- Activist investor Marathon Partners wants to nominate three members to e.l.f. Beauty's board.
- The company's CEO Tarang Amin defended the company's recent track record.
- 2018 was a "real wake up call" and it has recently showed five consecutive quartesr of sales growth.
Activist investor Marathon Partners is launching a new campaign against beauty products maker e.l.f. Beauty Inc (NYSE: ELF) and wants to nominate three directors to the eight-person board.
Marathon Partners has been an e.l.f. Beauty shareholder since 2018 when it owned around 5% of the entire company. The activist initially pushed e.l.f. Beauty to consider a sale of itself or refocus on its core operations.
Today Marathon’s stake stands at around 4% and was as high as 8% in the past.
The activist investor is likely frustrated with the stock’s performance since its first stake. The stock traded on several occasions above the $20 per share level in 2018. But the stock fell as low as $7.58 in 2020 but has since more than doubled in value.
CEO responds to Cramer
E.l.f. Beauty CEO Tarang Amin was a guest on CNBC’s “Mad Money” with Jim Cramer on Friday and said the company has been operating for 16 years in which it showed “very strong growth” in nearly every year. The notable exception took place in 2018 when its business declined by 2%.
But 2018 also served as a “real wake up call” and pushed management to rediscover how it can return to its roots, the CEO said. Management put in place a new strategic plan which helped generate year-over-year sales growth in each of the most recent five quarters. E.l.f. Beauty is also the only top-five brand beauty company actually gaining market share.
Digital disruptor at the core
E.l.f. Beauty credits its recent success to its commitment to remaining a core “digital disruptor” company, Amin said. A digital focus first strategy is truly paying off in what many call the “selfie generation” where young people feel the need to always look their best for selfies.
But more than just the selfie-takers, the older generation folks need to look good for the new reality where commerce is conducted more than over through Zoom and other video conferencing platforms.
CEO: Expansion Plans
Sales of beauty products contracted across the board and e.l.f. Beauty “was not immune” to the broader trend, the CEO said. But for the four week period ending in late May, the company noted an 11% consumption growth in a down category.
The company’s two biggest targets in Walmart Inc (NYSE: WMT) and Target Corporation (NYSE: TGT) are “both doing well” and the relationship remains strong. In fact, Walmart already said it will allocate more of its shelf space to e.l.f. Beauty products.
“We are the most productive brand that Walmart and Target carry and we need to keep it that way,” he said.