Is ELF's Pricing Strategy Offsetting Tariff-Driven Costs Through 2026?

Pricing discipline is emerging as a critical lever in e.l.f. Beauty Inc.’s ELF strategy to navigate elevated tariff pressures through fiscal 2026, allowing the company to protect margins while sustaining consumer demand in a value-conscious beauty environment. In the second quarter of fiscal 2026, e.l.f. Beauty delivered 14% year-over-year net sales growth despite significant tariff headwinds, highlighting the resilience of its pricing architecture within a low-growth mass beauty category.

A central element of this approach is e.l.f. Beauty’s portfolio-wide $1 price increase implemented on Aug. 1, 2025, which was designed to partially offset higher tariffs tied to China-based production. Even after the increase, approximately 75% of the portfolio remains priced at $10 or below, with an average unit retail of about $7.50 — well below legacy mass brands and prestige competitors. Consumption trends remained strong, with the core e.l.f. brand growing roughly 7% in the second quarter, indicating limited demand elasticity following the price action.

From a profitability standpoint, tariffs weighed on the second-quarter gross margin, which declined approximately 165 basis points year over year. However, pricing and product mix provided meaningful offsets, helping stabilize margins amid an estimated 3,500-basis-point tariff headwind for the year. Management estimates that every 10 percentage-point increase in tariffs equates to $17 million in annualized cost pressure, underscoring the necessity of proactive pricing adjustments.

The addition of Rhode supports margin defense through mix enhancement. While tariffs compressed near-term profitability, Rhode’s premium positioning and strong initial performance contribute favorably to gross margin recovery, reinforcing e.l.f. Beauty’s ability to balance value pricing with earnings durability.

e.l.f. Beauty expects the gross margin to improve sequentially in the second half of fiscal 2026, supported by pricing, mix benefits and moderating tariff rates. With full-year net sales growth guided at 18-20% and organic growth at 3-4%, e.l.f. Beauty’s pricing strategy appears well-positioned to offset tariff-driven costs while preserving its core value proposition through fiscal 2026.

e.l.f. Beauty’s Price Performance, Valuation & Estimates

ELF, which competes with Nu Skin Enterprises NUS and Coty Inc. COTY, has seen its shares decline 35.1% in the past six months against the industry’s growth of 16.5%. Meanwhile, shares of Nu Skin and Coty have rallied 30.1% and declined 33.4%, respectively.

e.l.f. Beauty’s forward 12-month price-to-earnings ratio of 23.55 reflects a lower valuation than the industry’s average of 29.35. ELF has a Value Score of F. ELF is trading at a premium to Nu Skin (with a forward 12-month P/E ratio of 7.13) and Coty (6.98).

The Zacks Consensus Estimate for ELF’s fiscal 2026 earnings implies a year-over-year decline of 15.9%, while the same for fiscal 2027 indicates growth of 24.7%. Earnings estimates for fiscal 2026 and 2027 have been southbound by 8 cents and 18 cents per share, respectively, in the past seven days.

e.l.f. Beauty currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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