^{Photo: CNBC}

E.l.f. Beauty’s fiscal first-quarter results reveal a company navigating significant headwinds from escalating tariffs on Chinese imports, with profits falling sharply by 30%, even as revenues edged higher. The cosmetics brand posted a net income of $33.3 million, down from $47.6 million a year earlier, weighed down by rising import costs that reflect the impact of ongoing U.S.-China trade tensions.

Financial Highlights: Strong Revenue Growth Meets Tariff Challenges

• Revenue rose 9% year-over-year to $354 million, narrowly beating Wall Street’s estimate of $350 million.
• Adjusted earnings per share came in at 89 cents, exceeding the 84-cent consensus.
• Net income declined to 58 cents per share, down from 81 cents a year prior.
• Adjusted net income, excluding one-time expenses like stock-based compensation, was $51.3 million.

This marks the second consecutive quarter where sales growth slowed to single digits after a period of robust expansion—E.l.f. previously enjoyed high double-digit growth over the past four years. CEO Tarang Amin attributed this moderation partly to “softness” in the broader beauty sector and consumer spending pressures.

Tariff Impact and Supply Chain Adjustments

E.l.f. sources roughly 75% of its products from China, making it highly sensitive to U.S. tariffs, which currently amount to approximately 55% on many Chinese goods.

“To offset the tariff impact, we’ve already raised prices by about $1 on certain products,” Amin told CNBC. “We’re also actively working to diversify our supply chain and grow our international business.”

Amin noted uncertainty remains high around tariff policy, especially with the possibility of duties rising as high as 170% in some cases. “While 55% tariffs are painful, they’re better than the alternative, and we’re closely monitoring any developments,” he said.

Due to these uncertainties, E.l.f. withheld full-year revenue guidance, instead projecting sales growth above 9% for the first half of the fiscal year and adjusted EBITDA margins at about 20%, down from 23% in the prior year’s first half.

Market Position and Product Innovation

Despite challenges, E.l.f. continues to capture market share and outperform the category, supported by strategic product launches. The company recently released the Bright Icon Vitamin C + E Ferulic Serum, priced at $17, offering an affordable alternative to premium skincare products retailing for over $180.

Additionally, a new sunscreen launch aims to capitalize on consumer demand for accessible, effective beauty solutions.

Strategic Growth via Acquisition: Rhode Beauty

In a move to strengthen its portfolio, E.l.f. recently completed the acquisition of Hailey Bieber’s beauty brand Rhode. Rhode’s upcoming launch in all Sephora stores across the U.S. and Canada this September is anticipated to contribute to revenue growth later in the fiscal year.

Looking Ahead: Navigating Volatility

CEO Amin emphasized the volatility in the macro environment, citing tariffs, inflation, and consumer uncertainty as key factors impacting results. However, he remains cautiously optimistic, pointing to Nielsen data that validates E.l.f.’s ongoing market momentum.

“We’re building on solid foundations, and while growth has moderated, our market share gains and innovation pipeline position us well for recovery,” Amin said.

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E.l.f. Beauty’s Q1 earnings underscore the dual pressures of a cooling beauty market and escalating trade tariffs. With strategic pricing adjustments, supply chain diversification, and key acquisitions like Rhode, the company aims to weather the tariff storm while maintaining a path toward sustainable growth in a complex global environment.