e.l.f. Beauty CEO sees ‘remarkable’ engagement on TikTok as it aims to attract Gen Z customers

Tarang Amin, e.l.f. Beauty CEO, joins Yahoo Finance to discuss e.l.f. Beauty’s Q1 earnings out yesterday, outlook for the beauty industry post-Covid, and the company’s push to attract Gen Z customers via TikTok.

Video transcript

ALEXIS CHRISTOFOROUS: ELF Beauty had a pretty attractive Q1 earnings report. The cosmetics company topped earnings and revenue estimates, also raised its outlook for fiscal year 2022. Joining us now is ELF Beauty CEO Tarang Amin. Tarang, always good to see you. These are impressive numbers, albeit you are comparing them to the year of the pandemic-- but net sales up 50% compared to a year ago, your 10th consecutive quarter of net sales growth. What drove those results for you at ELF?

TARANG AMIN: Well, thanks for having me again. I would say a continuation of our overall business model. We were strong entering the pandemic, we were strong throughout it, and I think we're even stronger now. And it fundamentally is about making the best of beauty accessible to every eye, lip, and face. And our strategy continues to work.

KRISTIN MYERS: Now, I know that you're having a push right now to attract some younger customers, the Gen Z customers. How have the beauty trends changed for the Gen Zers compared to folks like myself that are millennials and even older?

TARANG AMIN: Well, I think there are many commonalities. The love of this category in terms of new ideas and innovation I think resonates across all age groups. But we've had great success amongst Gen Z really by our ability to engage them, by going on platforms like TikTok, being the first beauty company on Twitch and into gaming-- really all the different ways that we engage.

And we're now the second favorite brand among Gen Z in our space. And we continue to do really well among that group. And it's really about engaging.

ALEXIS CHRISTOFOROUS: Talk to me about some of the trends that you're seeing right now. What are consumers gravitating to, and has it changed during this pandemic?

TARANG AMIN: Well, what we're really seeing is a strong inflection to the positive for the overall category. I think with all the restrictions we had last year, there's a lot of pent-up demand to be able to express yourself, to be able to get out there. In fact, June was the first month for the overall category that sales were above years ago. And so we're definitely seeing consumers return to the category. And we're seeing for us strength across every one of our segments.

We basically continue to build share. And we're the only top five brand really over a two-year basis that's built a lot of share. And it's really because of the innovation that we have. We have products that really resonate with our consumers, and our ability to really engage them is the thing that continues to propel us.

KRISTIN MYERS: What's your outlook as we come out of the pandemic? On the one hand, we are seeing folks leave their houses more and more often, folks willing to wear makeup to go to dinner, go to see their friends. But I'm also hearing from some of my friends actually say, listen, I haven't really worn makeup a lot throughout this pandemic, and I really like it.

And now that I'm starting to leave my house again, I'm starting to rethink having to wear foundation, and mascara, and some other more traditional beauty items and makeup items. How are you perceiving this post-pandemic world that we're going to be in, particularly when it comes to purchasing makeup and other beauty items?

TARANG AMIN: Well, I'm actually quite bullish on the category. As I mentioned, the category is coming back. We see a lot of consumer interest. And for ELF in particular, I think we're well-positioned. We have a very strong base in our core complexion products-- our primers, our concealers, products that you don't actually have a full face of makeup to still make great benefits-- as well as our growing skincare range.

We have continued to have real strength across our skincare items. And that includes expansion of our brand portfolio. With the acquisition of Well People, a pioneering clean beauty brand that really appeals to consumers who are looking for much more conscious about the ingredients in their products, or our groundbreaking lifestyle beauty brand, Keys Soulcare that we developed with Alicia Keys-- that's really about self care, self-love, and rituals. That's really changing the scope of conversation in our space. So we're able to appeal to a broad set of consumers really through a robust portfolio that has momentum across every one of our brands.

ALEXIS CHRISTOFOROUS: Tarang, we talk to a lot of CEOs here who have been complaining about supply chain bottlenecks. And I'm wondering if you are experiencing the same thing there at ELF and if inflation is starting to seep in. Are you able to absorb those costs, or do you envision having to pass those along to the consumer in the weeks and months ahead?

TARANG AMIN: Well, certainly, we've been impacted like everyone else by the global imbalance of containers. I'm actually proud of our team of how we've been able to navigate that. In the quarter, our in-stock levels are 95%. That really talks to the strength that we have with our retail partners and online.

Certainly, costs are elevated due to that. But I consider that temporal in nature. I feel like over time, global imbalances tend to balance out. And I feel like we're really well positioned with the best combination of cost, quality, and speed in our space.

KRISTIN MYERS: Tarang, I want to ask you about some of the ventures that ELF has been going into-- getting into gaming through a channel on Twitch. I see that there's also attempts to attract some Gen Z customers on TikTok. Tell us a little bit about that strategy.

TARANG AMIN: Yeah, so our strategy is really to engage our consumers and find where they're most comfortable. So our foray onto TikTok, we're one of the first beauty brands on TikTok. Our latest challenge, TikTok Gamers Got Talent, generated over 17 billion views. So it's been remarkable the level of engagement we've been able to see on that platform.

But similarly in gaming, it came from a simple insight that 70% of our consumers play video games, 65% of them watch others play video games on platforms like Twitch and YouTube. And so it was a natural thing for us to do and really engage-- and particularly our partnership with Lufu, the world's second-largest female gamer on empowerment, things that tie into our core values as a brand. We found it's a great way of continuing to engage with our community.

ALEXIS CHRISTOFOROUS: Well, you have definitely found the secret sauce there, I think. Tarang Amin, CEO of ELF Beauty, congratulations again on those results. And thanks for being with us.