China warns other countries, US companies seek clarity #JapanFinance

One of the biggest growth stories in cosmetics since the pandemic has been the rise of e.l.f. Beauty (ELF).

But that story may be put on hold as the US narrows its trade war to primarily focus on China. While the top exporters of cosmetics and skincare are South Korea and France, which now face a 10% tariff rate, e.l.f. has relied on sourcing from China to keep prices low for its value-oriented beauty offerings.

In a company presentation in December 2024, e.l.f. CFO Mandy Fields said that the company has been working to diversify its supply chain but that about 80% of the company’s products come from China. Those imports are now subject to a 245% tariff rate.

Over the past year, e.l.f. stock has crashed 68%. And executives at rival beauty giant L’Oréal (OR.PA) see an opportunity to grab market share back from e.l.f.

“What is true is that, in the world of indie brands, very clearly, … many of them … have been relying a lot on China,” L’Oréal CEO Nicolas Hieronimus said on the company’s earnings call. “If I take one of my favorite brands, which is NYX Professional Makeup, over the last couple of years, we’ve really worked at reducing the exposure of NYX to Chinese imported products. I think now it’s around 20%, which is not nothing, but it’s only 20%. And we know that some of our very direct competitors are closer to 80%. So at some point, … [if] the tariffs against China are confirmed and stand, it will indeed benefit some of our brands and makeup in particular.”