E.l.f. Beauty to Acquire Hailey Bieber’s Rhode in $1 Billion Deal

E.l.f. Beauty is acquiring Hailey Bieber's Rhode skincare brand for $1 billion, consisting of $800 million in cash and stock, and a potential $200 million earnout. The deal, E.l.f.'s largest to date, provides entry into Sephora and aligns with E.l.f.'s strategy of acquiring founder-led brands, following its Naturium acquisition; Bieber will remain as Rhode's chief creative officer. Despite recent headwinds from tariffs impacting E.l.f.'s share price, the acquisition is intended to fuel growth, with Rhode's net sales reaching $212 million in the last year.

Analysis

E.l.f. Beauty is acquiring Hailey Bieber's Rhode for $1 billion, consisting of $800 million in cash and stock payable at closing and a potential $200 million earnout over three years. This transaction, E.l.f.'s largest to date, is partly funded by $600 million in new debt. The acquisition is strategically significant, providing E.l.f. with Rhode, a rapidly expanding brand that achieved $212 million in net sales in the twelve months ending March 31 from a standing start in under three years and saw its earned media value grow 367% in 2024. Notably, Rhode secured this valuation when other beauty brands have reportedly struggled to find buyers. The deal also grants E.l.f. a crucial entry into Sephora U.S. and aligns with its established strategy of successfully integrating and scaling founder-led brands, such as Naturium (acquired for $333 million). Hailey Bieber will continue to guide Rhode as Chief Creative Officer. This major investment occurs while E.l.f., despite surpassing $1 billion in annual net sales and reporting strong Q4 results with net sales of $332.6 million (a 4% year-over-year increase, beating $327 million estimates) and adjusted diluted earnings per share of 78 cents (surpassing 72 cents consensus), confronts substantial headwinds from potential U.S. tariffs, as 75% of its products are manufactured in China. These tariff concerns have contributed to an approximate 25% decline in E.l.f.'s share price year-to-date and have led the company to withhold its fiscal 2026 financial outlook, although it has implemented a $1 price increase across E.l.f. products as a mitigation measure. Following this substantial acquisition, E.l.f. intends to prioritize the organic growth of its expanded brand portfolio.

Key Decisions for Investors

• Investors should assess the execution risk associated with E.l.f.'s largest acquisition, Rhode, particularly its integration and the realization of growth synergies through the new Sephora U.S. channel, while noting the increased leverage from $600 million in debt financing.
• Closely monitor the impact of U.S. tariffs on E.l.f.'s gross margins and consumer response to the announced $1 price increase, as 75% of its products are China-sourced and tariff uncertainty has led the company to withhold FY26 guidance.
• Evaluate whether E.l.f.'s approximate 25% year-to-date share price decline offers a strategic entry point, considering the strong growth metrics of Rhode and E.l.f.'s recent Q4 earnings beat, against the backdrop of persistent tariff challenges and the financial commitments of the acquisition.
• Consider E.l.f.'s demonstrated success in acquiring and scaling founder-led brands, such as Naturium, as a positive indicator for the Rhode deal, though the significantly larger scale of this particular acquisition presents a more substantial integration challenge.