E.l.f. Beauty Reports 30% Profit Drop as China Tariffs Squeeze Margins

NEW YORK – E.l.f. Beauty reported a 30% drop in net income in its fiscal first quarter, as the impact of new tariffs on Chinese imports began to erode the cosmetics company’s bottom line, despite it outperforming Wall Street expectations on both revenue and earnings per share.

For the three months ending June 30, E.l.f.’s net income fell to $33.3 million, down from $47.6 million in the same period a year earlier. The company sources approximately 75% of its products from China, exposing it heavily to the new 55% tariffs now in effect on imports.

“We’re operating in a very volatile macro environment,” said CEO Tarang Amin 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.”

The company cited the “wide range of potential outcomes” related to tariffs as the reason for withholding a full-year forecast. It instead issued guidance for the first half of the fiscal year, projecting sales growth above 9% and adjusted EBITDA margins of 20%, compared to 23% in the same period last year.

Tariff pressure prompts pricing and sourcing changes

To partially offset the rising costs, E.l.f. has raised product prices by $1 and is actively working to diversify its supply chain and expand international operations.

“We’re under 55% tariffs on goods coming from China, and we’ve planned against that,” said Amin. “I never thought I would see a day I’m happy to see 55% tariffs, but it’s a lot better than 170%.”

Amin indicated that the company is closely watching ongoing trade policy developments and will adjust accordingly.

Beats on earnings and revenue

Despite the headwinds, E.l.f. topped analyst forecasts for the quarter:

• Earnings per share: 89 cents adjusted vs. 84 cents expected

• Revenue: $354 million vs. $350 million expected

Adjusted net income, excluding one-time charges and stock-based compensation, stood at $51.3 million, or 89 cents per share.

Total revenue rose 9% from $324 million a year earlier. This marks the second straight quarter of single-digit revenue growth, a trend not seen by the company since 2020. Over the past four years, E.l.f. had posted consistent double-digit sales increases, but the broader cooldown in the beauty sector and consumer softness are now weighing on results.

“Sometimes people forget just how much we’ve been growing,” Amin said. “The category, the state of the consumer, is still challenged.”

Market share and product pipeline remain strong

Despite the slowdown, the company continues to gain market share, aided by affordable product launches often positioned as “dupes” of higher-end cosmetics. The recently released Bright Icon Vitamin C + E Ferulic Serum, priced at $17, is seen as a lower-cost alternative to SkinCeuticals’ $185 version.

E.l.f. also introduced a new sunscreen line and finalized its acquisition of Hailey Bieber’s beauty brand Rhode, which is set to roll out across Sephora stores in the U.S. and Canada starting in September.

The financial impact of Rhode’s launch will be visible in earnings reports later this year, the company said.