The acquisition opens up Elf to premium customers and potential gains in market share and earnings.

Elf Beauty (ELF) on Wednesday said it is buying Hailey Bieber's cosmetics company, Rhode, for up to $1 billion, marking the affordable beauty brand's entry into the premium segment.

Elf Beauty will pay Rhode's shareholders $800 million in cash and stock and, potentially, another $200 million after certain performance milestones.

The model and wife of pop star Justin Bieber, Hailey Bieber, started Rhone in 2022. The brand, which sells through its website and pop-up stores, has gained a significant following on social media, leveraging Hailey Bieber's popularity.

For Elf, the deal presents an opportunity to target a new set of consumers when its mass-market audiences face strained budgets.

"Rhode further diversifies our portfolio with a fast-growing brand that makes the best of prestige accessible," Elf CEO Tarang Amin said in a statement.

Elf, short for eyes, lips, and face, offers affordable beauty products at retail chains such as Walmart (WMT), Ulta Beauty (ULTA), and Target (TGT). Some of its products are marketed as vegan and cruelty-free.

Hailey Bieber will continue her founder role and act as a "strategic advisor" after the deal closes, expected in the second quarter of fiscal 2026.

On Stocktwits, the retail sentiment climbed higher in the 'extremely bearish category."

ELF sentiment and message volume as of May 28 | Source: Stocktwits

A user said, "ELF's supply chain combined with Rhode's reach could turn out be something huge."

On Wednesday, Elf reported higher-than-expected sales for its fiscal fourth quarter but did not offer investors a forecast for fiscal 2026.

Elf shares are down 28% this year.

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