e.l.f. Beauty's (ELF) Alicia Keys brand sales could exceed $25M in year 1 - Jefferies

Stephanie Wissink, an equity analyst at Jefferies, says that e.l.f. beauty (NYSE: ELF) could generate $25 million in first-year sales from indie brand Keys Soulcare with Alicia Keys.

The company announced that a virtual launch event (Keys Soulcare Lounge) will take place on Wednesday. The website - keyssoulcare is already up and running, with content across Body-Spirit-Mind-Connection. Wissink also expects the commerce component to go live in the near term.

“Ulta announced via its social feeds that it will roll out Keys Soulcare in December on an exclusive basis. This partnership aligns with the positioning of the brand - aspirational but accessible - and being content led, the brand can leverage ULTA's 30M+ beauty enthusiast loyalty program,” Wissink wrote in today’s note.

Although the brand enters a crowded marketplace, the analyst believes its positioning is unique in that the impetus isn't external, cosmetic beauty, but rather inner beauty driven.

“We've only gotten glimpses of the product range with skincare and home fragrance/candles being the launch focus. We expect body care, hair care, and potentially consumable beauty / beauty from within classifications to be added in 2021-22.

“We expect the Keys Soulcare collection to be among ELF's highest end price points ($20+), but to also retain an element of affordability. We don't see Keys Soulcare following the "fast to mass" model that elf core brand has leveraged. That said, we expect the line to have a forward lean in terms of trend and to skew higher in quality, esp in core ingredients and skincare formulations,” writes Wissink.

Jefferies’ analyst says that the expected sales volume ($25 million) represents about 50%

below upper tier brand launches.

“In terms of TAM, per Euromonitor, U.S. facial skincare = $13.8B, U.S. bodycare = $3.8B, U.S. haircare = $13.5B, and home fragrance = $1.9B. Sensitivity to our model is such that each $25M of revenues translates to $5.5-6.0M of incremental EBITDA on a base of ~$65.6M in FY21 (March YE). Our model for FY22 assumes 6% sales growth ($17M added sales) and 3.5% adj-EBITDA growth ($2.3M added EBITDA) - this appears conservative in the context of core brand momentum vs. the category and the Keys Soulcare launch potential.”

ELF is rated as “Buy” at Jefferies, with the price objective set at $25.00 per share.

For an analyst ratings summary and ratings history on e.l.f. Beauty click here. For more ratings news on e.l.f. Beauty click here.

Shares of e.l.f. Beauty closed at $21.05 yesterday.

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