E.l.f. Beauty acquired Rhode for $1 billion a year ago. It’s been a great investment so far

Today the beauty conglomerate E.l.f. Beauty released its earnings, delivering growth of 36% in net sales, to $479.4 million, across its portfolio of brands.

The brightest spot in the company’s portfolio? Hailey Bieber’s Rhode, which E.l.f. acquired just over a year ago in a deal worth up to $1 billion, just three years after the brand launched. Rhode has built a niche demonstrating that skincare products under $30 can feel luxurious. It has also created viral ad campaigns starring unexpected celebrities including the actor Harris Dickinson and the Love Story star Sarah Pidgeon. In doing so, it has also lent the mass-market conglomerate E.l.f. increased cultural relevance.

This quarter, Rhode reached roughly $160 million in net sales, a giant leap forward given that it achieved $212 million in net sales in the full year preceding its acquisition.  Rhode also became Sephora North America’s number one brand by some metrics. Upon launching at the retailer, the brand sold three Rhode products every second; it achieved similar success in the U.K.

Rhode’s CEO, Nick Vlahos, told Fast Company that the brand has embarked on an ambitious international expansion plan. This June, Rhode entered the Latin American market when it launched in Mexico. It also launched in seven European countries (Rhode sells direct to consumers in 25 countries). Soon, Rhode will also be in European branches of Sephora.

E.l.f. does not disclose how much of its business comes from direct to consumer versus Sephora, but Rhode reports that it drove $27 million in DTC sales in a single day when a limited edition collection dropped. Vlahos says that, by comparison, 90% of beauty industry brands do less than $25 million over a 12-month period. While the company acquired 90,000 new customers in a single day, it has also seen enormous success from returning consumers: 70% of its direct-to-consumer sales came from existing customers.

“E.l.f. has grown this past quarter [by] 36%, and with that $160 million [Rhode] are driving a significant portion of that overall growth,” Vlahos says, adding that Rhode has benefitted from E.l.f.’s expertise to streamline its supply chain, building out seven global facilities to serve retail and direct to consumer.

The brand has continued releasing a steady cadence of limited-edition exclusive collections to keep customers coming back. “Our largest DTC waitlist in our history was around the summer collection. We had over 700,000 people sign up,” Vlahos says.

Many celebrity-led brands like Selena Gomez’s Rare Beauty have seen success in recent years. But some that once flew high, like Rihanna’s Fenty, are losing momentum. Though increased retail presence in more territories is a quick way to expand the business, once a brand hits those ceilings, it can be difficult to keep sales momentum going. Vlahos says Rhode will stay the course by keeping brand offerings tightly edited, and surprising and delighting consumers to keep them coming back.

“A lot of times when you go into retail, the DTC business starts to stagnate,” he says. “What’s great about our business is that we continue to make sure that there’s a reason to come visit our DTC business.”

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