E.l.f. Beauty reported a sharp 30% drop in net income for its fiscal first quarter, as new tariffs on Chinese imports significantly impacted the company’s bottom line. Despite meeting Wall Street expectations for revenue and earnings per share, the cosmetics brand is navigating a challenging macroeconomic environment marked by escalating trade duties and shifting consumer behaviors.
Profit Falls as Tariffs Weigh Heavy
For the quarter ending June 30, E.l.f. Beauty’s net income fell to $33.3 million, or 58 cents per share, down from $47.6 million, or 81 cents per share, a year earlier. The decline comes as the company contends with increased tariff costs—currently up to 55%—on Chinese-sourced goods, which make up approximately 75% of its product inventory.
Excluding one-time items such as stock-based compensation, E.l.f. posted an adjusted net income of $51.3 million, or 89 cents per share. This beat analyst expectations of 84 cents per share, according to a survey conducted by LSEG.
Revenue rose 9% year-over-year to $354 million, slightly above the expected $350 million. However, the growth rate marked a slowdown compared to previous quarters, reflecting broader industry trends and cooling consumer demand.
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Strategic Shifts Amid Global Headwinds
Facing supply chain pressures and increasing costs, E.l.f. has opted not to issue full-year revenue guidance. Instead, the company provided projections only for the first half of its fiscal year, citing ongoing tariff uncertainty. The brand anticipates sales growth above 9% and adjusted EBITDA margins of around 20% during this period—down from 23% a year earlier.
“We’re operating in a volatile macro environment, with a great deal of uncertainty on tariffs,” CEO Tarang Amin said in an interview with CNBC. “Until we have greater resolution on what the tariff picture looks like, we didn’t think it made sense to issue full-year guidance.”
To counter the rising costs, E.l.f. has raised product prices by $1 and is actively working to diversify its manufacturing footprint beyond China. The company is also focusing on expanding internationally to reduce reliance on the U.S. market.
“I never thought I would see a day where I’m happy about 55% tariffs,” Amin remarked. “But that’s a lot better than 170%. Once we have resolution, we’ll be in a stronger position.”
Market Performance and Category Outlook
Despite the profit dip, E.l.f. outperformed Wall Street expectations. Still, its 9% sales growth marks the second consecutive quarter of single-digit revenue gains—a significant shift for a brand accustomed to high double-digit increases over the past four years.
The broader beauty sector has begun to slow after a period of rapid growth. Amin acknowledged that while E.l.f. remains resilient, the overall category and consumer sentiment are under pressure due to inflation and economic uncertainty.
“Sometimes people forget how much we’ve been growing,” Amin said. “The state of the consumer is still challenged. There’s uncertainty across tariffs, inflation, and discretionary spending.”
However, Amin remains optimistic about the current quarter, noting that the company’s latest performance still builds on a 50% growth rate from the same quarter last year.
Product Innovation and Market Share Gains
One of the key drivers of E.l.f.’s continued market share gains is its aggressive innovation strategy. Known for launching affordable “dupes” of luxury beauty products, E.l.f. continues to resonate with price-conscious consumers.
A recent example includes the Bright Icon Vitamin C + E Ferulic Serum, retailing for $17—a budget-friendly alternative to a $185 serum from prestige skincare brand SkinCeuticals. This approach has helped E.l.f. carve out a niche among younger consumers and savvy beauty enthusiasts looking for high-quality, affordable products.
In addition, the company recently launched a new sunscreen product and completed the acquisition of Rhode, the skincare line founded by Hailey Bieber. Rhode is set to debut in all Sephora stores across the U.S. and Canada in September, positioning E.l.f. to tap into a younger demographic and boost brand visibility.
The financial impact of the Rhode acquisition will begin to reflect in future quarters, potentially providing a significant uplift in both brand equity and revenue.
Future Outlook: Tariff Clarity and Global Expansion
Looking ahead, E.l.f. is focused on navigating geopolitical and economic headwinds through strategic expansion and operational agility. A key priority is diversifying the supply chain away from China to reduce exposure to tariff-related volatility. Additionally, the brand is ramping up its global footprint, aiming to lessen dependency on the U.S. market.
While the current quarter presents challenges, Amin remains confident that E.l.f.’s foundation in value, innovation, and digital engagement will help the company weather the storm.
“We’re still taking market share,” he said, citing Nielsen data that shows E.l.f. outperforming competitors even as the overall category contracts. “Our strategy of combining quality with affordability continues to set us apart.”
Frequently Asked Questions
Why did E.l.f. Beauty’s profits drop by 30%?
E.l.f. Beauty’s profits declined primarily due to increased tariffs on Chinese imports. Since the company sources approximately 75% of its products from China, the new tariffs significantly impacted production costs, affecting its bottom line.
How much was E.l.f. Beauty’s net income in the latest quarter?
For the fiscal first quarter ending June 30, E.l.f. Beauty reported a net income of $33.3 million, down from $47.6 million in the same quarter last year.
How have tariffs specifically impacted E.l.f. Beauty?
The company is currently facing 55% tariffs on Chinese imports. CEO Tarang Amin stated that this uncertainty prevents the company from forecasting full-year revenue, as the cost impact is still unfolding.
Why didn’t E.l.f. Beauty provide full-year guidance?
Due to the “wide range of potential outcomes” with ongoing tariff negotiations and regulatory uncertainty, the company only provided guidance for the first half of the fiscal year.
How is E.l.f. performing in terms of market share?
Despite macroeconomic challenges, E.l.f. continues to gain market share. Nielsen data shows that the company is outperforming the broader beauty category, which is currently facing slowed growth.
What’s the outlook for E.l.f. in the next quarter?
CEO Tarang Amin remains optimistic. While growth has slowed, he expects performance to improve as the company builds on strong prior-year growth and expands through new product launches and brand acquisitions.
Conclusion
E.l.f. Beauty’s 30% profit decline in its fiscal first quarter underscores the growing challenges many companies face amid rising global tariffs and economic uncertainty. With a significant portion of its supply chain rooted in China, the cosmetics brand is feeling the weight of increased import duties. However, despite these headwinds, E.l.f. continues to outperform expectations, gain market share, and innovate through strategic product launches and smart acquisitions like Rhode.