e.l.f. Beauty Inc. (NYSE: ELF) saw its stock price plummet 21.06% in Wednesday's trading session following the release of its quarterly earnings report and disappointing annual forecast. The cosmetics maker faced significant headwinds from tariff-related costs and a challenging consumer spending environment, leading to a sharp selloff.
For the second quarter, e.l.f. Beauty reported sales of $343.936 million, falling short of the analyst consensus estimate of $366.430 million by 6.14%. Despite the revenue miss, the company did manage to beat earnings expectations, posting adjusted earnings per share of $0.68 compared to the estimated $0.57. However, the company's gross margin declined by approximately 165 basis points to 69% compared to the same period last year, primarily due to increased tariff-related costs.
The stock's dramatic decline was largely driven by e.l.f. Beauty's fiscal 2026 forecast, which came in significantly below Wall Street estimates. The company expects full-year net sales between $1.55 billion and $1.57 billion, well below analysts' expectations of $1.65 billion. Additionally, e.l.f. Beauty projects adjusted profit in the range of $2.80 to $2.85 per share, falling short of the $3.58 per share estimate. The lowered guidance reflects ongoing challenges, including over $50 million in annual costs from higher tariffs and concerns about lower-income shoppers seeking cheaper alternatives in a frugal consumer spending environment.
Despite these challenges, e.l.f. Beauty's CEO Tarang Amin highlighted some positive developments, including market share gains for the company's namesake e.l.f. brand and a successful launch of the newly acquired Rhode brand at Sephora North America. Amin expressed confidence in the company's strategy to grow market share and capitalize on future opportunities, stating, "We remain confident in our strategy to grow market share and capitalize on the significant whitespace ahead of us."
As e.l.f. Beauty navigates these headwinds, investors will be closely watching how the company manages its supply chain, mitigates tariff impacts, and maintains its competitive edge in the affordable cosmetics market. The company's ability to balance cost pressures with continued innovation and market share growth will be crucial in determining its performance in the coming quarters.