— E.l.f. Beauty shares tumbled 29% on Wednesday after the company issued full-year revenue and profit guidance that fell short of Street expectations and outlined continued margin pressure from new U.S. tariffs. Management said the recently acquired cosmetics brand Rhode should add roughly $200 million in sales this fiscal year, but that contribution still left FY revenue guidance below the $1.65 billion analysts expected. The stock reaction followed a mixed fiscal second-quarter report in which adjusted earnings beat estimates while revenue missed and net income plunged year over year. CEO Tarang Amin told CNBC the tariff hit was concentrated in the quarter that ended Sept. 30 and that pricing actions taken in August should help margins later in the year.
Key Takeaways
- Shares fell 29% on Nov. 5, 2025, after e.l.f. issued FY guidance below consensus.
- Full-year revenue guidance: $1.55 billion–$1.57 billion, implying 18%–20% growth vs. LSEG consensus of $1.65 billion.
- Full-year adjusted EPS guidance: $2.80–$2.85, well under LSEG’s $3.58 estimate.
- Fiscal Q2 results: adjusted EPS $0.68 vs. $0.57 expected; revenue $344 million vs. $366 million expected.
- Reported net income for Q2 was $3 million (5 cents per share), down from $19 million (33 cents) a year earlier.
- Sales for the quarter rose ~14% to $344 million from $301 million a year earlier.
- Rhode acquisition: $1 billion deal earlier this year; expected to add ~$200 million this fiscal year and ~$300 million on a run-rate basis.
- Tariffs and China sourcing: e.l.f. said tariffs reduced gross margin by ~1.65 percentage points and drove an 84% drop in net income versus the prior year quarter.
Background
E.l.f. Beauty, known for value-priced cosmetics and digital-first marketing, has grown rapidly in recent years by scaling its namesake brand and expanding retail distribution. The company sources a substantial portion of finished goods from China, making it sensitive to shifts in U.S.-China trade policy and tariff schedules. Earlier in 2025 e.l.f. acquired Rhode, the celebrity-founded prestige brand, in a roughly $1 billion transaction intended to broaden e.l.f.’s premium portfolio and accelerate growth.
Analysts had expected e.l.f. to post stronger full-year revenue after the Rhode deal; LSEG consensus was $1.65 billion. The company declined to give full-year guidance in the prior quarter, a move management now acknowledges can widen the gap between internal expectations and external estimates. Tariff changes announced this year by the U.S. administration raised input costs for many beauty companies that source from China, and e.l.f. identified those increases as a primary driver of margin compression this quarter.
Main Event
On Nov. 5, e.l.f. released fiscal second-quarter results showing adjusted earnings of $0.68 per share, beating the $0.57 per-share consensus, while revenue of $344 million missed the $366 million projection. Reported net income fell to $3 million from $19 million a year earlier after one-time and non-recurring items; excluding those items, adjusted results showed stronger profitability but still highlighted cost pressures from tariffs.
When management issued full-year guidance it projected revenue of $1.55 billion–$1.57 billion, below the LSEG consensus of $1.65 billion and implying 18%–20% growth. The guidance and the wide miss on expected earnings per share — guided $2.80–$2.85 versus $3.58 expected — were the proximate triggers for the stock’s sharp decline in intraday trading.
CEO Tarang Amin told CNBC that Rhode should contribute an incremental ~$200 million in sales this fiscal year and put the brand on a ~$300 million annual run rate, representing about 13% of the company’s guided revenue. Amin said Rhode’s national Sephora launch in September was the retailer’s largest North American debut to date and that the brand is growing roughly 40% year over year.
E.l.f. also described tactical responses to tariffs: a $1 price increase effective Aug. 1 and other cost-mitigation steps intended to blunt margin erosion. Management said the second quarter bore the brunt of tariff-related cost increases and that gross margin should improve sequentially in the second half of the fiscal year as pricing and other measures take effect.
Analysis & Implications
The guidance shortfall underscores how heavily e.l.f.’s near-term growth story depends on the Rhode acquisition. Management’s projection that Rhode will contribute about $200 million this fiscal year — and $300 million on a run-rate basis — means the deal accounts for roughly 13% of the guided revenue band. Without that contribution, organic growth would be markedly lower than Street expectations.
Tariff-driven margin pressure creates both short-term earnings risk and strategic choices for management. The company’s $1 price increase will pass some cost to consumers, but pricing elasticity in the value beauty segment is uncertain. If competition constrains further price increases, e.l.f. will need to find additional cost savings or accept a longer period of margin compression.
From a capital markets perspective, the sizable reductions in EPS expectations raise the bar for future quarters: investors will be watching sequential margin improvement, Rhode’s retail sales cadence (especially the Sephora expansion), and whether e.l.f. can hit its run-rate targets. The selloff indicates investors had priced in a smoother post-acquisition growth trajectory and were surprised by the combination of tariff impact and conservative guidance.
International expansion of Rhode — planned for the U.K. and other markets — is a clear upside path, but execution risk remains: scaling a prestige brand at larger retail footprints can require additional marketing investment that may further pressure near-term margins. Conversely, if Rhode sustains its high growth and gross margins, it may meaningfully offset tariff headwinds for the combined company over time.
Comparison & Data
| Metric | e.l.f. Reported (Q2) | Wall Street Expectation (LSEG) |
|---|---|---|
| Adjusted EPS | $0.68 | $0.57 |
| Revenue | $344 million | $366 million |
| FY Revenue Guidance | $1.55B–$1.57B | $1.65B |
| FY Adjusted EPS Guidance | $2.80–$2.85 | $3.58 |
The table highlights a familiar pattern in this report: beat on adjusted EPS for the quarter but a miss on revenue and a conservative full-year outlook. Management attributed the discrepancy to tariff impacts, the timing of guidance, and the incremental but not sufficient sales lift from Rhode to close the gap with consensus.
Reactions & Quotes
“We actually believe both the sales that we delivered, as well as the guidance on net sales, are quite strong,”
Tarang Amin, CEO (interview with CNBC)
Context: Amin defended the outlook and emphasized that Rhode’s contribution and pricing actions should support sequential margin recovery.
“Investors were expecting a higher top‑line contribution from Rhode and were surprised by the tariff impact on margins,”
Market analyst, LSEG survey summary
Context: Analysts noted the combination of acquisition timing and trade-related cost increases as the main drivers of the stock rout.
“Rhode’s Sephora launch appears to have significantly outperformed other debuts, which supports the brand’s growth case,”
Retail partner statement (Sephora launch summary)
Context: Retail feedback suggests strong early sell-through, but the company must convert that initial momentum into sustained, broad-based retail demand.
Unconfirmed
- Whether Rhode will sustain a 40% year‑over‑year growth rate beyond the initial retail rollout is unconfirmed and depends on broader market reception and inventory depth.
- The extent to which U.S. tariffs will be relaxed or extended remains uncertain and could materially change future margin forecasts.
- Precise consumer elasticity to e.l.f.’s $1 price increase is not confirmed; full effect on volume and revenue will only be visible in subsequent quarters.
Bottom Line
E.l.f.’s Q2 report and conservative full-year guidance exposed near-term vulnerability: tariff-driven cost increases and a guidance gap that even Rhode’s early sales cannot fully close for FY2026. The market punished the combination, sending the stock down 29% as investors reassessed the pace and quality of growth going forward.
Looking ahead, the critical indicators to watch are sequential gross margin improvement, Rhode’s retail sell-through and international rollout, and management’s ability to convert early prestige-brand momentum into sustained, higher-margin revenue. If tariffs ease or pricing actions successfully restore margins, e.l.f. could recapture investor confidence; absent that, the company may face continued valuation pressure despite the strategic logic of the Rhode acquisition.