Hailey Bieber attends the Rhode UK launch party with Hailey Bieber at Chiltern Firehouse on May 17, 2023 in London, England.
Dave Benett | Dave Benett Collection | Getty Images
E.l.f. Beauty announced on Wednesday plans to acquire Hailey Bieber’s beauty brand Rhode in a deal worth up to $1 billion as the cosmetics company looks to expand further into skincare.
The acquisition – E.l.f.’s biggest ever, according to FactSet – is comprised of $800 million in cash and stock, plus an additional potential $200 million payout based on Rhode’s performance over the next three years. The deal is expected to close in the second quarter of the company’s fiscal 2026 — or later this year.
“I’ve been in the consumer space 34 years, and I’ve been blown away by seeing this brand over time. In less than three years, they’ve gone from zero to $212 million in net sales, direct-to-consumer only, with only 10 products. I didn’t think that was possible,” CEO Tarang Amin told CNBC in an interview. “So that level of disruption definitely caught our attention.”
In a news release, Bieber said she’s excited to partner with E.l.f. to bring her brand to “more faces, places, and spaces.”
“From day one, my vision for rhode has been to make essential skin care and hybrid makeup you can use every day,” said Bieber. “Just three years into this journey, our partnership with e.l.f. Beauty marks an incredible opportunity to elevate and accelerate our ability to reach more of our community with even more innovative products and widen our distribution globally.”
E.l.f. shares soared 11% on Thursday after the company announced the acquisition and released results for its fiscal fourth quarter. The company topped Wall Street’s quarterly estimates, but did not offer guidance due to the Trump administration’s changing tariff policy. E.l.f. gets a disproportionate amount of its products from China.
In a note Thursday, Goldman Sachs analysts said they see the Rhode deal “as a strategic positive as it further expands ELF into skincare with a prestige brand, and diversifies its customer base.”
“While rhode is a DTC brand, it’s expected to be rolled out into retail, including into Sephora, which we believe will further support growth ahead,” they added.
Why E.l.f. is betting on Rhode
Launched in 2022, Rhode has more than doubled its customer base over the past year and generated $212 million in revenue in the 12 months ended March 31. The company’s growth has primarily come through its website, but it plans to launch in Sephora stores throughout North America and the U.K. before the end of the year.
As part of the acquisition, Bieber will serve as Rhode’s chief creative officer and head of innovation, overseeing creative, product innovation and marketing. The brand was launched alongside two co-founders, Michael and Lauren Ratner, but it was Bieber’s influence and name that turned it into a billion-dollar brand.
Under her direction, Rhode last year became the No. 1 skincare brand in earned media value — or exposure through methods other than paid advertising — with 367% year-over-year growth.
Rhode is a solid match for E.l.f., which has seen growth skyrocket in recent years in large part to its digital prowess. The company has legions of online fans and is known for TikTok marketing that feels more natural to consumers.
The company is also looking to dig deeper into skincare, which has become more popular with all age groups, particularly E.l.f’s younger, core consumer. In 2023, it acquired skincare brand Naturium for $355 million. Its acquisition of Rhode will allow it to build on its skincare growth and reach a higher income consumer.
“E.l.f. cosmetics is about $6.50 in its core entry price point, Rhode, on average, is in the high 20s, so I’d say it does bring us a different consumer set to the company overall, but the same approach in terms of how we engage and entertain them,” said Amin.
The deal makes sense for E.l.f., and it was a competitive move to snag the brand before rivals did, but it comes at an uncertain and difficult time for the company. Even with expected price increases, China tariffs will likely reduce E.l.f.’s profits over time, and it’s funding $600 million of the deal with debt at a time of high interest rates.
The acquisition is a bet that consumers will keep spending on high-end skincare, even during a potential economic slowdown or recession.
E.l.f. beats earnings estimates
E.l.f. made the announcement as it posted fiscal fourth quarter results, which beat Wall Street’s expectations on the top and bottom lines.
Here’s how the beauty retailer performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: 78 cents adjusted vs. 72 cents expected
- Revenue: $333 million vs. $328 million expected
The company’s reported net income for the three-month period that ended March 31 was $28.3 million, or 49 cents per share, compared with $14.5 million, or 25 cents per share, a year earlier. Sales rose to $332.7 million, up about 4% from $321.1 million.
E.l.f.’s sales have increased rapidly in recent years, but investors have grown concerned as that growth started to slow and the threat of tariffs began weighing on its business. The company sources about 75% of its products from China, which currently faces a 30% duty on exports to the U.S. Last week, it announced plans to raise prices by $1 to offset higher costs from tariffs beginning on Aug. 1.
While U.S. duties on Chinese imports are 30% now, that could change as President Donald Trump negotiates with Beijing. As a result, E.l.f. said it isn’t providing a fiscal 2026 outlook “due to the wide range of potential outcomes related to tariffs.”
Amin said E.l.f. paid more than 145% in duties before Trump agreed to slash the levies on Chinese goods, but those costs didn’t come through during the quarter and will show up when the company reports its fiscal 2026 first-quarter earnings.