E.l.f.'s 83% Margin Owes Most of Its Jump to Tariff Refunds

This article first appeared on GuruFocus.

E.l.f. Beauty (NYSE:ELF), the value cosmetics and skincare maker behind e.l.f. Cosmetics and rhode, slipped 0.45% premarket after reporting first-quarter net sales of $479.4 million, up 36% and past the $431.2 million analyst estimate. It was the company's 30th straight quarter of sales growth. Adjusted earnings were $1.75 a share.

The margin line needs a closer look. Gross margin jumped roughly 1,400 basis points to 83%, but about 1,050 of those points came from one-time IEEPA tariff refunds, with the rest from pricing and lower tariff rates. Adjusted EBITDA rose 93% to $168.2 million.

E.l.f. raised its full-year outlook, now guiding to 18% to 20% net sales growth from 12% to 14% previously, and lifting adjusted EPS guidance to $3.50-$3.55 from $3.27-$3.32. rhode, the Hailey Bieber brand acquired last year, outran its earnout targets, triggering a $16.1 million charge tied to contingent consideration. The company bought back $50 million of stock in the quarter.