Olaplex Holdings Inc. Chief Executive Officer JuE Wong said the hair-care company will ramp up investments in the brand after failing to act quickly enough to stem a slowdown in demand and push back against consumer complaints.
(Bloomberg) — Olaplex Holdings Inc. Chief Executive Officer JuE Wong said the hair-care company will ramp up investments in the brand after failing to act quickly enough to stem a slowdown in demand and push back against consumer complaints.
On Tuesday, Olaplex said net revenue this year will be $563 million to $634 million, a 15% decrease from 2022 at the midpoint. The outlook was well below the average analyst estimate of $731 million.
Olaplex plans to add more staff to stores that sell its products, increase its marketing budget and boost communication with stylists, who play a key part in recommending the brand’s lineup. The Santa Barbara, California-based company is looking to counter “misconceptions” about its products, which have proliferated as Olaplex has expanded, Wong said.
“We can no longer take for granted that the consumer just understands,” Wong said in an interview. “We are aware that as the owners, it’s on us to make sure that we set the record straight in terms of what the products do.”
Olaplex warned late last year about slowing sales growth as competition with other brands heated up and inflation pressured consumers. Known for its “bond-building” line that seeks to repair damaged hair, the company is also fighting back against a lawsuit filed in early February alleging the company’s products cause hair loss and other issues. It denies the accusations.
It’s too early to quantify the lawsuit’s impact on Olaplex, Wong said, though a “lot of such kind of noise in the marketplace does hurt the brand.”
In a call with analysts, Wong said several macroeconomic factors have hurt the business. Professional stylists are buying fewer products and doing so less in advance as their clients extend the time between salon visits. Shoppers have been sensitive to higher prices, and Olaplex hasn’t done as many promotions as competitors.
Meanwhile, some professional and specialty retailers — the brand is available at Ulta and Sephora — have lowered inventory levels to adjust to those trends and as global supply chain constraints have eased.
Olaplex has mainly relied on stylists and social media to spread the word about its products since it was founded in 2014. Wong told analysts the company could have done better by, for example, hiring a chief marketing officer sooner than January 2022. It plans to increase its marketing budget to $70 million from $40 million in 2022, and it will be more proactive in countering “potential misinformation” about the brand.
“We are disappointed with this outlook and hold ourselves accountable for getting to this position and for improving the business,” she told analysts. Olaplex sees 2023 as a “reset year,” with Wong saying she still sees “significant long-term growth potential” for the business.
For the quarter ended Dec. 31, Olaplex said sales were $130.7 million, which trailed the $133 million analysts were expecting. Adjusted earnings of 7 cents a share beat estimates. In October, Olaplex sharply pulled back its outlook for the rest of 2022 given slower sales.
Olaplex shares fell almost 12% at 12:50 p.m. in New York, hitting their lowest level since October. The stock has declined 77% since the company’s initial-public offering in September 2021.
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