Affordable cosmetics company e.l.f. Beauty (ELF) has long relied on China to keep its prices low and create value-oriented “dupes” of higher-end products.
Now, President Trump’s economic agenda is putting that model to the test.
E.l.f. sources 75% of its products from China, making it highly exposed to higher costs from Trump’s tariffs (though less so than in 2019, when the company sourced 100% of its products from the country).
In addition to the broad-based tariffs Trump has levied in his second term, e.l.f. faces a 25% tariff on its China-sourced products that Trump levied in 2019. With the most recent 30% tariffs that Trump imposed on Chinese goods, which are undergoing legal scrutiny, e.l.f.’s product imports to the US were subject to tariffs at the 55% level.
Unlike other companies that have vocally pivoted to American onshoring to avoid being singled out by the president, CEO Tarang Amin said on the company’s earnings call that e.l.f. remains committed to its Chinese suppliers.
“We believe our unique China-based supply chain is an area of competitive advantage we’ve been honing for the past 21 years,” Amin said. “It underpins our value proposition, delivering the best combination of quality, cost, and speed in our industry. We’re … committed to our China team and suppliers.”
But tariffs create a challenging situation for a company that prides itself on its affordability factor.
E.l.f. recently took a rare step in announcing a $1 price increase on all items starting in August. In an interview with Yahoo Finance on Thursday, e.l.f Beauty CFO Mandy Fields did not say whether e.l.f. would pare back prices if tariffs were to come off.
“There’s just such a range of outcomes from a tariff perspective,” Fields said (see video above). “I would say pricing is one lever that we have in our toolkit, but we’re also looking at our supply chain to optimize that, and also looking at business diversification as we think about tariff mitigation.”
The beauty company also announced the acquisition of Rhode, a direct-to-consumer skin care brand founded by Hailey Bieber, for $1 billion. One of the reasons given for the deal was to help e.l.f. diversify its supply chain away from China.
E.l.f. Beauty stock soared 23% on Thursday following the announcement.
Many beauty brands are going back to the drawing board in hopes of finding ways to deal with tariffs, starting by reaching out to their suppliers and finding new efficiencies.
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