E.l.f. Beauty, the cosmetic company that stands for eyes-lips-face and is ranked number two in Forbes most successful mid-cap stock list, is under pressure from allegations by Muddy Waters’ Carson Block that it has “materially overstated revenue” by about $135 million to approximately $190 million over the last three quarters.
On Wednesday, November 20, Muddy Waters announced it was short-selling its ELF stock holdings, claiming the company misrepresented inventory levels to inflate its revenue numbers. ELF stock dropped 15% during inter-day trading.
It was an attempt to disrupt ELF’s strength in the stock market. But consumers who buy e.l.f. Beauty don’t care about stock prices. They care about the products and how well they perform. The e.l.f. brand has that ineffable, unquantifiable “sticky” quality that pulls in customers of all ages and keeps them loyal to the brand.
In advertising, the company makes the most of the stickiness of its hero Power Grip Primer product, which will have a starring role in a new commercial to air during Macy’s Thanksgiving Day Parade featuring actors Joey King and Lucien Laviscount.
But it’s the stickiness of the brand that confounds stock analysts like Muddy Waters’ Block. E.l.f. Beauty has mastered the magic marketing formula that generated an astounding 38% compound annual growth over the last four years, from $283 million in fiscal 2020 to just over $1 billion in fiscal 2024.
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Disputing Claims
Following Muddy Waters’ report, e.l.f. Beauty shot back the next day, claiming the allegations were without merit and that it was fully confident in its financial statements.
“Muddy Waters’ latest report is an attempt by a noted short seller to negatively impact e.l.f. Beauty’s share price for its own benefit and at the expense of all other e.l.f. Beauty shareholders,” the company stated.
“Muddy Waters has made numerous inaccurate statements about e.l.f. Beauty and our business by relying upon incomplete data and flawed assumptions, omitting critical context, and presenting speculation as fact,” it continued.
ELF stock immediately recovered and then some, ending the week up 4% from where it started on Wednesday morning. Yet, e.l.f. Beauty’s performance is, in a word, unbelievable.
It’s racked up 23 consecutive quarters of growth and ended fiscal 2024 in March with revenues up 77% in a beauty industry that advanced 10% to $446 billion last year. But, according to McKinsey, last year’s industry growth came largely through price increases, not rising demand.
E.l.f. Beauty is hardly guilty on that score with an average price for its flagship e.l.f. brand at $9. And its product quality is right up there with more premium brands and without potentially harmful chemicals that can be found in other brands.
“We’re committed to making clean beauty accessible to every eye, lip and face,” said Kory Marchisotto, chief marketing officer for e.l.f. Beauty. “Premium quality at an extraordinary value is at the heart of e.l.f.’s superpowers, and we are continuously challenging ourselves to be at the forefront of innovation with our incredible prices.”
Yet great Products at great Prices only gets a brand halfway in the traditional 4Ps of marketing. It’s in Promotion and Placement where e.l.f. Beauty shines, plus the missing and most important P of all: People.
It has excelled in all 5P superpowers of marketing that has made the e.l.f. brand and the e.l.f. Beauty company a dominant force in the beauty industry.
E.l.f.’s Promotion Superpower
As one of the first digitally-native beauty brands at its founding in 2004, e.l.f. Beauty has years of experience honing its digital-first marketing strategies, many more years than the legacy major beauty brands. And it is always willing to try new things being unencumbered by conventional thinking that can hold other brands back.
Collaborations
It’s mastered the rules of engagement in social media and learned how to use collaborations to spike engagement with existing customers and bring in new ones, like the recent collaboration with the industry-leading dating-app Tinder or Stanley in a limited-edition full-size Quencher Tumbler alongside a matching mini-tumbler to hold its popular lip oil.
Humor Makes It Memorable
Invariably, e.l.f. delivers promotional messages with a touch of humor. An Oracle study found that 90% of consumers are more likely to remember funny ads, yet humor is a missed opportunity for most brands. Only about 20% of business leaders surveyed by Oracle said they use humor in their ads.
“E.l.f. lives at that intersection of entertainment, beauty and culture,” shared chief brand officer Laurie Lam. “We’re ‘elfing entertaining.’”
The company has even developed its own entertainment production division, called e.l.f. Made, that creates commercials and spins off entertainment, like “Get Ready With Music, The Album,” a soundtrack to makeup to. It also has a partnership with Amazon Alexa to deliver inspiring messages, beauty tips and music from Alicia Keyes to support its Keyes Soulcare brand.
Sports Cultural Connection
And the culture component is most evident in e.l.f.’s ties with sports. It partners with the Billie Jean King Cup to support women’s sports. It is one of the few beauty brands that has ventured into the Super Bowl with commercials and it is the first to sponsor an entry in the Indianapolis 500 with professional driver Katherine Legge.
Entertainment, beauty and culture come together in the “eyes. lips. face. fandom." commercial that will air in Macy’s Thanksgiving Day Parade. It’s a meet-the-parents moment for a couple portrayed by Joey King and Lucien Laviscount on the big game day. She arrives with her team’s colors painted on half her face while his parents are ardent fans of the opposing team.
The magic ingredient that ends up binding everyone together is the e.l.f. Power Grip Primer as his parents use it to get their game face on too.
“The premise is that there is so much focus on what separates us, so this commercial is about universality and the universal appeal of sports,” Marchisotto shared. “Sports fan or not, everyone can identify with the nervous moment of meeting the parents who might be different. This is about bringing people together and expressing their individuality and their passions.”
It’s a premise that would work perfectly for next year’s Super Bowl, so I asked. She said, “We aren’t ready to answer that, but we do our best work on a short time line.”
Place Superpower
At its founding, e.l.f. Beauty was sold exclusively online, but as it picked up steam in the market, it also picked up retail partners, starting with Target in 2005 then Walmart, CVS, Walgreen’s and Ulta came on board. Even some Sephora stores have added the brand to their range.
Following what has become standard practice for digitally-native brands, e.l.f. opened its own stores in 2013, eventually reaching 22 stores before CEO Tarang Amin called it quits in 2019 and closed them.
According to reports, Amin found its DTC channels drove far more traffic to the brand and by closing its stores, resources could be freed up to better support the brand’s retail partners.
The decision to close its stores raised eyebrows at the time but turned out to be the right one for the brand. Some 84% of net sales last year were made through its retail partners, with Target, Walmart and Ulta accounting for 25%, 17% and 16% respectively.
International Expansion
And now it’s turning to expanding its international presence – 85% of sales last year came from the U.S. with Canada and the U.K. its primary international markets.
E.l.f. Beauty just announced it is going bigger in the U.K. with more shelf space in Boots and Superdrug locations and in Germany, 1,600 Rossmann locations will now carry the brand. In Mexico select Sephora stores will add the line and it is gaining wider mass distribution in Australia, Italy, the Netherlands and the Nordic countries.
“We see immense potential to make significant impact internationally,” Amin said. Through the first six months of fiscal 2025, international sales have nearly doubled, from $61 million to $118 million.
That added to the company’s confidence to raise guidance from 20% to 22% revenue growth announced at the start of this fiscal year to between 28% to 30% in the most recent earnings call.
The company now expects revenues to reach $1.3 billion in fiscal 2025 and adjusted EBITDA in the $304 to $308 million range, up from $285 to $289 million at the start of the year.
People Superpower
Capping off e.l.f. Beauty’s superpowers are the people, both its own people and the people the company serves.
Amin was just named to Fortune’s 100 Most Powerful People In Business list, alongside Elon Musk, Jeff Bezos, Tim Cook, Bill Gates and Warren Buffet. That’s saying something for a leader who started as a marketing director at Proctor & Gamble in 1981 and never started a company.
Chief marketing officer Marchisotto put in years at Shisheido in prestige and its BareMinerals brand before joining e.l.f. in 2019.
Chief brand officer Lam served nearly 16 years with L’Oréal, taking on increasingly responsible positions in marketing, e-commerce, business development and strategic acquisitions before moving to e.l.f. in 2022. Clearly, e.l.f. benefited and the legacy giants lost in the process.
The company runs a tight ship with only 475 full-time employees. Employment firm Indeed reports a company of its $1 billion size typically employs between 1,500 to 2,000 people. And all 475 employees are focused on serving the ever-growing e.l.f. Beauty community.
“Our community fuels an endless pipeline of stories, ideas and innovation,” Lam said. “The origin story of e.l.f. is rooted in disruption and being close to the consumer with all their diversity. Our mission is to make the best of beauty accessible to every eye, lip, face and skin concern, which means we need to be reflective of those in the communities which we serve.”
Made To Stick
E.l.f. Beauty describes itself as “a different kind of company that disrupts norms, shapes culture and connects communities, committed to positivety, inclusivity and accessibility.” Its brands include e.l.f. Cosmetics, e.l.f. Skin, Keys Soulcare, Well People and Naturiam, and all are “led by purpose, driven by results.”
By consistently delivering results, authentically living up to its founding mission and ethical principles and developing strong customer bonds and lasting loyalty, e.l.f. has achieved the elite status of a sticky brand. Wall Street investors may be slow to catch on, but consumers surely are not.
See also:
ForbesE.l.f. Beauty Takes Judge Judy To The Super Bowl, After Spectacular Quarter With Sales Up 85%By Pamela N. DanzigerForbesColor Cosmetics Powerhouse E.l.f. Beauty Acquires Naturium, Broadening Reach Into SkincareBy Pamela N. DanzigerForbesHow Good Leaders Become Great By Never Leading AloneBy Keith Ferrazzi
