Elf Beauty, a popular cosmetics-maker, recently announced its annual sales and profit forecast for the upcoming year. The company’s projections fell below Wall Street estimates, causing its shares to plummet by 26% in extended trading. In a statement, Elf Beauty attributed the lower forecast to higher tariff costs and cautious consumer spending trends.
The company, which had previously withdrawn its fiscal 2026 forecast in May, also reported second-quarter sales that missed expectations. Elf Beauty anticipates incurring over $50 million in annual costs due to increased U.S. tariffs on imports for the upcoming fiscal year. With China representing approximately 75% of the cosmetics-maker’s global production, the impact of these tariffs on the company’s bottom line is significant.
During the quarter ended September 30, Elf Beauty experienced a decline in gross margin by about 165 basis points, falling to 69%. The imposition of tariffs has put pressure on Elf’s margins, with industry analysts noting that the company is heavily relying on sales from its recently acquired brand, Rhode, to offset slowing sales from its flagship Elf brand.
To mitigate the effects of tariffs, Elf Beauty has been actively streamlining its supply chain and diversifying its operations. However, the company faces challenges as lower-income consumers opt for more affordable beauty alternatives and reduce spending on non-essential items like makeup and skincare products.
Despite these obstacles, Elf Beauty reported quarterly adjusted earnings per share of 68 cents, surpassing analyst estimates of 57 cents. The company attributed this success to price increases implemented in August, with no plans for further hikes in the near future. However, quarterly sales of $343.9 million fell short of expectations, which were set at $366.4 million.
Elf Beauty’s CEO, Tarang Amin, acknowledged a lack of significant product launches compared to the previous year, which saw the success of its lip oils. The company’s full-year net sales are projected to range between $1.55 billion and $1.57 billion, below analysts’ estimates of $1.65 billion. Additionally, adjusted profit is estimated to fall between $2.80 and $2.85 per share, lower than the expected $3.58 per share.
In conclusion, Elf Beauty faces challenges ahead as it navigates the impact of tariffs and shifts in consumer spending habits. The company remains focused on innovation and diversification to sustain its growth in a competitive market landscape.
(Reporting by Anuja Bharat Mistry and Prerna Bedi in Bengaluru; Editing by Tasim Zahid and Sriraj Kalluvila)
