E.l.f. Beauty has made headlines with its acquisition of Hailey Bieber's skincare brand, Rhode, in a deal valued at up to $1 billion. This strategic move aims to bolster e.l.f.'s presence in the skincare market and attract a higher-income consumer base.

The announcement was made on Wednesday, revealing that the acquisition consists of $600 million in cash and $200 million in newly issued shares of e.l.f. Beauty common stock. An additional $200 million could be earned based on Rhode's performance over the next three years. The deal is expected to close in the second quarter of e.l.f.'s fiscal 2026, which is anticipated later this year.

Hailey Bieber, a model and the wife of pop star Justin Bieber, will take on the role of Rhode's chief creative officer and head of innovation. She expressed her enthusiasm for the partnership, stating, "From day one, my vision for rhode has been to make essential skin care and hybrid makeup you can use every day. Just three years into this journey, our partnership with e.l.f. Beauty marks an incredible opportunity to elevate and accelerate our ability to reach more of our community with even more innovative products and widen our distribution globally."

Rhode, launched in 2022, has seen remarkable growth, generating $212 million in net sales in the 12 months ending March 31. The brand has primarily sold its products online but plans to expand into Sephora stores across North America and the U.K. by the end of the year.

E.l.f. Beauty's CEO, Tarang Amin, praised Rhode's rapid success, saying, "I've been in the consumer space 34 years, and I've been blown away by seeing this brand over time. In less than three years, they've gone from zero to $212 million in net sales, direct-to-consumer only, with only 10 products. I didn't think that was possible. So that level of disruption definitely caught our attention."

The acquisition marks e.l.f.'s largest deal to date, as the company seeks to deepen its engagement in the skincare sector. E.l.f. has previously acquired skincare brand Naturium for $355 million in 2023, indicating a clear strategy to diversify its offerings.

Despite the positive outlook, e.l.f. shares fell about 4% in extended trading following the announcement. The company recently reported fiscal fourth-quarter results that exceeded Wall Street's expectations, with earnings per share of 78 cents adjusted compared to the anticipated 72 cents. Revenue reached $333 million, surpassing the expected $328 million.

However, e.l.f. faces challenges, particularly due to its reliance on Chinese manufacturing, which accounts for about 75% of its products. The company is currently navigating a 30% duty on exports to the U.S., prompting plans to raise prices by $1 starting August 1 to offset increased costs.

As e.l.f. Beauty embarks on this new chapter with Rhode, it remains to be seen how the acquisition will impact its growth trajectory amid economic uncertainties and evolving consumer preferences.