What happened
In May 2025, budget beauty giant e.l.f. announced a $1 price increase across all of its SKUs effective August 1, 2025, citing tariffs that CEO Tarang Amin said then ran at 55% or higher and inflationary pressures — with about 75% of its supply chain still in China. Amin told Fortune the community's response was 'quite positive': 'We're not trying to pull anything over on anyone. This is exactly what we're facing, and they understand.' The company posted $332.6 million in quarterly net sales, up 4%, and 28% annual growth to $1.3 billion for fiscal 2025.
The units told a different story. On the May 2026 earnings call, Amin reported a 'more pronounced decline in units' — a 5-point unit-volume drop in the fourth quarter of fiscal 2026. 'From an external standpoint, the pricing action was successful,' he conceded. 'Overall, as everyone has seen, our dollars increased with that, but our units fell off.' The about-face began: testing price cuts family by family, with skin tints going from $18 to $14 and lifting almost 40% right away — a 38% lift on Amazon, 36% across all retailers, and a triple-digit sales lift on TikTok Shop, per Amin.
Fiscal 2026 still ended with net sales up 25% to $1.6 billion, propped up by the $1 billion August 2025 acquisition of Hailey Bieber's Rhode (about $390 million in net sales, growing 80%). But the fourth quarter swung to a net loss of $49.4 million from a $28.3 million profit a year earlier. CFO Mandy Fields said e.l.f. was pursuing a refund on roughly $58.5 million of IEEPA tariffs paid, while bracing for $15–20 million of incremental cost headwinds in fiscal 2027 from fuel and commodity inflation.
What it cost
A 5-point unit-volume decline in Q4 FY2026 and a $49.4M quarterly net loss; price cuts of up to $4 tested to win units back
Why it happened
About 75% of production stayed in China, leaving the brand fully exposed to 55%-plus tariffs when it chose pricing as the main offset.
A flat $1 increase ignored elasticity at e.l.f.'s budget price points, where a dollar is a meaningful share of the ticket.
Rising dollar sales masked the damage: revenue kept climbing on price and the Rhode acquisition while core unit velocity fell 5 points.
A weakening consumer — fuel costs and the Middle East conflict, per management — compounded the elasticity hit through fiscal 2026.
The lesson
Transparency buys goodwill, not immunity: passing tariffs through works until elasticity bites, and units — not sentiment — show where the ceiling is.
Aftermath
E.l.f. is 'testing our way into' which product families get price cuts, with the $14 skin-tint test as the template. Guidance for fiscal 2027 projects 12–14% net sales growth and roughly flat gross margin; the company continues to seek the $58.5 million tariff refund.
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