Olaplex Braces for Inventory, Economic Issues
● The hair care company expects sales to wane in 2023.
After years of growth, Olaplex is projecting a slowdown in 2023.
For 2022, the company's net sales hit $704.3 million, a 15.4 percent increase in the U.S. and 20.9 percent internationally. The professional channel grew 16 percent to $300.5 million; specialty retail jumped 33.9 percent to $235.3 million; and direct-toconsumer rose 3 percent to $168.5 million.
The results are in line with the company's guidance for 2022. Olaplex anticipated net sales of between $704 million and $711 million, a forecast which then caused its share price to slide.
The year's net income was $244 million, and diluted earnings per share were $0.35 for the year. Adjusted earnings before income, taxes, depreciation and amortization were $429 million, on the upper end of what the company forecast.
Though performance for the year met expectations, momentum slowed in the fourth quarter. Net sales for that period were only $130.7 million, down 18 percent in the U.S. Each channel — professional, direct-to-consumer and specialty retail — saw declines. That was due, at least in part, to inventory rebalancing, the company said.
Olaplex expects between $563 million and $634 million for 2023 sales — a 15 percent year-over-year decline. Those estimates reflect macroeconomic pressures as well as inventory issues, among other factors. Olaplex has also faced a lawsuit from consumers alleging the products have damaged their hair, and negative media attention around the safety of its products.
“It is very difficult to pin on one thing, there's [economic pressures] — beauty is resilient but not immune. There are promotions, and there is increased competition, which is healthy because it elevates the awareness of the category.
Yes, the lawsuit is there. But we see them as ebbs and flows because it's the headline of the moment,” said JuE Wong, Olaplex's chief executive officer.
Wong's rebound strategy includes significant investments in sales and marketing, including more coverage in-store. In October, the brand piloted training consultants in-store with 75 doors. “We know that works, so we're scaling it to 400 doors,” Wong said.
Education is a priority. “We grew so fast, we grew 112 percent from 2020 to 2021, and when you double your growth, you're getting all these new customers who may or may not know how to use a product properly. That's incumbent on us.”
Despite the headwinds, Wong is optimistic. “Consumers are not just looking at the dollar value, they're wondering ‘what's in it for me,' and about performance. Most shampoos will tell you to double-wash, but we advise to only do a single wash [with Olaplex shampoo]. Imagine what kind of value that is in terms of performance and longevity. We want to be able to talk about all of those equities in the brand,” she said.
Olaplex expects a big dip in sales to come imminently: The company released guidance for the first quarter, when it expects sales to fall 41 percent. The second half of 2023 will get a boost from new products and ramped up distribution, as well as heightened consumer demand, the company said.