E.l.f. Beauty recently made waves in the beauty industry with its acquisition of Hailey Bieber’s skincare brand, Rhode, for an impressive $1 billion. This surprise announcement delighted investors, leading to a remarkable 25% surge in E.l.f.’s share price, reaching $113. The acquisition, which is the company’s largest to date, includes $800 million in cash and stock payable at closing, alongside a potential earnout of $200 million based on the brand’s future growth over the next three years. To fund this ambitious move, E.l.f. secured $600 million in debt financing, setting the stage for a significant expansion in its portfolio.
Analysts are viewing this acquisition positively, particularly because Rhode operates as a direct-to-consumer brand, opening up substantial distribution opportunities for E.l.f. The brand is set to launch in Sephora stores across the U.S. and Canada this fall, with plans for a U.K. rollout by the year’s end. Tarang Amin, E.l.f. Beauty’s CEO, emphasized Rhode’s strong performance and the brand’s appeal beyond Hailey Bieber’s celebrity status. According to Amin, Sephora sees Bieber as a thoughtful founder with a unique vision and aesthetic, which boosts Rhode’s potential for success in new markets.
Bank of America analyst Anna Lizzul forecasted that the acquisition will enhance E.l.f.’s gross margins and earnings before interest, taxes, depreciation, and amortization (EBITDA), allowing for deeper investments in marketing. Similarly, other analysts echoed this optimistic outlook, suggesting that E.l.f. could become a strong competitor in the global beauty market, projecting double-digit sales growth and envisioning their value at $3 billion by 2030, with Rhode contributing positively to that trajectory.
While many analysts are enthusiastic, some remain cautious, questioning the sustainability of Rhode’s celebrity-driven success. Oliver Chen of TD Cowen acknowledged the brand’s impressive achievement of generating $212 million in direct-to-consumer sales within three years. He suggested that the upcoming Sephora launch positions Rhode for built-in growth while allowing it to maintain its brand integrity under E.l.f.’s ownership.
Amin has a confident view of Rhode, asserting that Bieber exemplifies much more than a celebrity and possesses the instincts required for successful brand management. This acquisition follows E.l.f.’s earlier purchase of Naturium, a skincare brand, for $333 million, aiming to enhance its presence in the skincare category. E.l.f. has seen growth across all its brands and recently expanded Naturium’s reach into Ulta Beauty and Shopper’s Drug Mart, showcasing its commitment to strategic expansion.
Concerns regarding tariffs, which significantly affect E.l.f. due to its reliance on Chinese manufacturing, are also being addressed by the company. Analysts believe E.l.f. can mitigate potential tariff impacts through pricing adjustments and cost reductions. Recently, the company announced a $1 price increase on all products, which is part of its strategy to maintain profitability amidst these challenges. Overall, E.l.f.’s acquisition of Rhode highlights a strategic move toward growth and innovation in a highly competitive beauty landscape.