Dive Brief:
- E.l.f. Beauty is reversing some of its previously implemented price increases following a 5-point unit volume decline in the fourth quarter, CEO Tarang Amin said on a Wednesday call with analysts.
- “As we look at the state of the consumer today, we have recently seen a more pronounced decline in units,” Amin said. “As a result, we are keenly focused on how to deliver a better value and improve unit velocity.”
- Meanwhile, the company posted a 25% year over year net sales increase to $1.6 billion in fiscal 2026, including a 35% year over year increase in Q4, according to a Wednesday release. For 2027, E.l.f projected a 12% to 14% increase in net sales.
Dive Insight:
Last year, the company announced that it would raise prices by $1 across all E.l.f. brand SKUs citing inflation and tariffs. Since then, multiple factors, including the war in Iran and rising fuel prices, have further dampened consumer sentiment.
“From an external standpoint, the pricing action was successful,” Amin said on the call. “Obviously, we had 55% tariffs, even higher than that at the time we made the pricing move, plus inflationary pressures that caused us to take a dollar price increase. Overall, as everyone has seen, our dollars increased with that, but our units fell off.”
Amin said that the company is currently testing pricing adjustments to find the right balance.
“We saw a pretty big fall off on units from where before we took pricing, to after we took pricing,” Amin said. “As we started doing some of these tests, we've seen really strong unit recovery on, for example, the skin tints at $18 [reduced to] $14, a 40% lift almost right away, and across all customers that we tested that in, gives us confidence.”
Amin said the company saw “a 38% lift on Amazon and a 36% lift across all retailers, including a triple-digit sales lift on TikTok Shop,” adding that the company planned to “test our way into which are the right families to be able to make that action on.”
The company’s $1 billion August 2025 acquisition of Hailey Bieber’s Rhode beauty brand brought in more than $500 million in global retail sales and about $390 million in net sales, showing an 80% year over year net sales growth. As a result, net loss for the fourth quarter was $49.4 million, compared to a net income of $28.3 million in the year-ago quarter.
Mandy Fields, E.l.f.’s chief financial officer, reiterated that the company hoped to recoup some of its tariff-related expenses in fiscal 2027, while it also monitors increased fuel costs.
“As we consider the conflict in the Middle East, we are starting to see some inflationary pressure on commodities and transportation costs like many other companies have spoken about,” Fields said on the call, adding that the company “could face $15 million to $20 million of incremental cost headwinds in fiscal ’27.”
To offset some of those headwinds, Fields said, “we're also pursuing a refund on the IEEPA tariffs we paid last year, which stand at approximately $58.5 million.” However, Fields added that the company’s outlook “does not factor in the impact of oil prices or tariff refunds given the situation remains fluid.”
Fields added that the company’s fiscal 2027 gross margin would remain approximately flat year over year. In addition, she said net sales in the first quarter would be down “high single digits” and “rebound strongly in Q2 in the mid-teens range as we annualize the acquisition of Rhode and lap our decision to temporarily stop shipments in Q2 last year on orders that did not reflect our price increase.”
