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E.l.f. Beauty Stock Plunges 29% After Weak Guidance and Tariff Shock
E.l.f. Beauty Faces Its Toughest Quarter Yet
E.l.f. Beauty (NYSE: ELF) just delivered a harsh reminder that even the most admired growth stories aren’t immune to macro shocks. The fast-rising cosmetics company saw its stock plunge nearly 29% Wednesday after posting weaker-than-expected guidance and revealing that new tariffs from President Trump’s trade policy have severely eroded profitability.
The quarter was a paradox: E.l.f. beat earnings expectations but missed on revenue, all while unveiling guidance that suggests growth is slowing sharply from its recent hyper-expansion phase.
The Numbers Behind the Sell-Off
Here’s how E.l.f. performed versus Wall Street expectations (LSEG consensus):
| Metric | Reported | Expected |
|---|---|---|
| Adjusted EPS | $0.68 | $0.57 |
| Revenue | $344 million | $366 million |
| Net Income | $3 million (5 ¢/share) | $19 million (33 ¢/share YoY) |
Revenue rose 14% year-over-year, but the shortfall versus estimates—combined with a grim full-year forecast—was enough to trigger the biggest single-day drop in E.l.f.’s stock since its IPO.
The company now expects fiscal-year revenue between $1.55 billion and $1.57 billion, implying 18%–20% growth, below analyst expectations of $1.65 billion.
Adjusted full-year earnings guidance of $2.80 – $2.85 per share also badly missed forecasts of $3.58.
Tariffs Hit Where It Hurts — the Supply Chain
E.l.f. sources most of its cosmetics and packaging components from China, leaving it directly exposed to the latest round of U.S. import tariffs.
During the quarter, the company’s net income plunged 84%, and its gross margin fell 1.65 percentage points, primarily due to higher tariff costs.
CEO Tarang Amin told CNBC the company raised prices by about $1 per item effective August 1 to offset tariffs, but the impact won’t be fully visible until the back half of the fiscal year.
He noted that Q2 would likely represent the peak of tariff pressure, with margins expected to recover sequentially.
Still, the hit reveals a deeper truth: E.l.f.’s competitive advantage—affordable pricing—depends on a low-cost global supply chain that may no longer be structurally cheap.
Rhode Acquisition: The Bright Spot Amid Turbulence
E.l.f. Beauty’s $1 billion acquisition of Hailey Bieber’s “Rhode” cosmetics line was supposed to be its biggest growth catalyst—and, in fairness, it’s working.
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Rhode is projected to contribute $200 million in sales this fiscal year.
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On an annual run-rate basis, that figure could hit $300 million by 2026.
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Rhode’s launch at Sephora became the largest brand debut in North America in the retailer’s history—2.5× bigger than the next-largest launch.
At roughly 13% of E.l.f.’s full-year revenue guidance, Rhode’s performance is strong enough to cushion—but not offset—tariff and cost pressures elsewhere.
The challenge is scale. Rhode is a digital-first, influencer-driven brand still ramping international distribution. While its growth validates E.l.f.’s acquisition strategy, it can’t immediately replace lost margin from tariffs and slowing core-brand momentum.
Slowing Growth, Rising Costs — and Market Realism
E.l.f. had become a Wall Street darling, trading at valuation multiples more common among software firms than retailers. That optimism hinged on two assumptions:
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Unstoppable growth in mass-market cosmetics, and
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Margin expansion from scale.
This quarter broke both narratives.
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Growth remains solid—but slowing.
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Margins are falling due to global trade policy, input inflation, and a maturing cost base.
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The Rhode acquisition adds excitement but introduces integration risk and deferred synergies.
In short, E.l.f. is still growing—but investors were pricing in perfection.
The Macro Layer: Beauty Meets Geopolitics
The tariff hit isn’t just a company problem—it’s a sector warning.
Roughly 60% of mass-market cosmetics sold in the U.S. contain components sourced from China, according to industry data.
If trade tensions persist into 2026, many beauty brands will face:
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Margin compression from higher import costs.
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Pricing pushback from inflation-weary consumers.
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Inventory volatility as suppliers re-route production through Vietnam, Indonesia, and Mexico.
In that environment, E.l.f.’s brand power and DTC agility are strengths—but not immunity.
CEO Outlook: Optimism Through the Pain
Amin struck an upbeat tone despite the sell-off:
“We actually believe both the sales that we delivered, as well as the guidance on net sales, are quite strong,” he said, arguing that consensus estimates were inflated due to a lack of prior-quarter guidance.
He reiterated that E.l.f.’s product pipeline remains robust, with major new launches planned for 2026, and predicted that gross margin would sequentially improve as pricing catches up with tariffs.
Investor Takeaways
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Short-term pain: Tariff drag and guidance reset likely keep pressure on the stock through early 2026.
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Medium-term potential: Rhode integration, price adjustments, and new product launches could reignite top-line momentum.
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Long-term risk: Continued reliance on Chinese sourcing and political volatility threaten structural margin recovery.
With shares down nearly 30%, the market is recalibrating E.l.f.’s valuation from “hyper-growth disrupter” to “strong but cyclical brand.”
Bottom Line
E.l.f. Beauty’s 29% plunge reflects more than a bad quarter—it’s a reality check for the entire beauty industry.
Even fast-growing brands with influencer-fueled followings can’t outrun tariffs, rising input costs, and market saturation.
The company still has enviable demand trends and a potential global blockbuster in Rhode, but investors now see a different story: a brand transitioning from explosive growth to hard-won resilience.
In other words, the mirror isn’t cracked—but the reflection just got a lot more realistic.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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