E.l.f. Beauty is planning to walk back some of the tariff-fueled price increases it implemented less than a year ago after the retailer has seen a slide in demand that’s ramped up in recent months as consumers contend with higher gas prices.

“Whenever you take a price increase that’s that big, you’re going to see unit degradation, but I would say we’ve seen units drop off a bit more in the last few months as consumers have particularly been suffering with higher costs,” CEO Tarang Amin told CNBC in an interview. “So it’s one of the reasons why we want to reinforce the value proposition we have.” 

Recently, E.l.f. tested a $4 price reduction on its $18 Halo Glow skin tint and saw a nearly 40% lift in the business, which signaled to the company just how “sensitive” consumers are on pricing right now, Amin said. 

As a result, it plans to test additional price reductions on certain families of products to see if that will drive unit growth. Last August, it raised prices by $1 across its entire E.l.f. assortment.

“There’ll be additional items that we will test lower pricing on to really be able to reinforce our value proposition at a time when the consumer is suffering,” Amin said. 

E.l.f. unveiled plans to lower prices came as the company announced fiscal fourth-quarter earnings Wednesday that beat Wall Street’s expectations on the top and bottom lines but issued guidance that failed to wow. 

Here’s how the beauty retailer performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 32 cents adjusted vs. 29 cents expected
• Revenue: $449 million vs. $423 million expected

E.l.f. stock rose roughly 7% in after-hours trading on Wednesday.

In the three months ended March 31, E.l.f. posted a loss of $49.4 million, or 82 cents per share, compared with income of $28.3 million, or 49 cents per share, a year earlier. 

E.l.f’s loss was primarily driven by a $57.6 million cost associated with its acquisition of Rhode that the company incurred under the terms of the deal following better-than-expected performance from the brand. Excluding that charge and other one-time expenses, E.l.f. saw net income of $19.4 million, or 32 cents per share. 

Sales rose to $449 million, up about 35% from $332.6 million a year earlier.

During the quarter, E.l.f. saw its gross margin grow by 1.4 percentage points to 73% — thanks in large part to the higher pricing that the company is now in the process of walking back for some products. When asked what those reductions will mean for margins moving forward, Amin said the company is expecting a $55 million tariff refund, which will offset the impact to profitability. 

Still, the company’s fiscal 2027 guidance came in weaker than expected. E.l.f. said it’s expecting sales of between $1.84 billion to $1.87 billion, which is primarily below expectations of $1.87 billion, according to analysts surveyed by LSEG. 

The profitability picture looks worse. The company said it’s expecting adjusted earnings per share to be between $3.27 and $3.32, well below expectations of $3.61 per share. 

“I’m really proud of the profitability we just delivered that was in the face of 55% tariffs, so the team’s done a really nice job navigating through a pretty crazy tariff environment,” Amin said. “For the year ahead, we’ve guided to gross margins being flat, which we also think is quite strong in the environment we’re operating in. We still have tariffs that we’re facing at the 35% level, which is what we’ve modeled for the year, and then continued the retail expansion of Rhode.” 

Since its acquisition of Rhode, announced about a year ago, the celebrity beauty brand has been the primary engine behind E.l.f.’s overall growth. Over the past year, sales have grown 80%, fueled by its expansion into Sephora North America, Sephora UK and Mecca. Rhode now has the No. 1 brand position in all three retailers. 

This fall, Rhode is expected to launch in 19 European countries with Sephora so there’s still a “huge amount of white space” for the brand, Amin said.

In years past, E.l.f.’s growth was primarily driven by ultrapopular product launches. With Rhode now driving growth, it’s unclear how much runway the brand still has and what that will ultimately mean for the company. Amin said “balanced growth” will define the story moving forward across its portfolio of brands, which he said he’s open to expanding.  

“Our first priority is realizing the organic growth we have with our existing portfolio. We have a very high bar when it comes to M&A,” Amin said. “But the good news is we’re a destination of choice for the strongest founders in the industry, just given our approach of supporting a founder’s vision and being able to lend our capabilities and continue to accelerate the growth. So I’d say M&A is definitely part of our future.”