Olaplex Shares Tumble on Worse-Than-Expected Earnings
Cult hair care brand Olaplex’s shares slid as much as 25 percent in Tuesday morning trading after it cut forecasts as its second-quarter performance fell short of Wall Street’s expectations, but offset some of those losses later in the day.
The company, which went public through an initial public offering in 2021, is forecasting net sales in the range of $445 million to $465 million for fiscal-year 2023. This is approximately $144 million lower than its previous forecast.
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JuE Wong, Olaplex’s president and chief executive officer, said: “We have updated our assumptions for the remainder of the year and reduced our fiscal 2023 outlook. We are intently focused on stabilizing demand trends in the second half of 2023, while increasing and optimizing the mix of our marketing investments in support of this objective.”
For the second quarter ended June 30, net sales were $109.2 million, down 48.2 percent from a year earlier. Analysts polled by Factset had forecasted $130 million. Direct-to-consumer sales came in at $38.5 million, down 6.4 percent, and specialty retail sales were $29.8 million, 53.7 percent lower than in the prior-year period.
Net sales decreased 58.7 percent in the U.S. and 34 percent internationally.
Wong told WWD in an interview that Olaplex continues to be negatively impacted by competition, a more promotional environment and misinformation related to the brand. In particular, in a suit against Olaplex, several plaintiffs claimed they have sustained personal injuries to their hair and scalp including hair loss and damaged hair, something Wong vehemently denies.
“All of this has played a part in the slowdown in demand,” she said. “This doesn’t mean that we are not investing behind the brand. In spite of all these headwinds we still believe in investing behind our four key priorities: sales and marketing, supporting the pro and stylist community, education, PR.”
And during a call with investors, Wong highlighted the importance of working with the professional community, which is how customers are often first introduced to the brand.
“The professional community remains at the foundation of our brand and is core to maintaining our credibility in the category. We know it is critical to address and solve the issues we are facing in that channel by increasing our visibility and investing more to deepen engagement with stylists.”
Net income was $6.2 million and adjusted net income was $21.2 million for the quarter, as compared to $87.7 million and $98.8 million, respectively, during the same period in 2022.
Adjusted diluted EPS was 3 cents, as compared to 14 cents for the second quarter of 2022. Analysts had penciled in 5 cents, according to Factset.
Raymond James analyst Olivia Tong said: “Overall, Olaplex is experiencing challenges stabilizing its business as competitive products continue to enter the hair care category. Management acknowledges marketing initiatives were not effective enough to stabilize sales losses, with the updated guide now also assuming recent launches and distribution gains will also be a smaller contributor versus prior expectations.”
Olaplex’s stock closed down almost 10 percent to $3.23.
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