e.l.f. Beauty Inc. (NYSE: ELF) is facing market pressure after its recently acquired skincare brand, Rhode, posted softer-than-expected sales in its latest earnings report. The company’s shares dropped as much as 10% intraday, extending a broader decline amid concerns that the Rhode acquisition, once seen as a growth catalyst, may not be delivering as strongly as hoped.
According to filings, Rhode generated approximately $40.2 million in quarterly revenue, missing analysts’ internal estimates that had been projecting higher numbers following strong brand buzz and influencer-led visibility. Investors were expecting Rhode, founded by Hailey Bieber and known for its minimalist “glazed donut skin” aesthetic, to significantly boost e.l.f.’s top-line growth after its acquisition earlier this year.
However, analysts suggest the shortfall has tempered enthusiasm. UBS maintained a Neutral rating with a $150 price target, while several other firms, including Morgan Stanley and Piper Sandler, flagged near-term risks due to integration costs and potential overvaluation. Some analysts have also pointed out that the skincare segment, while growing, remains highly competitive with saturated product categories, and it may take several quarters before e.l.f. can fully leverage Rhode’s potential.
In addition to Rhode’s underperformance, e.l.f. Beauty also reported weaker January retail trends across core makeup categories, reflecting a cooling demand in the mass beauty segment. According to Reuters, the company lowered parts of its annual outlook, citing softening consumer spending and higher marketing expenses as contributing factors.
Despite the market reaction, e.l.f. Beauty’s management emphasized that the company remains confident in its long-term growth trajectory. CEO Tarang Amin reiterated that Rhode represents a long-term investment in skincare innovation, aligning with e.l.f. ‘s mission of accessible, cruelty-free beauty. “We remain excited about Rhode’s community, its founder-led creativity, and the brand’s runway for global expansion,” Amin said during the earnings call.
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Still, the short-term market mood is cautious. Investors are watching closely to see whether e.l.f. can stabilize Rhode’s performance in the coming quarters and justify the premium paid for the acquisition. If the trend continues, analysts warn that the company’s strong reputation as a fast-growing, value-driven beauty player could take a hit.
As of now, e.l.f. Beauty remains one of the most-watched names in the beauty sector, but Rhode’s disappointing debut has cast a shadow over what was once viewed as a strategic leap into the skincare space.
