e.l.f Beauty, Inc. (ELF) Securities Class Action Lawsuit Update: [April 4, 2025]

Introduction  

Elf Beauty manufactures and sells affordable cosmetics online. Elf’s low price point depends, in part, on maintaining only enough inventory to meet demand.   

From November 2023 to November 2024, Elf published financial results consistently showing over 70% sales growth.  At the same time, the Company reported rising inventory levels. Elf’s CFO attributed the rising inventory levels to increased customer demand and called the inventory levels “appropriate.” 

However, in November 2024, a shortseller report Elf reported inflated revenue for the previous three quarters. The report also revealed Elf’s management hadn’t intended for the inventory increase and knew the increase imperiled Elf’s revenue trajectory. As a result, the Company reported profit revenue in its earnings reports for the previous quarters. 

Investor confidence was shook due to the news and Elf’s share price dropped.  

e.l.f. Beauty, Inc. (ELF) Securities Fraud Class Action Case Details  

Rottman v. E.L.F. Beauty, Inc., et al 4:25-cv-02316  

U.S. District Court, Northern District of California 

Filed on March 6, 2025  

e.l.f. Beauty, Inc. (ELF) Company Profile  

Elf provides cosmetics and beauty products under various brand names, including e.l.f. cosmetics, e.l.f. Skin, Well People, Naturium, and Keys Soulcare. The Company sells products online through its own Web site and other e-commerce web sites.   

Elf’s brands are priced more affordably than many other comestic brands, with $6 average price point (versus a $9 average price point for mass cosmetics nationally). Its brands appeal to value-conscious consumers.   

Elf’s low price point depends on a “scalable, asset-light supply chain” according to the Company. Elf sources many of its materials from China, which keeps supply costs low. Finally, Elf's low costs depends on tight inventory management and maintaining only enough inventory to meet demand. 

e.l.f. Beauty, Inc. (ELF) Lawsuit Class Period   

November 1, 2023 to November 19, 2024, inclusive.    

 The lawsuit aims to represent investors who purchased Elf securities during the specified class period.

e.l.f. Beauty, Inc. (ELF) Lawsuit Allegations  

From 2024 to 2024, Elf touted its revenue growth and solid financials.   

In November 2023, February 2024, May 2024, August 2024, and November 2024, Elf published press releases announcing its quarterly financial results. In each of those press releases, Elf boasted strong sales growth of between 70% to 85%.   

During the earnings call associated with those quarterly reports, Mandy Fields, Elf’s CEO, stated Elf was experiencing rising inventory levels. During each call throughout this period, Fields consistently commented that Elf’s inventory levels were rising. However, Fields attributed the rising inventory to “strong consumer demand” and claimed the inventory levels were appropriate. For instance, during the November 2023 earnings call, Fields said the inventory levels were “in line with our expectations.” During the February 2024 earnings call, Fields said Elf had “the appropriate levels of inventory.”   Similarly, in May 2024, the Company filed its Q4-24 financial results, in which the Elf reported “[n]et sales increased 71%.” Yet, during the associated earnings call, Fields again reported “we continue to build back our inventory levels to support strong consumer demand.”   

The Truth Emerges  

On November 20, 2024, shortseller Muddy Waters Research published a report entitled “e.l.f. Beauty, Inc. A Revenue and Inventory Mystery” (the “Muddy Waters Report”). The Report alleged Elf overstated its revenue for at least the three quarters preceding the report. Further, the Report alleged in Q2-24, Elf’s management realized the Company’s inventory had ballooned, which imperiled Elf’s revenue trajectory. As a result, Elf began reporting materially false revenue and profits “for cash that [had] not really come in," to maintain investor confidence.

Market Reaction  

Investors reacted negatively to this news and Elf’s stock dropped 2.23% on the day of the Report’s release. Since the Muddy Waters Report’s publication to March 2025, Elf’s shares have lost almost half their value.  

Next Steps  

• Submissions for lead plaintiff are due May 5, 2025. 

• The Court will issue its order for lead plaintiff and counsel in the weeks after submissions are due.    

• The Court will then consider motion for class certification.

• The Court may later consider a Motion to Dismiss.