Elf Beauty sees smaller core profit margin in first half of fiscal 2026 on tariff costs

(Reuters) -Elf Beauty said on Wednesday it expects a smaller core profit margin for the first half of fiscal 2026 due to higher tariff costs, clouding gains from an upbeat first quarter.

Shares of the company, which refrained from providing fiscal 2026 forecasts for the second time in a row, were down about 11% after the bell.

Several retailers, already facing challenges with waning demand, have been struggling to chalk out their business plans owing to Trump administration's unpredictable trade policies, especially those related to Southeast Asia.

Elf Beauty, which has reduced its production from China to "little less" than 75% from about 100% back in 2019, said that it has been optimizing its supply chain, diversifying its business and taking price increases to address tariff-related headwinds.

Elf, which acquired Hailey Bieber's makeup brand Rhode, increased product prices by $1 across its brands starting this month to counter trade-related costs, similar to broader industry peers.

The company expects adjusted earnings before interest, taxes, depreciation and amortization margins to be about 20% in the first half of fiscal 2026, compared with 23% in the same period of fiscal 2025.

However, Elf has been able to hold up its sales growth across retail and online channels on the back of strong demand for products such as its vegan lip oils and blush tints available at drugstores and supermarkets including Walgreens, Target as well as Dollar General.

Elf's quarterly revenue of $353.7 million beat estimates of $350.3 million, as per data compiled by LSEG.

On an adjusted basis, the company's earnings came in at 89 cents per share, compared with analysts' estimates of 84 cents per share.

(Reporting by Anuja Bharat Mistry and Neil Kanatt in Bengaluru; Editing by Alan Barona)

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