E.l.f. Beauty Inc’s (NYSE:ELF) stock collapse over the past two days didn’t just smudge its own valuation, it also cast a shadow over several consumer and retail ETFs exposed to high-multiple, tariff-sensitive names. On Wednesday, ELF crashed 29%, and Thursday is going even worse for the stock, which is down 36% at the time of writing. Funds like the iShares U.S. Consumer Goods ETF (NYSE:IYK), VanEck Retail ETF (NASDAQ:RTH), and SPDR S&P Retail ETF (NYSE:XRT) all hold companies in similar product categories or supply chains, leaving them vulnerable to the same profit pressures now battering E.l.f.
The IYK ETF, which counts Procter & Gamble Co (NYSE:PG) and Estee Lauder Companies Inc (NYSE:EL) among its top holdings, has been a quiet beneficiary of post-pandemic consumer resilience. But with E.l.f. warning that tariffs have slashed its margins and earnings guidance, even defensive consumer names could start to lose their shine. IYK has inched down on Thursday.
The RTH ETF, home to retailers like Amazon.com Inc (NASDAQ:AMZN) and Costco Wholesale Corp (NASDAQ:COST), also includes companies that depend heavily on imported goods. In the meantime, the equal-weighted XRT ETF, often a barometer for middle-America spending trends, could see pressure if inflation and tariffs combine to dull consumer enthusiasm for discretionary buys. RTH and XRT are down 1.2% and 3%, respectively, on Thursday.
Tariffs And Margins: The New Beauty Blunder
E.l.f. Beauty, which sources nearly all of its products from China, reported a net income that dropped 84% in the latest quarter after new tariffs from President Donald Trump drove up costs. The company’s gross margin declined 1.65 percentage points, leading to a $1 price hike across its products in August. CEO Tarang Amin said the quarter bore the brunt of the tariff headwinds, but that the impact should “moderate” in the second half.
For ETF investors, that’s little comfort. E.l.f.’s tariff woes highlight a broader vulnerability: many “Made in America” consumer brands rely on global supply chains. If tariffs persist or expand, ETFs with exposure to consumer goods and retail sectors could see earnings revisions ripple across portfolios.
Valuations Still Priced For Perfection
Even after its steep selloff, E.l.f. trades at around 70 times forward 12 months earnings, according to Benzinga Pro, a valuation that might make sense for a software startup, not a cosmetics maker battling margin compression. Analysts at TD Cowen, UBS, and Piper Sandler have cut price targets and ratings, warning that core business growth is slowing even as Rhode, its Hailey Bieber-backed brand, shines.
To ETF managers, the episode is a reminder that headline growth stories can turn into portfolio blemishes all too quickly. With consumer ETFs such as IYK and RTH heavily tilted toward companies with premium valuations, investors might want to check if exposure still looks as flawless as the packaging.
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