Hailey Bieber attended the Rhode UK launch party with Hailey Bieber at Chiltern Firehouse in London, England on May 17, 2023.
Dave Benett | Dave Benett series | Getty Images
Elf beauty It announced Wednesday that it has acquired Hailey Bieber's beauty brand Rhode, a deal worth up to $1 billion, as cosmetics companies hope to further expand into skin care.
According to FACTSET, the acquisition is Elf’s largest ever acquisition, including $800 million in cash and stock, as well as an additional $200 million payment based on Rhode’s performance over the next three years. The transaction is expected to be completed in the company's fiscal year 2026 or later this year.
"I've been in the 34-year consumer space for 34 years and was shocked by seeing the brand over time. In less than three years, their net sales have changed from zero to $212 million, direct to consumers, with only 10 products. I don't think it's possible," CEO Tarang Amin told CNBC in an interview. "So, this interference has certainly caught our attention."
Bieber said in a press release that she is happy to work with the elves to bring her brand to “more faces, places and spaces.”
“From day one, my vision for Rhodes has enabled you to use essential skin care and blended makeup every day,” Bieber said. “This journey is just three years old and our partnership with Elf Beauty marks an incredible opportunity to enhance and accelerate the capabilities of our community with more innovative products and expand our distribution globally.”
Elf shares fell by about 4% after the company announced its acquisition and released its fourth-year results. The company made its quarterly estimates on Wall Street, but provided no guidance due to the Trump administration's ever-changing tariff policies. The Elf has obtained disproportionate products from China.
Launched in 2022, Rhode has more than doubled its customer base over the past year and generated $212 million in revenue in the 12 months ended March 31. The company's growth is primarily through its website, but is scheduled to launch in Sephora stores in North America and the UK by the end of the year.
As part of the acquisition, Bieber will serve as Chief Creative Officer and Head of Innovation for Rhode, overseeing creativity, product innovation and marketing. The brand was launched with two co-founders Michael and Lauren Ratner, but Bieber’s influence and name turned it into a billion-dollar brand.
Under her guidance, Rhode became the No. 1 skincare brand to gain media value last year, or through other methods other than paid advertising, up 367% year-on-year.
Rhode is a solid match for the elves, and its digital capabilities have soared dramatically in recent years. The company has a large number of online followers and is known for Tiktok marketing, which is more natural to consumers.
The company also hopes to delve into skincare products, which are becoming increasingly popular among core consumers of all ages, especially the Elf. In 2023, it acquired skincare brand Naturium for $355 million. Its acquisition of Rhode will allow it to build on skin care growth and earn higher income consumers.
"The core entrance to Elf cosmetics is worth about $6.50, and Rhode is on average in the 20s, so I said that it does bring us a different consumer overall, but the same approach in terms of how we engage and entertain," Amin said.
The deal makes sense for the Elf, a competitive move to snap up the brand before its competitors, but it is an uncertain and difficult time for the company. Even if prices are expected to rise, Chinese tariffs may reduce the Elf’s profits over time, and at high interest rates, the $600 million in the deal will be funded in debt.
The acquisition is a bet that consumers will continue to spend on high-end skin care even during a potential economic slowdown or recession.
Elf made the announcement as it released its fourth-quarter results, which beat Wall Street’s expectations at the top and bottom line.
According to an LSEG survey of analysts, beauty retailers' performance compared to Wall Street expectations.
The company reported net income for the three months ended March 31 at $28.3 million, or 49 cents per share, compared with a year ago, $14.5 million, or 25 cents per share. Sales rose to $332.7 million, up about 4% from $321.1 million.
Sales of the Elf have increased rapidly in recent years, but as growth began to slow down, the threat of tariffs began to pressure its business, and investors' sales volumes grew. The company currently faced a 30% export tax on the U.S. last week, with 75% of its products announcing a price increase of $1 to offset the cost of raising prices from tariffs starting on August 1.
Although the U.S. has a 30% responsibility for Chinese imports now, things may change as President Donald Trump negotiates with Beijing. As a result, the Elf said it did not offer a prospect for fiscal 2026 “due to the wide range of potential outcomes related to tariffs.”
Amin said the elves paid more than 145% of their duties before Trump agreed to cut taxes on Chinese goods, but those fees were not paid in the quarter and will appear when the company reported its first-quarter earnings for fiscal 2026.