e.l.f. doubles down on rhode after $1B acquisition to lock in Gen Z demand

e.l.f. Beauty made a strategic pivot by acquiring rhode for $1 billion to move from mass-market viral items into an affordable-luxury segment aimed at younger consumers. The deal immediately altered the company’s revenue mix: rhode recorded about $212 million in net sales in its most recent fiscal year and accounted for roughly $128 million of e.l.f.’s third-quarter sales acceleration.

Management now expects rhode to generate as much as $265 million in net sales for the year, a projection representing as much as 70% growth year-over-year and signaling that the brand must sustain viral momentum to justify the purchase price. By contrast, e.l.f.’s original core business showed muted expansion, increasing only about 2% in the referenced third quarter, underscoring that future company growth will be driven by the acquired portfolio. CEO Tarang Amin is reconfiguring the company into a multi-brand platform; he is targeting both value channels like Dollar General and prestige retailers such as Sephora to widen distribution footprints.

Operational headwinds are tangible. The firm raised retail prices by roughly $1 last year to offset new trade levies tied to imports, and approximately 75% of its SKUs were sourced from China at the time of that adjustment. That exposure leaves margins vulnerable to further tariff shifts and adds sensitivity to U.S.-China trade policy moves. Concurrently, e.l.f. is defending a visible diversity, equity, and inclusion posture; its internal demographics report 76% women, 74% Gen Z or millennials, and 44% employees from diverse backgrounds — metrics management presents publicly and which have political as well as brand implications.

The company’s go-to-market playbook centers on social virality and influencer-driven demand generation, mechanics that made rhode a breakout with a very small SKU base. E.l.f. has moved capital away from an owned-store model and into digital and retail partnerships after closing 22 physical shops in a prior restructuring. The growth thesis depends on reproducing rhode-level fervor across additional higher-priced brands; management says it is screening over 120 potential targets, signaling an acquisition-led scaling strategy rather than purely organic expansion. Investors should watch three near-term variables: rhode’s ability to maintain conversion and repurchase rates after nationwide rollout, tariff trajectories that could compress gross margins, and any consumer backlash tied to the company’s public DEI positioning.

If rhode sustains the forecasted sales lift, e.l.f. could transform into a diversified beauty platform that spans mass and premium price tiers, improving average selling price and margin profile. If those sales fade, however, the company risks carrying an expensive asset that materially influences investor expectations. In sum, the acquisition is a deliberate bet to convert cultural influence into predictable revenue; its success will hinge on repeat purchase economics, margin protection from trade policy, and continued resonance with Gen Z consumers.