Why e.l.f. Beauty’s CFO sees $1B Rhode acquisition as a strategic innovation move

Good morning. During uncertain times, research shows it’s more effective for companies to pursue emerging growth opportunities than to simply protect the status quo. For e.l.f. Beauty, that includes making bold moves to drive growth through M&A.

The multinational beauty company announced this week that it will acquire model and entrepreneur Hailey Bieber’s Rhode lifestyle brand for about $1 billion, paying $800 million in cash and stock at closing, plus an additional potential earnout of $200 million based on Rhode’s growth over the next three years.

In my conversation with e.l.f. Beauty CFO Mandy Fields, she traced the company’s focus on innovation during uncertain times back to the pandemic. While many companies pulled back on marketing spend and paused innovation, “we leaned into all of those things,” said Fields who joined the company as CFO in 2019. That commitment continues to this day, she said.

“Our strategic imperative is to build a different kind of company with brands that disrupt norms, shape culture, and connect communities,” she explained. “And when we found Rhode, it checked the boxes across all of those aspects. Despite what’s going on around us, we believe this is the right strategic move for e.l.f.”

Bieber, who is married to pop star Justin Bieber and the daughter of actor Stephen Baldwin, launched Rhode in 2022. In the last 12 months, Rhode generated $212 million in net sales. The brand has a huge social media presence, including Bieber’s personal Instagram account, which has 54 million followers.

Fields also noted that e.l.f. Beauty has a disciplined approach to M&A. The company acquired the skin-care brand Naturium in 2023 for $355 million, doubling e.l.f. Beauty’s presence in skin care, she said.

Navigating tariffs

On Wednesday E.l.f. Beauty reported revenue of $332.6 million for the quarter that ended March 31, a 4% increase that beat analysts’ expectations of 1.6% year-over-year growth. “We saw growth across the board—geographically in both the U.S. and international markets, and in both retail and digital channels,” Fields said. It was the 25th consecutive quarter of net sales growth and market share gains, she said. For the full year, e.l.f. Beauty delivered 28% sales growth and a 26% increase in adjusted EBITDA.

The company did not provide a fiscal 2026 financial outlook due to a wide range of possible outcomes from a tariff perspective. “We just want to see more certainty there,” Fields said. The company estimates the impact on production costs due to the current tariff rate would be approximately $50 million annually.

The tariff mitigation plan focuses on pricing, supply chain optimization, and business diversification, Fields explained. E.l.f. Beauty announced last week plans to increase the cost of its products globally by $1 due to tariffs, effective August 1. As a high-quality, value brand, even with that price increase, 75% of its products will still be below $10, Fields said. This is the company’s third price increase in its 21 years in business.

E.l.f. Beauty is a favorite brand among Gen Z and is gaining popularity with millennials and Gen X. “I’m so proud to be a part of a company where we are transparent with our community on what to expect,” Fields said.

Regarding the price increase, the “overwhelming response has been quite positive from our community,” e.l.f. Beauty CEO Tarang Amin told Fortune in an interview. “This is exactly what we’re facing, and they understand,” Amin said.

About 75% of e.l.f. Beauty’s global production comes from China, down from 100% in 2019, Fields said. The company is working with existing partners to establish new locations outside China and seeking new suppliers in other regions, she explained. Additionally, 19% of the company’s sales now come from outside the U.S., providing further insulation from tariff risks, she said.

By staying transparent and focused on innovation, e.l.f. Beauty shows it can build trust and seize new opportunities—even in uncertain times.

Have a good weekend. See you on Monday.

Sheryl Estrada
sheryl.estrada@fortune.com

Leaderboard

Some notable moves this week:

Matthew E. Garth has been appointed EVP and CFO of Dentsply Sirona (Nasdaq: XRAY), a dental products manufacturer, effective May 30. Garth was most recently EVP, CFO and chief administrative officer of The Scotts Miracle-Gro Company. Before that, Garth served as SVP of finance and treasury, and CFO of Minerals Technologies, Inc. He also held senior financial roles at Alcoa Corporation.

Sandra Beaver has resigned from her CFO position at Evolus, Inc. (Nasdaq: EOLS), a performance beauty company, effective June 13, to accept the same position at a private mental health and wellness technology company. Evolus has initiated a search to identify her successor.

Tom Cowhey was appointed CFO of athenahealth, a provider of network-enabled software and services, effective June 9. Cowhey brings more than two decades of experience. He most recently served as EVP and CFO at CVS Health, where he was also a member of the investment committee for CVS Health Ventures. Before that, Cowhey was the CFO at Surgery Partners and also held various positions at Aetna, including as CFO of Aetna’s U.S. health plan business.

Dawn Hooper was promoted to CFO of Jack in the Box Inc. (Nasdaq: JACK), a restaurant company, effective immediately. Hooper, a Jack in the Box veteran of 25 years, previously served as interim principal financial officer, and most recently held the role of SVP and controller. She has been with the company since October 2000 and throughout her tenure has held key leadership roles, including assistant controller, VP of financial reporting, and senior manager of corporate accounting.

Andrew F. Walters was promoted from CFO to CEO of H2O America (Nasdaq: HTO), a network of local water and wastewater utilities, effective July 1. Walters succeeds Eric W. Thornburg who will retire on June 30. For more than 11 years, Walters has served in key leadership roles within H2O America. Before joining the company, Walters was a managing director within J.P. Morgan Asset Management’s Infrastructure Investments Group.

James Rinn was appointed CFO of PSQ Holdings, Inc. (NYSE: PSQH), a payments provider, effective June 1. Rinn will succeed Brad Searle, who will transition to SVP of finance for the company’s brands division. Rinn has served as a member of the PublicSquare board of directors and as audit committee chair since the company’s IPO in July 2023. He currently serves as the CFO of Sedera, Inc. Rinn brings over 30 years of accounting leadership at public and private companies, having held multiple CFO roles.

Owen Barwell was appointed CFO of BioMADE, a U.S. Department of Defense-funded nonprofit. Barwell joins the organization from the U.S. Nuclear Regulatory Commission, the domestic regulator for commercial nuclear power plants. He brings over 35 years of experience spanning the federal, public, and private sectors across the energy, professional services, aerospace, commercial real estate, and rail industries.

Big Deal

“Causal AI: How cause and effect will change artificial intelligence,” is a new S&P Global thought leadership report. Causal AI aims to transform AI from a predictive tool to one that can explain events and solve problems by understanding the relationship between cause and effect, known as causality, according to the report. It has a philosophical influence (Aristotle, David Hume) and statistical methods (Robert Fisher), with significant contributions from Turing Prize-winning computer scientist Judea Pearl.