Piper keeps Neutral on Elf as market share reverts to negative in February

Piper Sandler notes that February consumption data for Elf Beauty (ELF) slowed to flat, a five-point deceleration vs. January. Thus far in Q4, consumption data is running at low single digit vs. high single digit in the U.S. during Q3 and similar trends called out mid-month at a competitor conference. The firm’s sense is this could be weather related, as Spring innovation is in the process of being set at partners. The slowdown is being driven by volume, which after maintaining the negative mid-single digit range since higher pricing was rolled out, dipped to minus 10% in February. At the same time, looking at U.S. Mass Cosmetics market, 2% strength from January continued into February. Piper is staying Neutral on Elf, as acceleration in core business from lose single digit is key for the stock.