e.l.f. Beauty (ELF) 2027财年第二季度业绩电话会：销售额增长51%，上调业绩展望

核心要点

• 2027财年第二季度净销售额同比增长51%，标志着e.l.f. Beauty连续第31个季度实现增长。有机净销售额增长约35%，而Rhode贡献了约16个百分点。
• 调整后EBITDA增长86%至1.23亿美元。调整后净利润达到7300万美元，即摊薄后每股收益1.21美元，而上年同期为4100万美元（即每股0.68美元）。
• 在美国市场，净销售额增长25%；得益于Rhode在欧洲丝芙兰上市以及e.l.f.在加拿大、英国和德国趋势改善，国际净销售额暴增165%。
• 毛利率扩大约160个基点至71%。关税降低、有利的产品组合以及关税退税带来的30个基点，足以抵消价格投入的影响。
• 管理层将2027财年净销售额增长预期从18%–20%上调至22%–24%，并将调整后每股收益指引从3.50美元–3.55美元上调至3.82美元–3.86美元。
• 管理层预计下半财年增速将放缓至7%–10%，其中第三季度高于该区间，第四季度低于该区间，原因在于上年同期有新产品上市基数较高。

关键财务数据

定价和产品组合为季度销售额增长贡献了约20个百分点，而销量增长贡献了31个百分点。

业务与经营业绩

e.l.f. Cosmetics重获销量增长势头

e.l.f. Cosmetics在该季度获得了30个基点的市场份额。管理层将这一改善归因于其性价比主张、创新产品管线和营销执行力。按销售额和销量计算，秋季前10大平价美妆新品中有5款来自该品牌。

在测试显示出极其显著的销量反响后，公司对约10%的SKU降价1美元。管理层表示，其余90%的产品定价合理。

Rhode推动国际业务扩张

管理层表示，Rhode在欧洲19个国家的上市成为了丝芙兰迄今为止规模最大的新品发布。在所参与竞争的13个细分领域中，该品牌在12个领域排名第一或第二，并持续保持极高的复购率。

Rhode目前仅入驻了丝芙兰全球约40%的门店，仍有进一步拓展渠道的空间。管理层还表示，在经历了最初的零售入驻高基数之后，Rhode在美国市场仍持续实现同比增长。

公司预计Rhode的零售拓展将对毛利率造成压力，但管理层表示，在扣除营销投入后，该品牌仍能对调整后EBITDA利润率起到提振作用。

新品类拓展

e.l.f. Hair在Target推出了6款售价在10美元或以下的护发产品。在三个月内，它打入了Target护发品牌前20名和造型品牌前7名。大约有一半的e.l.f. Hair消费者是首次购买e.l.f.品牌的客户。

香氛及身体护理系列e.l.f. Pop于10月通过亚马逊和TikTok Shop发售。更多香型计划于2027财年晚些时候推出。

Naturium自三年前被收购以来规模增长了一倍以上。该品牌已拓展至墨西哥和加拿大的丝芙兰，并在当地迅速进入身体护理品牌前十名。

数字渠道与区域市场增长

互联商务（Connected commerce）占第二季度消费额的31%。在美国，e.l.f.是亚马逊上排名第一的美妆品牌，在TikTok Shop的美妆类目中排名第二。

在过去12个月中，国际销售额约占净销售额的25%。管理层将国际扩张视为重大的长期机遇，并指出e.l.f. Cosmetics约65%的社交媒体粉丝以及Rhode约75%的粉丝来自美国以外地区。

公司还实现了经营组合的多元化。非e.l.f.品牌目前贡献了30%的净销售额，而三年前仅为数百万美元。护肤品在销售额中的占比从9%上升至23%，而中国以外地区的制造占比则从1%飙升至近70%。

管理层业绩指引

管理层预计下半财年净销售额增长率约为7%–10%。预计第三季度增速将高于该区间，而第四季度增速将低于该区间，主要受上年同期新产品上市及零售渠道扩张的时间点因素影响。

公司计划将上半年收到的全部5200万美元关税退税，通过降低部分产品价格和加大营销投入进行再投资。管理层预计该再投资对全年调整后EBITDA的影响为中性。由于营销支出由第二季度推迟至下半财年，预计下半财年调整后EBITDA利润率将处于10%–13%的低两位数水平。

若剔除关税退税因素，管理层对2027财年毛利率的展望与上年同期相比基本持平。随着Rhode进一步扩展零售渠道，预计下半财年毛利率将出现同比下降。

风险与关注焦点

• 第四季度面临较高的对比基数，原因在于上年同期e.l.f.在Ulta Beauty和dm进行了渠道拓展，Rhode在Mecca上市，以及Naturium进驻沃尔玛。
• 尽管调整后EBITDA利润率保持强劲，但Rhode向线下零售的转向预计将挤压毛利率。
• 第二季度的国际销售额包含了Rhode在欧洲丝芙兰上市的渠道铺货出货量，这会对后续季度的业绩表现带来时间窗口上的考量。
• 从第二季度推迟的营销支出将拖累下半财年的盈利能力，预计调整后EBITDA利润率将在10%–13%的低两位数区间。
• 公司在将关税退税进行再投资的同时，永久下调了部分产品的价格，这使得销量反响和营销效果变得更加重要。

分析师问答精选

• Rhode分销渠道：管理层计划在丝芙兰及其他合作伙伴中保持有纪律的扩张策略。在DTC（直面消费者）独家新品上市的支持下，零售和DTC渠道销售额仍将是重点方向。
• 美国及国际市场势头：管理层表示，e.l.f.在美国的有机业绩表现符合或略好于预期。加拿大、英国和德国市场在第二季度有所改善。
• 美发与香氛业务潜力：在Target上市后，美发产品仍是目前的重点，但管理层看到了这两个品类的巨大机遇，并计划采取“边测试边学习”的渐进式扩张方法。
• 品牌组合投资：每个品牌都有专门的管理团队和投资重点，而e.l.f. Beauty在公司层面实行统一的损益表管理。
• Naturium空白市场空间：管理层看到了在美国和国际市场的进一步分销潜力，包括在沃尔玛和其他零售商处的继续拓展。
• Rhode获客成本：管理层表示，由于品牌势头强劲、产品创新以及DTC限时独家新品，公司并未遇到获客成本上升的情况。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Unknown Executive

Thank you for joining us today to discuss e.l.f. Beauty's Second Quarter Fiscal '27 results. I'm Ashley Helgans newly appointed Vice President of Investor Relations, and I look forward to working with many of you on this call.

With me today are Tarang Amin, Chairman and Chief Executive Officer; and Mandy Fields, Senior Vice President and Chief Financial Officer. We encourage you to tune into our webcast presentation for the best viewing experience, which you can access on our website at investor.elfbeauty.com. Since many of our remarks today contain forward-looking statements, please refer to our earnings release and reports filed with the SEC, where you will find that factors could cause actual results to differ materially from these forward-looking statements.

In addition, the company's presentation today includes information presented on a non-GAAP basis. Our earnings release contains reconciliations of these differences between the non-GAAP presentation and the most directly comparable GAAP measures.

With that, let me turn the webcast over to Tarang.

Tarang Amin

Welcome, Ashley, and good afternoon, everyone. I'm proud of the e.l.f. Beauty team for achieving another quarter of industry-leading results. In Q2, we grew net sales 51% and adjusted EBITDA 86%. This marks our 31st consecutive quarter of net sales growth. That's almost 8 continuous years of growth. We're one of only 6 public consumer companies out of 516 that has grown for 31 straight quarters and average at least 20% net sales growth per quarter.

With the momentum we're seeing, we're raising our fiscal '27 outlook to 22% to 24% net sales growth as compared to 18% to 20% previously. Our consistent category-leading growth is a testament to the strength of our team, strategy and portfolio of brands. e.l.f. Cosmetics reignited unit momentum this quarter and gained 30 basis points of market share. Road continues to break records with every launch, including most recently in Sephora Europe, marking the biggest launch in Sephora's history and Naturium remains one of the fastest-growing skin care brands, more than doubling since our acquisition just 3 years ago.

The strength of our portfolio is powered by leading engagement with our community, especially the next generation of consumers. In Piper Sandler's annual taking stock with teen survey we made history with 2 unprecedented achievements. Health Cosmetics was named the #1 favorite teen cosmetics brand for a record ninth consecutive survey with mindshare nearly 5x the next closest brand and Rod and e.l.f. were the only 2 brands in the top 10 for both skin care and cosmetics.

No other portfolio and beauty can claim this level of strength amongst teens. Our mission is to make the best of beauty accessible to every eye, lip and face. We recently refreshed our business strategy to unlock the full potential of our portfolio of brands. This new strategy is powered by 5 integrated pillars, cultivate a passionate team of owners, co-create with our community, win with winners expand our portfolio and accelerate global expansion.

Together, we believe these strengthen our competitive moat and give us confidence addressing the tremendous white space we see ahead. Let me walk through how each pillar powered our results in Q2. First, cultivating a passionate team of owners in a high-performance culture. I believe that our people are our greatest competitive advantage, and our results are a direct reflection of their tremendous talent and teamwork. We're the only public beauty company that grants equity annually to every employee, strongly aligning our interest with the long-term interest of our shareholders. We nurture our high-performance team culture that delivers exceptional employee engagement.

In our latest engagement survey, 93% of our employees stated they are proud to work at e.l.f. Beauty. This engagement helps fuel our productivity. On a sales and profit per employee basis, we outperformed the average of 516 public consumer companies by 3 and 8x, respectively. Second, core with our community through value, innovation and marketing. We listen closely to our community and quickly translate the request into premium quality products at extraordinary prices.

In Q2, we had an incredible fall innovation class across e.l.f. Beauty exceeding our expectations. With e.l.f. Cosmetics, our continuous stream of innovation has led us to holding the #1 or #2 position in 22 segments up from [indiscernible] years ago. This fall was no exception, e.l.f. Cosmetics holds the #1 position in mass for fall innovation launches with 5 of the top 10 products in both dollars and units. We're building on this strength by fast-tracking additional innovation our community has been asking for ahead of the holidays.

With Rhode, each launch continues to exceed our expectations. Our recent limited edition collection with influencer Alexandria Leclerc, had over a 200,000-person waitlist sold out of most items within the first hour and marked our largest limited edition launch to date. And it's not just launch success. Rhode has amongst the highest repeat rates in beauty, a testament to the quality and durability of our products.

Our third strategic pillar is to win with the winners across channels and platforms. We have a long track record of winning with the retailers at priority Beauty. This quarter, we strengthened our position in connected commerce and elevate our partnership with Sephora. As a digitally native company, we continue to lean into connect e-commerce to launch newness fuel discovery and scale across geographies.

In Q2, connected commerce drove 31% of our consumption. We're seeing particular strength on Amazon and TikTok shop. In the U.S., e.l.f. was both the #1 cosmetics brand on Amazon and the most search cosmetics brand on the platform, on TikTok shop the momentum is equally strong. In Q2, e.l.f. Cosmetics climbed to the #2 rank in cosmetics. Consumers continue to choose e.l.f. wherever they shop for beauty. We're seeing the same momentum with our physical retail partners.

This quarter, we strengthened our relationship with Sephora, the leading global specialty beauty retailer with our launch of Rhode in Europe, e.l.f. in Brazil and Iterum in Canada and Mexico. Starting with Rhode. In the last year, we executed record-breaking launches with Sephora in North America and the U.K., achieving the #1 beauty ranking in both geographies. Building on that success, this quarter, we broke our own records with the expansion into Europe across 19 countries, exceeding what we achieved in North America and marking Sephora's largest launch ever. But it's not just excitement from our launches that's unprecedented. Rhode ranks #1 or 2 in 12 of the 13 segments we compete in, with exceptionally high repeat rates. This speaks to both the momentum and durability of this exceptional brand. With Health Cosmetics, our #1 ranking in Sephora, Mexico built the foundation for us to launch in Sephora Brazil this September.

Brazil is our most requested country and the third largest beauty market in the world. To amplify the launch, we leverage our disruptive marketing engine with our e.l.f. Fofoka campaign, inspired by the Portuguese word Fofoka, the art of sharing news and spilling the tea.

[Presentation]

Tarang Amin

In the first few weeks of launch, we achieved the #1 rank in both dollars and units. Naturium is also expanding our footprint with Sephora. Adding to the success we have seen from our expansion into Sephora, Australia and New Zealand last year. We launched in Sephora Mexico and Canada in September where we quickly broke into the top 10 brands in body.

Turning to our fourth strategic pillar, expanding our portfolio of discipline across complementary yet distinct brands and categories. The e.l.f. brand is incredibly elastic and our consumers continue to ask for us in multiple categories. We listen, we learn, and we lean in. We took this approach with e.l.f. SKIN expanding from a test in target back in 2019 to a business that's now over $200 million in retail sales. We're taking the same thoughtful approach with hair care, bringing prestige-inspired products to our consumers at an extraordinary value.

Our community wants e.l.f. in hair care. We launched e.l.f. Hair in July with a curated 6 product assortment each with a clear prestige frame of reference, all priced at $10 or less. Within the first 3 months of our exclusive launch with Target, e.l.f. has already broken into their top 20 hair care brands and top 7 in styling. We're taking this test and learn approach to fragrance. Fragrance is an $11 billion category in the U.S. and the fastest-growing in beauty. In October, we launched e.l.f. Pop exclusively on Amazon and TikTok Shop. e.l.f. Pop is a new fragrance and body collection that transports our community to sensorial destinations around the world. The full Pop lineup featuring additional cents will be released later this fiscal year.

Finally, our fifth strategic pillar of accelerating global expansion by activating our full in-market growth engine. We're still in the early days of international expansion. On a trailing 12-month basis, International accounted for approximately 25% of our net sales compared to approximately 70% for our legacy peers. We believe this gap represents one of our biggest opportunities and the demand is already there. About 65% of e.l.f. Cosmetics and 75% of Rhode's social following is outside the U.S.

Even after Rhode's launch in Europe, the brand is still only in 40% of Sephora's global doors. Our 5 integrated strategic pillars drive competitive advantage and industry-leading growth. I'm also proud of the work the team has done to further diversify our business. What started as a single brand in a single category in a single country is now a house of brands, each growing across categories and geographies.

Over the past 3 years, non-e.l.f. brand sales have grown from a few million dollars to 30% of our net sales. Skin care has increased from 9% to 23%. And manufacturing outside of China has grown from 1% to nearly 70%.

In summary, I'm proud of our results and excited by the momentum across our portfolio. We continue to demonstrate exceptional consistent category-leading growth driven by a passionate team of owners in a high-performance culture. Every one of our brands is growing. We're co-creating with the most desirable consumers in beauty. We're winning with the winners to expand our brands globally, and we're just getting started.

I'll now turn the call over to Mandy to discuss our second quarter results and raised outlook for fiscal '27.

Mandy Fields

Thank you, Tarang. I'll now cover the highlights of our second quarter results and our raised outlook for fiscal '27. Q2 net sales grew 51% year-over-year. Rhode contributed approximately 16 percentage points to net sales growth in the 1-month period prior to annualizing the acquisition on August 5.

Organic net sales grew approximately 35% year-over-year. This better-than-expected performance was supported by growth across all of our brands, along with pipeline shipments for Rhode's launch in Sephora Europe. U.S. net sales grew 25% in Q2, while international net sales grew 165%.

In addition to Rhode's record-breaking launch in Europe, we saw a meaningful improvement in trends for e.l.f. in our largest international markets, Canada, the U.K. and Germany. Pricing and product mix added approximately 20 percentage points to net sales in Q2, while unit volumes added 31 percentage points.

Q2 gross margin of 71% increased approximately 160 basis points compared to the prior year, 30 basis points were driven by incremental tariff refunds flowing through COGS in the quarter. The remaining increase was driven by lower year-over-year tariffs and a more favorable than planned mix benefit, partially offset by price investments.

On an adjusted basis, SG&A as a percentage of sales was 53% in Q2 as compared to 56% in Q2 last year. Marketing and digital investment for the quarter was 21% of net sales, below our expectations due to timing shifts in spending and compared to 23% last year. Q2 adjusted EBITDA was $123 million, up 86% as compared to $66 million in Q2 last year. Q2 adjusted net income was $73 million or $1.21 per diluted share compared to $41 million or $0.68 per diluted share a year ago.

Moving to the balance sheet. We believe our balance sheet continues to position us well to execute our long-term strategic plans and invest in the growth of our business. Our liquidity position remains strong, with net leverage at approximately 1x adjusted EBITDA. We ended Q2 with $351 million in cash on hand, compared to a cash balance of $194 million a year ago. We expect our cash priorities to support the growth of all of our brands, technology investment, including AI and automation, as well as investment in infrastructure to ensure our brands show up their very best in our retailers across the globe.

Following the end of the quarter, we used a portion of our cash to satisfy the first payment of the road earnout given the brand's exceptional performance. Now let's turn to our raised outlook for fiscal '27. We are raising our outlook on both the top and bottom line. For the full year, we expect net sales growth of approximately 22% to 24%, up from 18% to 20% previously.

Adjusted EBITDA of $421 million to $427 million, up from $401 million to $407 million, adjusted net income of $231 million to $233 million, up from $212 million to $215 million and adjusted EPS of $3.82 to $3.86 per diluted share, up from $3.50 to $3.55. We continue to expect an adjusted tax rate of approximately 25% to 26% and approximately 60.5 million fully diluted shares.

Starting with the top line. For the full year, we expect to deliver 22% to 24% net sales growth, reflecting the strong results from Q2 and an improved second half outlook. Our raised outlook translates to organic net sales growth on the full year of 9% to 11%, up from 6% to 7% previously.

Looking to the second half, we expect net sales growth of approximately 7% to 10%, up from the implied 6% to 9% previously with each of our brands expected to contribute to growth for the balance of the year. From a cadence perspective, we expect Q3 net sales growth above that range and Q4 below that range, primarily due to the timing of launch activity in the year ago period.

Recall, in Q4 last year, e.l.f. expanded space with Ulta Beauty and launch with DM in Germany. Rhode launched in Mecca in Australia and New Zealand and Naturium expanded into Walmart for the first time.

Turning to gross margin. We now expect an increase of approximately 250 basis points year-over-year as compared to 200 basis points previously, driven by the upside we saw in Q2, excluding tariff refunds, our fiscal '27 outlook remains unchanged at approximately flat gross margin versus prior year. Looking to the second half, we continue to expect gross margin to be lower year-over-year as Rhode expands its retail presence.

From a spend perspective, we continue to expect marketing and digital investment at the higher end of our 23% to 25% of net sales range for the full year. From a profitability perspective, our outlook implies adjusted EBITDA growth of approximately 26% to 27%, up from 20% to 21% previously with adjusted EBITDA margin expanding approximately 50 basis points year-over-year versus 20 basis points previously.

As a reminder, our outlook assumes we fully reinvest the $52 million of tariff refunds received in the first half through lower prices on a subset of our portfolio and increased marketing investments across our brands for a neutral impact on full year adjusted EBITDA. With marketing spend shifting from Q2 into the back half, we now expect second half adjusted EBITDA margin in the low teens, reflecting both the reinvestments and the timing shift in spend.

In summary, Q2 marked our 31st consecutive quarter of net sales growth, a testament to the durability of our model and the power of our brand portfolio. We believe we have a winning strategy and are in the early innings of unlocking our full portfolio potential.

With that, operator, you may open the call to questions.

Operator

[Operator Instructions] And today's first question comes from Sydney Wagner at Jefferies.

分析师问答

Sydney Wagner

[indiscernible] standard the e.l.f. brand into hair, body and fragrance, how are you thinking about the opportunity for each adjacency to create incremental shelf space at retailers over time? And then maybe just talk through kind of the proof points that you would need to see for a broader expansion of body and fragrance and then just on the portfolio of brands overall, e.l.f. Rhode and Naturium are all expanding across categories and geographies. So how are you prioritizing marketing, innovation and investments across the portfolio? And are there any constraints that could affect that pace of expansion?

Tarang Amin

This is Trang. I'll take your first question. On here, we're extremely excited about the momentum we're seeing on e.l.f. Hair. This is a category consumers have been asking for some time. And we're using the same approach we use when we expanded from elf cosmetic cell skin, taking inspiration from the best products in prestige, putting our twist on it and introducing a great value.

Our e.l.f. Hair line is a curated line of 6 products, each with a clear frame of reference to prestige, all at $10 or less. And we have seen great success initially in the first 3 months our exclusive launch with Target. e.l.f. Hair is already in the top 20 brands in hair care, top 7 in styling. And in terms of our expansion plans, we're currently in exclusivity with Target. We will eventually expand distribution of e.l.f. Hair similar to what we've done with e.l.f. SKIN and that will come with incremental space here right now is [indiscernible] Hair care aisle. We'll continue to expand space with e.l.f. hair would be our strategy, just like we're expanding space with e.l.f. SKIN. And then in terms of body and fragrance, the proof points that really consumer response and we see it's off -- lop is off to a great start. We're starting with Amazon and TikTok shop, for instance, transporting consumers to different sensorial destinations around the world and we're really pleased with what we're initially seeing there. And so I would say, in summary, e.l.f. is a really elastic brand. There's a number of categories consumers want to see us in, and we have a good disciplined approach in terms of how we expand.

And then in terms of your question on portfolio, one of the great things about e.l.f. Beauty is every single one of our brands is growing. We see strength across the portfolio. All of our brands contributed to growth, in Q2, and we foresee that growth continuing through the balance of the year. The way we manage our brand though is individually. We have a CEO of e.l.f. for Rhode, President for Naturium, President for e.l.f. Brands, each have their own P&L each have kind of their own levels of investment relative to our ability to invest in the brands. We use a rate-based approach in terms of our investments. And so we feel good about the focus we have against each brand with their ability to be able to pursue the white space that they see for themselves. And then just one clarification. It's less about P&Ls by brand. It's more about focus by brand. We have overall one P&L for the overall company.

Operator

Our next question today comes from Andrea Teixeira with JPMorgan.

Andrea Teixeira

I was just like trying Trang and Mandy to get to the fourth quarter, of course, you have a lot of tough comps for the base brand for else and then also for Rhode. Can you talk to what you see from a sellout perspective in terms of like the exit of the quarter for both brands and in particular, as you expand. So on on a U.S. basis, if that's possible to talk about Rhode or the U.S. has been lapping the introduction last year into retail and how we should be thinking as a run rate for both health base business and growth.

Mandy Fields

Thanks for the question, Andrea. So in terms of our back half that we talked on the call, we said that we're outlooking 7% to 10% growth. And that growth is well ahead of where the category is tracking right now. Category is kind of low single digits. We're planning to deliver multiples above that. We have a track record of consistent category-leading growth, and I think that's what is reflected in our second half into the fourth quarter.

To your point, we do have some launches that we're cycling in the fourth quarter with Ulta Beauty expansion on e.l.f. on our DM launch on e.l.f. Rhode going into Cameka, Naturium launching in Walmart. So that will have -- on the call, I said Q3 a little bit higher than that 7% to 10% range, Q4 a little bit lower than that range. But still, we see it as strength across the board just given again where the category is. And then you also asked about Rhode here in the in the U.S., even after cycling the launch -- the U.S. launch last year, they're still delivering growth on a year-over-year basis here in the U.S.

Tarang Amin

What I'd add, Andrea, on that on Rhode, the strength that we continue to see on Rhode and the momentum in the U.S. alone in Canada, where we did lap the launch, Rhode is by far Sephora's #1 brand. And not only is the #1 brand, it has most of the highest rates they've seen that talks about the durability. And we're doing all of that mainly in One Bay. So we still have further expansion opportunity here even in North America as we continue to expand around the world.

Operator

Our next question today comes from Olivia Tong at Raymond James.

Olivia Tong Cheang

On Rhode, happy anniversary, can you talk about the sellout trends, both in the U.S. and existing markets? And then the uptake in Continental Europe? And then second, what's the biggest unlock you've seen since acquisition for Rhode and then third, what do you think is the right pace for further geographic expansion there, as you mentioned at the vast majority of the Rhode social followship is still overseas.

Mandy Fields

Thanks, Olivia. So on the sellout trends, as I just mentioned, U.S. continues to be strong. Europe was a record launch for Rhode in the European markets. It's the largest launched the for as ever seen only the second best to our U.S. launch that we had last year. And so we feel great about the trends that we're continuing to see on road. It's just got a ton of momentum behind it.

Tarang Amin

And then to your second question on the biggest unlock on road, the great news on Rhode is we have momentum across multiple dimensions. And so we've been able to, as you see, very strong innovation cadence on road, still sticking to the overall vision of 1 of everything really good, but we have real strength across the portfolio, not only in skin where we started, but in hybrid color and in lip -- in fact, in Sephora, we're #1 or 2 in 12 of the 13 segments we compete in. So real strength across the board, really driven by innovation, our overall engagement efforts. We are investing more in the brand and still having the brand be accretive on an adjusted EBITDA margin basis.

So we've got a great approach on Rhode. That team has done an exceptional job, and we see continued white space ahead as we continue to expand. I would say the distribution expansion strategy will be the same disciplined strategy we've used. As we've launched now with Sephora in North America, Mecca in Australia and New Zealand, 19 countries and Sephora in Europe, even after all of those expansions, Rhode is still in only about 40% of the 4 stores globally. So we still have a lot further to go. There is in a market in the world that doesn't want Rhode right now.

Operator

Next question today comes from Anna Lizzul with Bank of America.

Anna Lizzul

I was wondering if you could talk about the road business and the Sephora Europe expansion. How do you see the split of business evolving now between retail and DTC? And should we ultimately view this split as becoming similar to retail and DTC and the e.l.f. brand? And then as you're expanding into retail, how should we expect gross margin to evolve? Is there any opportunity the cushion with the retail expansion kind of pressuring gross margin a little bit to cushion this with incremental pricing or mix benefits for Rhode.

Tarang Amin

So Anna, on Rhode, we're seeing momentum across both retail and DTC. One of the things I've been really pleased with the team's been able to do is have a series of exclusive launches on DTC, which has continued to propel that business even as we've expanded our retail distribution. I already talked about the #1 position we have within Sephora in every market therein as well as with Mecca in terms of where road is, but DTC is also extremely strong. We talked in our prepared remarks, our overall digital penetration for is 31% of our consumption. It's a very strong digital presence. We continue to lead in on the leading digital platforms. Same is true, obviously, with our site on road. And so I would say you're going to continue to see emphasis on both our DTC business as well as our retail expansion.

Mandy Fields

And then on the gross margin piece, we have outlooked that as Rhode goes further into retail, we will see some compression on the gross margin front. But as I mentioned earlier, from an adjusted EBITDA margin standpoint, even with that gross margin compression and the investments that we want to make from a marketing standpoint still are seeing strong EBITDA margins on Rhode.

Operator

Our next question today comes from Susan Anderson at Canaccord Genuity.

Susan Anderson

I guess I'm curious just on the e.l.f. Hair, it sounds like it's really off to a strong start. I'm curious if you have any information on what overlap there is with existing loyal customers that are now buying e.l.f. Hair? And then also, I'm just curious on your thoughts on hair versus fragrance and which one you think could be bigger longer term?

Tarang Amin

So e.l.f. Hair is indeed after an extremely strong start. I talked about our rankings within Target, what we're seeing from a consumer standpoint. One of the great things about e.l.f. Hair is, it's also brought significant new consumers to the franchise. I'd say about half of the consumers we have in e.l.f. Hair are new to the e.l.f. brand. So it's a combination of our current health consumers buying into the new category, but also being able to attract new consumers. And a lot of that has to do with the overall strategy of having clear frames of reference to prestige at all $10 or less, terrific value for people who otherwise couldn't get access to those products. And then in terms of hair and fragrance, we're bullish on both, we see both as really big categories. We mentioned the size of hair in the U.S. alone, $17 billion, fragrances $11 billion as you extend globally. They're quite sizable, but we'll use the same disciplined strategy we use on e.l.f. SKIN. We will pursue that kind of 1 step at a time. I would say, e.l.f. Hair is main focus right now, fragrance and we're getting great signals on. We'll continue that expansion as well as we go forward. But we see big opportunity on both those categories.

Operator

And our next question today comes from Peter Grom at UBS.

Peter Grom

Great. I wanted to ask specifically on the top line performance in the quarter. And just maybe some clarification on the path from here. So first, just on the U.S., I'm curious how organic sales came in relative to your expectations. And I asked just because if I were to back out the road M&A benefit, and I understand we don't know the exact split of U.S. versus international but it would imply high single-digit organic sales growth despite having pretty easy shipment comparisons from a year ago.

So I was just hoping to unpack that a bit more. And then just on the second half, and I understand there was a pipeline fill benefit that helped drive the strong 2Q internationally, but the mix of international really steps up. So just curious how you would characterize growth in U.S. versus international as we look ahead.

Mandy Fields

Peter, so from an organic sales standpoint in the quarter, like we said, growth with road being a part of that as a contributor, but all brands growing in that number. And so I would say that, that was consistent with what we had expected, maybe even a little bit better as we saw the quarter come in. when I think about how we've raised our guidance to 22% to 24%, a portion of that is driven by the Q2 outperformance, but also being incrementally more positive on the second half as well. even as we look between U.S. and international, we talked about else our top countries, U.K., Germany and Canada, all doing much better into Q2. And so have momentum not just on road from an international perspective but also on the core e.l.f. brands. And so that is encouraging.

Operator

Our next question today comes from Mark Altschwager with Baird.

Mark Altschwager

Mandy, looking ahead to fiscal '28, just with the reinvestment concentrated here in the second half, should we think about the fiscal '27 adjusted EBITDA as the base to grow from next year? And on the second half spend, how much is permanent pricing on the 10% SKU relative to the marketing investment that could roll off next year?

Mandy Fields

Yes. So not providing insight into fiscal '28 at this time, you have to stay tuned for our make call for that. But what I can tell you on the reinvestment, we are taking the $52 million that we've gotten from tariff refunds and we've invested a portion of that into pricing as we talked last quarter, and the majority of that being invested across marketing and digital with that coming in the second half. That's why you see those lower EBITDA margins in the second half. largely, those are going to be neutral in impact.

So we got the refund in the first half of the year, reinvesting in the second half of the year. So when you think about our EBITDA margin overall, up 50 basis points on a year-over-year basis, we even raised that this time. guidance standpoint, that's really going to be the base for us to build off of as we go into fiscal '28.

Operator

Our next question today comes from Joanna Kim at TD Cowen.

I'm sorry, [indiscernible], I apologize .

Jungwon Kim

Just a question on Naturium. As you see -- continue to see success, how should we just think about the retail expansion opportunity within the U.S. as well as international? And what is the sort of the growth outlook that you have for the brand as you think about skin care.

Tarang Amin

So we still see major white space from a retail expansion opportunity, both in the U.S. and especially internationally. In the U.S., for perspective, our national share on to start with is about a 13% share target, which is our longest-standing national retailer has over a 20% share. if you look at the trajectory of each of our customers, we see them tracking towards that ultimate kind of goal of being able to get to that 20% share and above. And a lot of that is going to be driven by continued expansion -- if you take a look at what we've been able to do with Walmart with their highest vision sets where we're anchoring their new beauty concept.

We're really pleased with the numbers. And so as Walmart in terms of what we're seeing off of those sets. And so there's a major opportunity for continued expansion there. If you take a look at Ulta, there are brands that have much more space than we do there really across the board. No one is quite at the level that target is at. And so it gives us a great opportunity. And then if you look at Naturium, we have even a further opportunity on Natrium as we go in terms of our expansion. We mentioned last year we got into Walmart. We see further opportunity to expand within Walmart with Natrium just given the strength and the momentum we have behind that brand in addition to additional customers, we're not fully distributed yet on Naturium by a long shot. So we still have a long way to go.

Operator

And our next question today comes from Anna Andreeva with Piper Sandler.

Anna Andreeva

Great. And congrats, nice results. Just curious, did you guys quantify how much of that 51% growth you saw in the second quarter was the sell into Sephora Europe. Curious if you can share any learnings so far from the launch and maybe talk about what was your approach to choosing some of the specific European countries. And then secondly to Mandy, with the second quarter SG&A shifting later with marketing. Just any color on how we should think about the catch up? Is it more in 3Q or equally split between the quarters?

Tarang Amin

Yes. So we haven't quantified the pipeline for -- or we haven't disclosed the pipeline for Sephora Europe pipeline. But what I'd tell you is there was a lot of pipeline Sephora learned from their experience in North America and wanted to make sure they had a stronger stance and I'm glad they did that because it was the biggest launch they've ever seen far exceeded any of our expectations. We had a good inventory position to be able to support that launch. And then in terms of what we're seeing, we've been extremely pleased with the performance by far, the #1 brand Sephora carries in Europe with the strongest repeat rates that they see. So we're seeing the same characteristics that we've seen in the U.S. in terms of -- and really across each of their markets in Europe as we're going through.

Mandy Fields

Yes. And then on your question on marketing investment, we talked about sales being kind of above that 7% to 10% range in Q3, a little bit below that in Q4. I would say from an investment standpoint, you're going to see more -- even if you went historically, probably leaned a little bit more to Q4 as we go through. But again, I would focus you on the second half in total. And just looking at the EBITDA margin in the low teens is reflective of the reinvestment plus the timing shift in spend that we saw out of Q2.

Operator

Our next question today comes from Jon Anderson at William Blair.

Jon Andersen

Congratulations. I just had a quick question on e.l.f.'s performance outside the U.S. And what you're seeing as more strength in some of your key markets. Is this the categories improving? Is it the competitive situation getting better? Is it specific actions that you're taking? Can you kind of give us a little bit more color on what you're seeing in the U.K., what you're seeing in Germany? And how do you think about the growth there going forward for the Coral brand?

Tarang Amin

Jon, this is Tarang. I'd say we've had very strong consumption those markets. So it's primarily based on our execution. We talked about focus plan we had against both the U.K. and Germany and putting more support on from a marketing standpoint. -- fundamentals from a sales standpoint. So in the U.K., we've seen strong consumption, and that's really even before we started our expansion further with boots our retail expansion there.

So feeling really good about the momentum in the U.K. continues to build. And in Germany, we saw an immediate change as we got into Germany, that expansion, and we see that continue to build as well. So really pleased with the work the team has done there, and we've continued to see good momentum within Canada across our key retailers as well as online in each of these areas. The last thing I'll add is we continue to see real strength in connected commerce. We mentioned in the prepared remarks, where e.l.f. is the #1 brand on Amazon, most are on their platform. We're now #2 with TikTok shop in the U.S. We see major international opportunities with both Amazon and TikTok shop as we go forward. So it's not just our retail penetration in those markets. we see both retail as well as connected commerce being able to continue to drive momentum.

Operator

Our next question today comes from Rupesh Parikh with Oppenheimer.

Rupesh Parikh

Also congrats on nice quarter. As I look at the e.l.f. Brand, nice share gains this quarter. Just curious in your confidence in seeing the share gains as you look at the balance of your fiscal year.

Tarang Amin

Ruoesh, we're really pleased with the share gains that we've seen on the e.l.f. brand. As we talked about strong consumption. You're seeing that in the scanner data, particularly pleased on reigniting unit momentum on the e.l.f. brand. So we feel great about that. And then just stepping back, if you take a look at the e.l.f. brand over the last few years, I believe we've grown close to 900 basis points of market share. So we still feel we have further share to be built as I gave that comparison to target in our national shares. And so we're feeling really good with where e.l.f. is right now and what we are seeing for the rest of the year.

Operator

And our next question today comes from Javier Escalante with Core ISI.

Javier Escalante Manzo

Congratulations on the very strong quarter. I have 2 questions, 1 on e.l.f. 1 on Rhode, you did a lot of changes on the cosmetic side, the pricing innovation. If you were to kind of like at a very high level, right, what was the unlock to go from market share losses to market share gains in the quarter on makeup specifically. Also with else, the launches in Mexico and Brazil through Sephora, -- is this -- can we see this as a ceding to understand the market why not the broader distribution that is more consistent with what we had seen in the U.S. So this is on health. And on road, some companies have commented on increased acquisition costs. Digital to go to making the DTC online very onerous. So if you can comment whether you had seen increases in customer acquisition cost yourself and how does it change the DTC versus Sephora equation for Rhode.

Tarang Amin

Sure. So first of all, on e.l.f. I'm really pleased with the work the team has done. And it really goes back to the core fundamentals that have been the consistent driver of our growth, if you look at almost 8 continuous years of growth. They've really been centered on 3 things: our value proposition, powers innovation and disruptive marketing engine. We talked last quarter about doing a broad pricing test where we took everything down $1. What we found was 90% of our items are appropriately priced, delivered a great value every day even at $1 higher. But there were 10% of the items where we did see outsized unit growth by going down $1 lower. In fact, unit growth was so great that we see it as building gross profit over time.

So really terrific actions, but it was only 10% of our SKUs. Let's say, a bigger contributor than that is our innovation. Again, innovation is something we've had a consistent track record over the years of being able to take inspiration from prestige or our community, put the e.l.f. twist and bring in a great value. I mentioned our fall innovation is number one. in mass with 5 of the top 10 items from our fall innovation. A number of items have very clear references prestige that are really resonating. We also mentioned in the prepared remarks that we have additional innovation that we're bringing in based on what our community wants. You can see one of the items that already hit market, our appeal of approval at $6 just a phenomenal price given the prestige quality. If you want, you can go and take a look at one of the reviews from Makela. She went off and bought those products on our own organically and posted a review and can't get over just how great these products are. And so we feel really good about innovation. And then last is, we've always have a consistent track record of how we engage consumers by far, the #1 brand in most Gen-C, Gen alpha and millennials. As you mentioned there on the Piper Sandler survey that it just came out, we had 2 [indiscernible] achievements, both wafers, e.l.f. Cosmetics ninth consecutive survey. We're #1 with a mind share, nearly 5x the #2 brand and both e.l.f. and Rhode being in the top 10 in both cosmetics as well as skin care. So real strength across all 3 dimensions. And like I said, that's more consistent with our history as we've gone forward. And then from a Mexico and Brazil point. I would say the lead partner that we've gone in with is Sephora, and we're extremely pleased with the execution we have in both countries. I mentioned our #1 position. And then we'll look from there in terms of what the other distribution opportunities are.

In Mexico, we've already entered Ulta as they've expanded -- started their expansion into Mexico. We also just launched the brand with Amazon. In Mexico, which has a very strong business in Mexico. So you are seeing some expansion in terms of our distribution. We see both Mexico and Sephora is having really great potential. And then finally, on your question on road. I would say we have not seen higher acquisition costs. And a lot of that has to do with the momentum we have behind the brand, the strength of the innovation as well as our linear time exclusive. We have upcoming here in November, Haley's birthday month, which is always a very exciting time for the brand in terms of the level of interest we get there's already such a great consumer interest, and particularly given the strategy of limited time exclusive have been able to drive really strong traffic and sales on our DTC side.

Operator

And our next question today comes from Anna Glaessgen with B. Riley Securities.

Anna Glaessgen

Actually, last answer leads into it well. I wanted to ask for some more perspective on your approach to product innovation that road how do you balance keeping the assortment fresh and these limited time collabs with maintaining customer satisfaction considering a lot of these are selling out really quickly. And do you view these collabs as a test for launching more permanent offerings?

Tarang Amin

So we love the product strategy on Rhode. Haley's vision of 1 of everything really good. We continue to follow a well-curated line I mentioned earlier, we love the balance strength we have on road with strength across skin, hybrid color and then the strategy of these limited edition collaborations really have to do with continuing to broaden the aperture and appeal of Rhode. The Alexandra [indiscernible] Collaboration we did, not only had a 200,000-person waitlist we launched most of those items sold out within an hour.

So it continues to drive interest in the brand, which is similar to a strategy that we've used with e.l.f. in terms of the types of collaborations we do to bring even greater interest to the brand, more new users to the brand. So we feel really great. And we have a very good pipeline of innovation on road, but still following that curated strategy in terms of really making sure we have 1 of everything.

Operator

Thank you. And that concludes our question-and-answer session. I'd like to turn the conference back over to Tarang Amin for closing remarks.

Tarang Amin

Well, thanks for joining us, everyone. I'm so proud of our passionate team of owners, operating in a high-performance culture. We're showing what it means to be a different kind of beauty company by building brands that disrupt norms shape culture and connect communities through positivity, inclusivity and accessibility.

Our refreshed strategy is powered by 5 integrated pillars, cultivating a passionate team of owners, co-creating with our community, winning with winners, expanding our portfolio and accelerating global expansion. Together, they strengthen our competitive moat and gives us great confidence that anything is else impossible. We look forward to seeing some of you at our upcoming investor conferences and to speaking with you again when we discuss our third quarter fiscal '27 results in February. Thank you, and be well.

Operator

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.