Elf Beauty forecasts weak year, flags up to $20 million hit from Iran war
Elf Beauty Inc. shares experienced a significant decline in extended trading on Wednesday after the cosmetics company issued an annual sales and profit forecast below Wall Street estimates. The company cited higher U.S. tariff costs and cautious consumer spending as key factors impacting its outlook.
Shares of Elf Beauty tumbled as much as 34% following the announcement, with some reports indicating a 26% drop in extended trading. The revised forecast comes after the company had previously pulled its fiscal 2026 outlook in May.
The cosmetics maker now anticipates more than $50 million in annual costs stemming from higher U.S. tariffs on imports in fiscal 2026. These tariffs have sharply reduced Elf's margins, according to eMarketer analyst Rachel Wolff.
In addition to tariff pressures, Elf Beauty also missed expectations for its second-quarter sales. The company's CEO, Tarang Amin, acknowledged the challenge, stating in an interview with Reuters, "we feel great about our innovation this year, but it's not as big as the lip oils were last year."
Last year, Elf Beauty benefited from the popularity of its lip oils, which launched in 2023 and gained significant traction and social media virality in early 2024. This success contributed to the company's shares touching a record high.
Analysts noted a broader slowdown in the mass beauty category. Sky Canaves, principal analyst at Emarketer, suggested that Elf's core Gen Z demographic has been "distracted by natural disasters, political change, and uncertainty over TikTok's fate," which is likely to weigh on the brand through the remainder of its fiscal year.
Wolff added that Elf Beauty is increasingly relying on its Rhode brand as sales for its namesake Elf brand begin to slow. The company's guidance reflects weakening cosmetics demand at the start of the year.
Despite the challenging forecast and sales miss, Elf Beauty's quarterly adjusted earnings per share of 68 cents surpassed analyst estimates of 57 cents. This beat followed $1 price increases implemented in August.