The news: Estée Lauder and e.l.f. Beauty both raised their fiscal year outlooks after delivering better-than-expected results for the fiscal quarter ended December 31. The two companies, however, are on different paths: e.l.f is riding strong momentum after its Rhode acquisition, while Estée Lauder is fighting to stay relevant in the US.

By the numbers: Both Estée Lauder and e.l.f. ended the year on solid footing, signaling that despite global headwinds, the “lipstick effect” is holding strong across most markets.

• Estée Lauder’s net sales rose 5.6% YoY to $4.23 billion, with growth across all categories—most notably skincare and fragrance, which rose 7% and 9%, respectively, on a reported basis.
• E.l.f.’s net sales jumped 38% YoY, with Rhode accounting for over 95% of revenue growth.

Despite their sales strength, the two companies face diverging competitive realities in the US. E.l.f. continues to gain strength: Market share for its namesake brand grew by 130 basis points in the quarter, the largest increase among some 700 brands tracked by Nielsen, while Rhode is the top-selling brand in Sephora. The company expects that trajectory to continue even as it pushes through price increases tied to tariffs, with sales for the fiscal year ending in March forecast to rise 22% to 23%.

By contrast, Estée Lauder is working to regain market share lost over the previous decade. That requires shifting distribution away from retail channels in decline—like department stores—and toward TikTok Shop, Amazon, and Sephora. The company has also retooled its organizational structure to speed up innovation and unlock savings that can fund larger marketing efforts.

Recommendations for the beauty industry: E.l.f.’s and Estée Lauder’s performances show that beauty companies need to be nimble to succeed in the US and beyond.

Specifically, they should:

• Accelerate product innovation to stay relevant in a saturated market.
• Recalibrate their distribution channels toward faster-growing ecommerce platforms and away from traditional sellers like department stores and drugstores.
• Ramp up marketing investments to boost brand awareness.

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