E.l.f. Beauty Fires Back At Muddy Waters Over Revenue Inflation Claims

E.l.f. Beauty, Inc. ELF shares are trading relatively flat on Thursday after the company issued a statement in response to a report from Muddy Waters Research.

Short seller Muddy Waters released a report Wednesday alleging that E.L.F. has overstated its revenue over the last three quarters by approximately $135 million to $190 million. Muddy Waters Research founder Carson Block revealed a new short position in E.l.f. Beauty at the Sohn Conference on Wednesday.

"We believe that in Q2 FY24, ELF management realized its growth narrative was in trouble as its inventory built. It appears that ELF then began reporting inflated revenue and profits," the short seller said.

According to the company, the short seller’s report aimed to negatively impact E.l.f. Beauty’s stock price.

E.l.f. Beauty rejected the allegations, calling them “without merit” and stating that Muddy Waters relied on incomplete data, flawed assumptions, and speculation.

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The beauty company pointed out that in early 2024, for competitive reasons, it filed a request with U.S. Customs and Border Protection to keep certain customs import data confidential.

This request resulted in a lack of public import data after Feb. 6, which Muddy Waters had used in its analysis. E.l.f. Beauty emphasized that the import data presented by Muddy Waters was not reflective of the company's actual U.S. imports.

Further, E.l.f. Beauty refuted Muddy Waters’ assertions by pointing to strong consumption data from Nielsen and Circana, which showed robust demand for its products. The company also highlighted its rigorous inventory control procedures and revenue recognition practices, which ensure accurate financial reporting.

In its statement, E.l.f. Beauty reiterated its confidence in its financials, citing its recent second-quarter fiscal 2025 results, which marked the 23rd consecutive quarter of net sales growth and market share gains. The company remains confident in its business model, strategy, and momentum in the competitive beauty industry.

Price Action: ELF shares were up 5.4% to $125.46 at last check Thursday.

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