ELF Accused of Inflating Revenue and Profit 

ELF Beauty faces a class action lawsuit, accusing the brand of inflating revenue, profits and inventory figures in its financial reports. 

The case—Rottman v. E.l.f. Beauty, inc. et al—was filed on March 6 following a November 2024 report by investment research firm Muddy Waters.

ELF Beauty recorded a $36.9 million increase in inventory in Q2 FY24. The company attributed changes to its sourcing practices.  The 48-page report by Muddy Waters claimed ELF’s reported inventory levels were not equivalent to its revenue figures. According to the report, ELF Beauty “materially inflated” its inventory to account for unreceived revenue. ELF Beauty refuted the claims, stating that Muddy Waters had relied on “incomplete data and flawed assumptions” and had omitted key context.

The short seller estimated that ELF overstated its revenue by between $135 million and $190 million.

Having filed a confidentiality request with US Customs and Border Protection in early 2024, a significant portion of the brand’s important data was not publicly available. 

The plaintiffs seek to recover losses for investors who were negatively affected by the alleged misrepresentation. The class action lawsuit includes investors who purchased shares between November 1, 2023 and November 19, 2024. According to the law firms involved in the case, investors have until May 5, 2025, to request appointment as lead plaintiff in the case.