By Anuja Bharat Mistry

(Reuters) – Elf Beauty raised its forecasts for annual sales and profit on Wednesday, betting on its efforts to sell cosmetics such as lip oil and liquid blush at affordable prices in the U.S. and abroad, lifting the company's shares by a wide margin Trade increased 18%.

Customers looking for cheaper makeup and skin care products have helped boost Elf's sales in a tough market where major beauty brands like Estee Lauder and L'Oreal are struggling to drive demand.

Elf expects net sales to be in the range of $1.32 billion to $1.34 billion, compared to its previous forecast of $1.28 billion to $1.30 billion.

Elf's strategy of introducing “duplicates” of luxury cosmetics and keeping prices for the products between $2 and $10 has further fueled demand.

The California-based company has also expanded its product offerings to mass retailers such as Walmart, Target and Amazon.com, reaching a broader customer base.

Price increases in international markets such as India and Germany as well as efficient cost-saving measures helped the company increase its gross margin by 40 basis points to 71% in the second quarter.

Elf has broad appeal across all income groups, CEO Tarang Amin told Reuters, adding that the company's “strategy is to offer the highest quality at an acceptable price or at an exceptional price.”

The company expects full-year adjusted earnings per share to be between $3.47 and $3.53, up from the previous range of $3.36 to $3.41 per share.

Net sales were $301.1 million for the quarter ended Sept. 30, compared with analysts' average estimate of $285.8 million, according to data compiled by LSEG.

On an adjusted basis, the company reported profit of 77 cents per share, beating analysts' estimates of 43 cents per share.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Shailesh Kuber)