption, e.l.f. sustains its position as the most productive brand carried by retailers, and we expect continued orders for our products.

Mark Altschwager — Analyst

Thank you. Separately, while I don’t want to delve too deeply into your revenue projections for fiscal ’26, could you discuss the flexibility of your cost structure if demand continues to be soft?

Mandy Fields — Senior Vice President, Chief Financial Officer

Indeed. As we observed in Q4, our SG&A costs have been manageable. While investing in marketing is crucial, we maintain flexibility to adjust costs in specific areas. We run cost-saving programs annually with suppliers, but overriding priority remains to invest in growth opportunities, aligning with Tarang’s earlier comments.

Mark Altschwager — Analyst

Thank you.

Operator

That wraps up our question-and-answer session. I will now return the conference to Tarang Amin for concluding remarks.

Tarang P. Amin — Chairman and Chief Executive Officer

Thank you all for joining today. I want to express how proud I am of the e.l.f. Beauty team for delivering consistent, industry-leading results. Thank you to our passionate partners who share our vision for a different kind of beauty company. We look forward to connecting at CAGNY in a few weeks and discussing our fourth-quarter results and fiscal ’26 outlook in May. Thank you, and stay well.

Operator

[Operator signoff]

Duration: 0 minutes

Call Participants:

KC Katten — Vice President, Corporate Development and Investor Relations

Tarang P. Amin — Chairman and Chief Executive Officer

Mandy Fields — Senior Vice President, Chief Financial Officer

Bill Chappell — Analyst

Tarang Amin — Chairman and Chief Executive Officer

Andrea Teixeira — Analyst

Dara Mohsenian — Analyst

Ashley Helgans — Jefferies — Analyst

Olivia Tong — Analyst

Patty Kanada — Goldman Sachs — Analyst

Korinne Wolfmeyer — Analyst

Peter Grom — Analyst

Linda Bolton-Weiser — D.A. Davidson — Analyst

Susan Anderson — Canaccord Genuity — Analyst

Anna Lizzul — Analyst

Mark Altschwager — Analyst

More e.l.f. analysis

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