Dive Brief:
- Calling 2023 “a reset year,” Olaplex Holdings, parent company of hair care brand Olaplex, projects a 36% drop in adjusted net income in 2023, according to the company’s latest earnings report.
- Additionally, the company is projecting net sales to fall about 15% for the full year and 41% in Q1. That includes a 28% sales drop in its DTC business and a 47% fall in specialty retail channels.
- For fiscal year 2022, net sales increased 17.7% year over year to $704.3 million, while fourth quarter net sales declined 21.5% to $130.7 million.
Dive Insight:
Olaplex attributes its projected Q1 2023 decline to inventory rebalancing at some professional and specialty retail customers, which is expected to lower net sales for the quarter by around $25 million.
Though the company anticipates Q2 will be better, Olaplex still predicts sales will be “down significantly” compared to last year because of lower consumer demand. However, in the second half of the year, the company thinks new product releases, distribution gains, and investments in sales and marketing will support better results.
“Our priorities in 2023 are to reset our base and invest in our core to provide a more powerful platform for growth,” JuE Wong, Olaplex’s CEO, said in a statement. “We are focused on increasing investments in sales, marketing and education, while continuing to bring to market efficacious products that professionals and consumers love and trust. We believe the actions we are taking along with our strength in product technology, R&D and community, combined with our strong cash flow generation, will enable us to increase our leadership position in prestige haircare and return the business to growth in the future."
Though the company plans on introducing new products, its current assortment is under scrutiny in a lawsuit. Filed earlier this month in California, the complaint of around 30 consumers alleges that the company’s products damaged their hair and scalps.
The lawsuit and projected sales drop follow the company’s IPO nearly two years ago. In September 2021, Olaplex filed to go public after generating $282.3 million in revenue in 2020 and $270 million in revenue in the first half of 2021. Founded in 2014, Olaplex at the time of its IPO filing had more than 100 patents on shampoos, bonding oils, hair treatments and more. DTC made up 24% of Olaplex’s sales in 2022, while professionals made up nearly 43% and specialty retail accounted for the remaining 33%.
The company faces competition from numerous direct-to-consumer brands. One of them, the DTC hair care brand K18, has grown its e-commerce and social media presence and expanded into wholesale by entering over 500 Sephora stores.
