Elf Beauty says short-seller Muddy Waters' claims are 'without merit'
Adds Muddy Waters' statement
Nov 21 (Reuters) -Elf Beauty ELF.N said on Thursday allegations by short-seller Muddy Waters about the beauty company overstating its revenue and inventory numbers were "without merit".
Muddy Waters has taken a short position in Elf, claiming that the company possibly overstated its revenue by as much as $190 million over the past three years and inflated its inventory numbers to cover for insufficient sales, the hedge fund's founder CarsonBlock said on Wednesday at a conference in London.
Shares of Elf rose 6%, a day after fallingas much as 16% and closing2.2% lower. The stock nearly quadrupled from 2023 to hit a record high in March.
"Muddy Waters' latest report is an attempt by a noted short-seller to negatively impact Elf Beauty's share price for its own benefit and at the expense of all other Elf Beauty shareholders, and Muddy Waters' allegations are without merit," Elf said in a statement.
Elf raised its forecasts for annual sales and profit earlier in November, becoming the only company performing well in a weak beauty market where legacy cosmetics brands such as Estee Lauder EL.N and L'Oreal OREP.PA have been facing slowing demand.
The beauty company said on Thursday that for competitive reasons, it had filed a request for confidentiality with U.S. Customs and Border Protection in early 2024, regarding customsimport data.
"Therefore, import data available to the public after February 6, 2024, does not include a substantial majority of our actual U.S. imports," Elf said.
Following talks with Elf's Chinese suppliers and a former manager in China, Muddy Waters said it had concluded thatthe way theinventory numbers had been accounted for was"categorically false".
The company'sresponse "failed to address our finding that Elf's inventory increase could not have been due to a sourcing process change", Block said.
Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Devika Syamnath
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