Why e.l.f. Beauty's CFO sees $1B Rhode acquisition as a strategic innovation move
Good morning. During uncertain times, research shows it's more effective for companies to pursue emerging growth opportunities than to simply protect the status quo. For e.l.f. Beauty, that includes making bold moves to drive growth through M&A.
The multinational beauty company announced this week that it will acquire model and entrepreneur Hailey Bieber's Rhode lifestyle brand for about $1 billion, paying $800 million in cash and stock at closing, plus an additional potential earnout of $200 million based on Rhode's growth over the next three years.
In my conversation with e.l.f. Beauty CFO Mandy Fields, she traced the company's focus on innovation during uncertain times back to the pandemic. While many companies pulled back on marketing spend and paused innovation, 'we leaned into all of those things,' said Fields who joined the company as CFO in 2019. That commitment continues to this day, she said.
'Our strategic imperative is to build a different kind of company with brands that disrupt norms, shape culture, and connect communities,' she explained. 'And when we found Rhode, it checked the boxes across all of those aspects. Despite what's going on around us, we believe this is the right strategic move for e.l.f.' Bieber, who is married to pop star Justin Bieber and the daughter of actor Stephen Baldwin, launched Rhode in 2022. In the last 12 months, Rhode generated $212 million in net sales. The brand has a huge social media presence, including Bieber's personal Instagram account, which has 54 million followers.
Fields also noted that e.l.f. Beauty has a disciplined approach to M&A. The company acquired the skin-care brand Naturium in 2023 for $355 million, doubling e.l.f. Beauty's presence in skin care, she said.
On Wednesday E.l.f. Beauty reported revenue of $332.6 million for the quarter that ended March 31, a 4% increase that beat analysts' expectations of 1.6% year-over-year growth. 'We saw growth across the board—geographically in both the U.S. and international markets, and in both retail and digital channels,' Fields said. It was the 25th consecutive quarter of net sales growth and market share gains, she said. For the full year, e.l.f. Beauty delivered 28% sales growth and a 26% increase in adjusted EBITDA.
The company did not provide a fiscal 2026 financial outlook due to a wide range of possible outcomes from a tariff perspective. 'We just want to see more certainty there,' Fields said. The company estimates the impact on production costs due to the current tariff rate would be approximately $50 million annually.
The tariff mitigation plan focuses on pricing, supply chain optimization, and business diversification, Fields explained. E.l.f. Beauty announced last week plans to increase the cost of its products globally by $1 due to tariffs, effective August 1. As a high-quality, value brand, even with that price increase, 75% of its products will still be below $10, Fields said. This is the company's third price increase in its 21 years in business.
E.l.f. Beauty is a favorite brand among Gen Z and is gaining popularity with millennials and Gen X. 'I'm so proud to be a part of a company where we are transparent with our community on what to expect,' Fields said.
Regarding the price increase, the 'overwhelming response has been quite positive from our community,' e.l.f. Beauty CEO Tarang Amin told Fortune in an interview. 'This is exactly what we're facing, and they understand,' Amin said.
About 75% of e.l.f. Beauty's global production comes from China, down from 100% in 2019, Fields said. The company is working with existing partners to establish new locations outside China and seeking new suppliers in other regions, she explained. Additionally, 19% of the company's sales now come from outside the U.S., providing further insulation from tariff risks, she said.By staying transparent and focused on innovation, e.l.f. Beauty shows it can build trust and seize new opportunities—even in uncertain times.Have a good weekend. See you on Monday.
Sheryl Estradasheryl.estrada@fortune.com
This story was originally featured on Fortune.com
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