The hits keep coming for Olaplex.
In an earnings call Tuesday, the hair care company announced it expects full year 2023 revenue between $563 million and $634 million, an anticipated drop of 15 percent from 2022. Those numbers fall short of analyst predictions of $731 million; shares sank as much as 20 percent on Tuesday.
“We are disappointed. This is not something we wanted to happen,” CEO JuE Wong told BoF. “In disappointment, there has to be lessons learned, we don’t get an A for effort, we get an A for results.”
Olaplex’s 2022 net sales fell 17.7 percent to $704.3 million from the year prior. Its fourth quarter net sales decreased 21 percent to $130 million. In the same quarter, professional sales (to salons) were down 4 percent to $54.9 million, while direct-to-consumer sales declined 13.2 percent to $43.2 million and specialty retail fell 45.3 percent to $32.6 million.
The company expects impact from inventory rebalancing at professional and specialty retail — which it began in October 2022 — to lower 2023′s first quarter net sales by $25 million.
Wong called 2023 a “reset year” for the brand, which has struggled with negative press, sagging sales and increased competition in the expanding hair bond-building category from new entrants like K18 as well as legacy players.
Olaplex is battling a deluge of headlines around its products’ efficacy. A group of 28 customers in California sued the company on Feb. 9, saying they suffered hair loss and damage after using the brand’s products. Chief executive JuE Wong called the allegations misinformation, said the lawsuit was “frivolous” and promised investors Olaplex would go on the defence and act faster in the face of attacks on the brand. The suit comes after the company came under fire in early 2022 for the inclusion of lilial, an ingredient that has been linked to fertility issues, in its products. Olaplex stopped using lilial in 2021, but TikTok creators questioned whether the brand was safe, and Olaplex was sued in Canada for not disclosing the ingredient’s health risks.
Wong chalked up much of the brand’s disappointing performance to its lack of investment in marketing and education over the past year. Olaplex expects to increase its full-year marketing investment from $40 million in 2022 to $70 million in 2023.
A highly promotional and uncertain macroeconomic environment, have made Olaplex’s situation more challenging, too, said Wong, as the company rarely discounts products. Olaplex’s pricing strategy won’t shift, instead, the company will double down on its sampling program, and specifically push its premiere, patented product, No. 3 bond repairing treatment, in its marketing.
“Our brand is still very strong. The fundamentals of the brand are still right there to see … especially with our patented technology,” said Wong on the company’s earnings call.
