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Hailey Bieber's cosmetics line Rhode is expected to increase E.l.f. Beauty 's annual sales by $200 million this fiscal year, making the buzzy brand a critical growth driver for its new parent company, E.l.f. CEO Tarang Amin told CNBC Wednesday. E.l.f., which bought Rhode for $1 billion in a blockbuster deal earlier this year, finalized the acquisition in August. On an annual run rate basis, Rhode is expected to deliver $300 million in revenue for E.l.f. after launching in Sephora stores nationwide in September, the biggest brand launch the retailer has seen in North America in its history, Amin said. "It was two and a half times bigger than the number two, [Sephora's] second biggest launch ever, so it's performed extremely well," Amin said. "We continue to see incredible potential for growth, not only in North America where we just launched and in the UK where we're about to launch, but also internationally. ... We definitely see global potential for that brand and see it being much bigger than it is today." E.l.f. unveiled details about the impact Rhode is expected to have on its sales for the first time on Wednesday as it delivered fiscal second-quarter earnings. Despite strong sales at Rhode, as well as across E.l.f.'s e-commerce and retail channels, the company missed revenue estimates but beat on earnings. Here's how the beauty company did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG: Earnings per share: 68 cents adjusted vs. 57 cents expected Revenue: $344 million vs. $366 million expected The company's reported net income for the three-month period that ended Sept. 30 was $3 million, or 5 cents per share, compared with $19 million, or 33 cents per share, a year earlier. Excluding one-time items related to stock-based compensation and other non-recurring charges, E.l.f. saw earnings of 68 cents per share. Sales rose to $344 million, up about 14% from $301 million a year earlier. E.l.f., which primarily sources its makeup from China, has seen its profitability crushed by President Donald Trump's new tariffs. During the quarter, its net income fell by a staggering 84% while the company said its gross margin fell by 1.65 percentage points, primarily driven by higher tariff costs. Amin said the second quarter is expected to see the greatest hit from tariffs and the impact is expected to moderate sequentially from there. "In response to tariffs, we took our prices up $1, that was effective Aug. 1 so you're seeing tariff impact without pricing in this quarter," Amin said. "In the second half of the year, gross margin will actually improve sequentially. Last quarter, E.l.f. declined to release full-year guidance, citing the uncertain tariff and macroeconomic environment. But after Trump's recent trade deal with China, Amin said the company now feels more confident in releasing an outlook. It's expecting full-year revenue to be between $1.55 billion and $1.57 billion, implying 18% to 20% sales growth, but below the $1.65 billion analysts were expecting, according to LSEG. Rhode's expected contribution to sales represents about 13% of that revenue forecast. That means E.l.f.'s sales growth could have been far slimmer without the acquisition, which reflects how important the deal is to E.l.f's future as its outsized growth continues to moderate. E.l.f. expects full-year adjusted earnings per share to be between $2.80 and $2.85, far below expectations of $3.58, according to LSEG. Amin blamed the misses on revenue and guidance on the fact the company didn't release guidance last quarter, which he said can impact consensus estimates. "We actually believe both the sales that we delivered, as well as the guidance on net sales, are quite strong," he said.
