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With gas prices finally off the Iran war highs, lower-income shoppers are showing signs of life in the cosmetics aisle.

"So we're currently doing some price discovery where we're taking certain items and we're taking them down in price and seeing how they respond," e.l.f. Beauty (ELF) CEO Tarang Amin told Yahoo Finance at the Cannes Lions Festival of Creativity on Monday. "We have a skin tint that's an incredible innovation that was priced at $18. We took it down to $14. And in the most recent weeks, we've seen almost an 85% lift in that item."

E.l.f. Beauty delivered a resilient earnings report on May 20 that beat Wall Street expectations, with revenue jumping 35.1% year over year to $449.3 million.

Despite the strong headline numbers, the company exposed an underlying shift in consumer behavior that weighed on investor sentiment.

After implementing across-the-board price hikes of up to 15% to counter severe tariff and inflationary pressures, cash-strapped shoppers began pushing back, Amin noted. The company β€” known for its far lower prices compared to prestige cosmetics brands like L'OrΓ©al β€” saw a decline in unit sales.

The company guided to full-year sales growth of 12% amid cautious trends, further pressuring the stock. Shares are down 17% in the past six months.

As a result, Amin actively lowered prices on several key product lines to counteract the unit slump. The cuts are not across the board, however, Amin told Yahoo Finance.

"We think ELF will continue to support strong demand as ELF recruits more consumers from virtually all income and age cohorts, and market share momentum continues to build based on innovation and repeat purchases. We believe ELF's robust sales growth is proof of strong brand equity," JPMorgan analyst Andrea Teixeira said in a note.

Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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