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

E.l.f. Beauty is acquiring Hailey Bieber's skincare brand Rhode for $1 billion, comprised of $800 million in cash and stock plus a potential $200 million earnout based on future growth; the deal, E.l.f.'s largest to date, will be funded with $600 million in debt financing and gives E.l.f. access to Sephora U.S. Rhode's net sales reached $212 million in the 12 months ended March 31, making it the top skincare brand by earned media value, while Bieber will remain as Rhode's chief creative officer and strategic advisor.

Analysis

E.l.f. Beauty (ELF) has announced its largest acquisition to date, agreeing to purchase Hailey Bieber's skincare brand Rhode for $1 billion, comprising $800 million in cash and stock at closing and a potential $200 million earnout contingent on future growth over three years. This strategic move, funded partly by $600 million in debt financing, aims to leverage Rhode's rapid ascent; the brand achieved $212 million in net sales in the 12 months ending March 31, 2024, and was the top skincare brand by earned media value in 2024, growing 367% year-over-year. The acquisition provides E.l.f. with a significant entry into Sephora U.S. and Canada, commencing this fall and expanding to the U.K. by year-end, a channel previously untapped by E.l.f. This deal aligns with E.l.f.'s strategy of acquiring and scaling founder-led brands, similar to its successful 2023 acquisition of Naturium for $333 million, which doubled its skincare penetration. Despite E.l.f.'s recent Q4 performance surpassing expectations, with net sales increasing 4% to $332.6 million and adjusted diluted EPS at 78 cents (beating estimates of $327 million and 72 cents respectively), the company's stock has declined approximately 25% year-to-date, primarily due to concerns over tariffs, as 75% of its products are manufactured in China. Rhode's manufacturing, primarily in Italy and South Korea, offers some diversification. E.l.f. is not providing a fiscal 2026 outlook due to tariff uncertainties but has implemented a $1 price increase on its products as a mitigation measure, which reportedly received 99% positive sentiment. Hailey Bieber will remain as Rhode’s Chief Creative Officer and a strategic adviser.

Key Decisions for Investors

• Investors should evaluate the long-term growth potential from Rhode's integration and E.l.f.'s entry into Sephora against the increased debt burden and the $1 billion valuation for a relatively young brand.
• Monitor E.l.f.'s ability to successfully integrate Rhode and achieve projected synergies, particularly given this is its largest acquisition amidst existing tariff headwinds.
• Closely track developments regarding U.S. tariffs on Chinese imports, as this remains a significant overhang for E.l.f.'s profitability and is currently preventing the company from issuing FY26 guidance, despite mitigation efforts.
• Consider whether the recent ~25% YTD decline in ELF's share price adequately factors in the tariff risks or presents a buying opportunity given the strong brand momentum, recent earnings beat, and the strategic potential of the Rhode acquisition.