E.l.f. Beauty (ELF) Stock Crashes Nearly 30% as Tariffs Crush Profits

TLDR

• E.l.f. Beauty stock dropped 29% after issuing fiscal year guidance below Wall Street expectations, with revenue forecast at $1.55-$1.57 billion versus the expected $1.65 billion.
• The company expects over $50 million in annual costs from tariffs, with China accounting for 75% of its production, causing gross margins to fall 165 basis points to 69%.
• Rhode, acquired for $1 billion, is expected to add $200 million in sales this fiscal year and $300 million on an annual run rate basis, representing about 13% of total revenue.
• Second quarter revenue came in at $344 million versus expectations of $366 million, though adjusted earnings of 68 cents per share beat estimates of 57 cents.
• Net income plunged 84% to $3 million as the company absorbed tariff costs before August price increases took effect, with profitability expected to improve in the second half.

E.l.f. Beauty shares tumbled 29% Wednesday after the cosmetics company issued fiscal year guidance that fell well short of Wall Street expectations. The company forecast revenue between $1.55 billion and $1.57 billion for the full year.

e.l.f. Beauty, Inc., ELF

Analysts had expected $1.65 billion in revenue. The company also projected adjusted earnings per share of $2.80 to $2.85, far below the $3.58 consensus estimate.

This marks the first time E.l.f. has provided full-year guidance since pulling it in May. CEO Tarang Amin blamed the miss partly on the lack of guidance last quarter, which he said impacted consensus estimates.

For the fiscal second quarter ended September 30, E.l.f. reported revenue of $344 million. This represented 14% growth from $301 million a year earlier but missed expectations of $366 million.

The company did beat earnings expectations. Adjusted earnings came in at 68 cents per share versus the expected 57 cents.

Tariff Costs Hammer Profitability

The company expects more than $50 million in annual costs from tariffs in fiscal 2026. China accounts for about 75% of E.l.f.’s global production.

Gross margins fell 165 basis points to 69% in the quarter. Net income dropped 84% to just $3 million, down from $19 million a year earlier.

Amin said the second quarter saw the biggest tariff impact. The company raised prices by $1 in August, but those increases weren’t reflected in the quarter’s results.

The company has no plans for additional price increases. It’s working to streamline its supply chain and diversify operations to reduce tariff exposure.

Rhode Acquisition Becomes Critical Growth Driver

Rhode, Hailey Bieber’s cosmetics line acquired earlier this year for $1 billion, has become essential to E.l.f.’s growth story. The brand is expected to contribute $200 million in sales this fiscal year.

On an annual run rate basis, Rhode should add $300 million. That means Rhode represents about 13% of E.l.f.’s total revenue forecast.

The acquisition highlights how much E.l.f. needs Rhode to maintain growth. Without it, the company’s revenue potential would have been considerably slimmer as its namesake brand growth moderates.

Rhode launched in Sephora stores nationwide in September. Amin called it the biggest brand launch in Sephora’s North American history.

Last year’s lip oils gained social media traction in early 2024. This helped push E.l.f. shares to record highs.

Rhode is launching in the UK soon. Amin sees potential for global expansion well beyond current levels.

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