e.l.f. Beauty is facing a class action lawsuit following allegations that it inflated revenue, profits and inventory figures in its financial reports.
Filed on 6 March, the case Rottman v. e.l.f. Beauty, Inc. et al, accuses the US beauty brand, CEO Tarang Amin and CFO Mandy Fields of misrepresenting financial performance over multiple quarters.
The lawsuit follows a report published in November 2024 by investment research firm Muddy Waters, which claimed that e.l.f. Beauty’s reported inventory levels did not align with its revenue figures.
The class action includes investors who purchased shares between 1 November 2023 and 19 November 2024.
“We believe the allegations are meritless and look forward to establishing that through the legal process,” an e.l.f. Beauty spokesperson told The Business of Fashion in response to the lawsuit.
Muddy Waters’ 48-page report alleged that e.l.f. Beauty had “materially inflated” its inventory to account for revenue that had not been received.
It pointed to a US$36.9m increase in inventory reported in Q2 FY24, which the colour cosmetics brand attributed to changes in its sourcing practices.
The report claimed that this explanation was misleading and that the company had instead manipulated its financials to mask slowing sales.
The short seller estimated that e.l.f. had overstated its revenue by between $135m and $190m.
e.l.f. Beauty strongly refuted the claims at the time, stating that Muddy Waters had relied on “incomplete data and flawed assumptions” and had omitted key context.
The brand also noted that it had filed a confidentiality request with US Customs and Border Protection in early 2024, meaning that a significant portion of its import data was not publicly available.
Despite the controversy, e.l.f. Beauty’s financial results have continued to show strong growth.
The company reported a 40% increase in net sales for its 2025 fiscal year to date, although it acknowledged that consumption was “softer than expected”.
Following news of the lawsuit, e.l.f.'s share price fluctuated, rising from $64.42 on 6 March to $69.63 on 7 March.
The class-action lawsuit seeks to recover losses for investors who were negatively affected by the alleged misrepresentation.
Law firms involved in the case have advised investors they have until 5 May 2025 to request appointment as lead plaintiff in the case.
e.l.f. Beauty has not issued any further comments beyond its initial statement rejecting the claims.
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