e.l.f. Beauty Stock Slides As Muddy Waters Founder Reportedly Discusses Short Position: Retail Turns Anxious
Block was speaking at the Sohn Conference in London where he said that elf Beaty “seems to sell a product it does not have,” according to a Business Insider report.
FollowShares of elf Beauty ($ELF) slid nearly 10% on Wednesday noon after short-seller Carson Block, founder of Muddy Waters Research, reportedly said he is shorting the stock.
Block was speaking at the Sohn Conference in London where he said that elf Beaty “seems to sell a product it does not have,” according to a Business Insider report.
Based on import data and referencing conversations with E.L.F.'s global shipping partners, the short-seller also claimed that the company has materially overstated revenue over the past three quarters — possibly by approximately $135 million to $190 million.
According to Block’s report, the firm believes that at the end of last year "ELF management realized its growth narrative was in trouble as its inventory built.”
"It appears that ELF then began reporting inflated revenue and profits," said the report. "Its reported inventory also appears materially inflated as a result — i.e., to account for cash that has not really come in."
Following the development, elf Beauty became the fourth-most trending ticker on Stocktwits. Retail sentiment on the platform dipped into the ‘extremely bearish’ territory (11/100) from ‘bullish’ a day ago.
elf Beauty Sentiment Meter and Message Volume as of 12:27 p.m. ET on Nov. 20, 2024 | Source: Stocktwits
Retail chatter, however, remains mixed with some users taking a bearish stance while others still holding onto their bullish views.
elf Beauty was in the news lately after the firm posted a strong second-quarter earnings earlier this month.
The firm’s net sales increased 40% to $301.1 million, primarily driven by strength in both the retailer and e-commerce channels.
The company also raised its fiscal 2025 outlook, now expecting net sales in the range of $1.315 billion - $1.335 billion compared to an earlier guidance of $1.28 billion - $1.30 billion. Adjusted diluted earnings per share (EPS) is expected to come in at $3.47-$3.53 versus an earlier expectation of $3.36-$3.41.
Despite the strong earnings and revised outlook, shares of elf Beauty are down over 21% on a year-to-date basis.
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