Welcome to the December issue Financial focuswe analyze the financial strategies that shape the success of leading cosmetics and personal care brands. This month, we spotlight Elf Cosmetics, a brand that has redefined affordable beauty while maintaining incredible financial health and multi-generational appeal.
As someone who loves both makeup and skin care, ELF Cosmetics is a brand that I’m very familiar with. They are best known for creating affordable copies of high-end products.
And the quality is often better than the original expensive item you’re being scammed from. This is a niche business model that they own and they do it very well.
But there are other things they do well. ELF reported a 40% increase in net sales in its latest fiscal 2025 second quarter results. This growth was driven by strong sales in retail and e-commerce channels both in the United States and internationally.
At the same time, the company’s gross profit margin increased to 71% in the second quarter of 2025 due to cost reductions, favorable foreign exchange effects and price increases in international markets.
While these numbers are certainly positive, they’re not the only reason ELF has been so successful.
It comes down to a combination of smart financial management, respect for suppliers, and strategic expansion plans.
ELF recognizes that suppliers are essential to economic success
The strength of a cosmetics brand is determined by its suppliers and vendors. And ELF knows that.
Suppliers and vendors provide materials, manufacture ELF products, perform product testing, and more. Without these, ELF would not be able to launch so many products each year, most of which are doing very well in the market.
However, in order for these suppliers and vendors to be able to perform their jobs and provide what ELF needs, they must receive timely payments from ELF and other customers. as credit safe data Clearly, ELF has a strong track record of paying suppliers on time.
For example, from November 2023 to September 2024, brands’ days past due (DBT), or the number of days invoices were late, ranged from 2 to 6 days. This is very low.
Let’s put this into context. Suppose that one of ELF’s suppliers and ELF agree to payment terms of Net 30. This means that ELF pays its suppliers only a few days late at most, and generally pays its suppliers on time.
It’s also worth noting that ELF tends to pay its suppliers faster than other cosmetics brands. According to Creditsafe data, the industry average DBT is 9 and ELF has managed to stay below that value for the past 12 months.
Additionally, ELF achieved exceptional payout rates in May 2024, with 68% of invoices paid within the current cycle. Also, in November 2024, almost 84% of outstanding invoices in the current category were paid. Financial stability reduces risk and optimizes cash flow, allowing ELF to focus on strategic investments and maintain stakeholder trust.
Marketing investments are supported by executives
Having spent my career in marketing, I can tell you how important marketing is to achieving your sales and revenue goals. But it’s not about implementing a one-off tactic, it’s the same thing everyone else is doing.
It requires significant investment, a clear strategy centered around the company’s long-term goals, and a motivated team that can deliver on that investment and strategy. ELF has mastered this.
According to recent financial statements, ELF allocates 24-26% of sales to marketing, with the aim of maximizing the company’s reach and appeal. CEO Taran Amin highlighted the ROI of these efforts, which not only makes ELF a top brand among Gen Z, but also resonates deeply with Millennials and Gen Alphas.
ELF employs disruptive marketing campaigns that combine creativity and authenticity. From viral TikTok challenges to collaborations with influencers, their efforts are gaining attention while enhancing the brand’s reputation for affordability and quality. This approach helps keep ELF top of mind even as consumer preferences change.
A cautious approach to spending and retail expansion strategy is paying off.
If you’ve ever stepped into a Target, CVS, Walgreens, or Dollar General store, you’ll notice that most ELF products are available. This is a wise move.
Rather than launch its own ELF store and take on the financial burden of leasing, selling merchandise, hiring staff, etc., the brand is looking to partner with retailers that already have a high market share among consumers. I am making use of it.
During the company’s second quarter 2024 earnings call, Rick Gomez, Target’s executive vice president and chief commercial officer, said the company has experienced consistent sales growth in the beauty category. ELF announced earlier this year that CVS will more than double the shelf space for ELF products in spring 2024. Walmart also has similar plans to increase shelf space for its ELF brand in summer 2024.
If you look at this from a strategic perspective, it makes perfect sense. ELF allows you to reap the rewards without taking on too much risk.
Another area where ELF is being cautious is supply chain. At one point, ELF outsourced the production of 99% of its products to Chinese suppliers. However, this has caused problems for ELF in the past – including examples of supplier issues.
Brands like ELF rely on a small group of suppliers from a single country, which can lead to supplier closures due to political issues, factory strikes, or natural disasters. In such cases, the company may be left with manufacturing orders that it cannot fulfill and must scramble to find alternative suppliers, ultimately increasing costs and potentially losing customers.
This is likely why ELF currently only outsources 80% of its manufacturing to factories in China.
Additionally, ELF is further diversifying its revenue sources, with 21% of its net sales now coming from international markets, up from 16% a year ago. The focus on clean aesthetics and sustainable packaging is evidence of the way the company operates, always putting the needs of its buyers first and changing its approach based on consumer attitudes and pain points. is.
What cosmetics brands can learn from Elf Cosmetics
You might wonder why a brand known for deceiving high-end cosmetics is doing so well. While ELF doesn’t play it safe with product launches or marketing campaigns, it takes a more cautious approach to its finances.
But this is a good thing. Rather than trying to launch its own retail stores, the company is leveraging retail spaces that its target audience already frequents regularly, such as Target, CVS, and Walgreens.
And by providing reliable and on-time payments, the company is believed to have been able to build strong trusting relationships with its suppliers. And this likely helps in producing and delivering orders on time.
If orders are produced with high quality and delivered on time, customers are satisfied and more likely to come back and spend more money. And it’s not just about how paying suppliers on time has improved ELF’s relationships with suppliers. It is also a way to increase the likelihood that ELF will secure funding if needed.
For more information or questions, please email Ragini.Bhalla@creditsafe.com or LinkedIn Credit Safe.
