Olaplex Holdings Inc recently released its fourth-quarter and fiscal year 2023 results, revealing a challenging period for the company. Net sales took a significant hit, plummeting by 34.9% to $458.3 million compared to the previous year. The decline was more pronounced in the United States, with a 47.8% decrease in net sales, while international sales saw an 18.3% decrease.
The fourth quarter of 2023 also saw declines, with net sales decreasing by 14.5% to $111.7 million. Sales across all channels experienced a drop, with the professional channel being the most affected, seeing a decrease of 22.7%. Net income for the quarter decreased by 58.1%.
Amanda Baldwin, who took over as Olaplex’s new CEO in mid-December 2023, shared her strategy to bring the company back to growth during the fourth-quarter earnings call on Feb. 29. Baldwin acknowledged the company’s challenging 18 months and identified the causes of its slowdown as rapid growth, execution errors, insufficient investment in resources to support the professional stylist community, and increasing competition.
To revive the brand, Baldwin outlined her comeback strategy, which includes a renewed focus on the professional stylist channel, investments in elevating brand equity, and data-driven decision-making. She emphasized the need to engage with stylists more effectively through team salon visits, trade show presentations, account management, and educational tools. The professional channel experienced a significant 40.1% sales decrease in 2023, prompting the company to prioritize improvement in this area.
Apart from increased competition, Olaplex faced additional challenges such as a lawsuit and viral TikTok videos alleging hair loss caused by their products. These factors contributed to a 15% decrease in direct-to-consumer (DTC) sales and a 42.6% decline in specialty retail sales for 2023.
Baldwin revealed plans to enhance product development and marketing efforts to cultivate “true brand love.” This involves leveraging data to calculate return on investment (ROI) in marketing, upgrading visual merchandising and sampling, and enhancing paid media at the retailer partner level. Distribution also plays a crucial role in Olaplex’s strategy to boost brand equity. The company aims to combat product diversion by closing accounts where evidence of distributors as the source of diverted products is found, particularly on online platforms like TikTok Shop.
Olaplex has provided guidance for fiscal year 2024, indicating a potential stabilization of sales. The company expects net sales to range between $435 million and $463 million. Adjusted net income is projected to fall within the range of $87 million to $100 million, while adjusted EBITDA is anticipated to be in the range of $143 million to $159 million.
The company’s guidance takes into account expectations regarding consumer demand and strategic investments aimed at driving sell-through, enhancing foundational capabilities, and fostering a healthier brand. Management also anticipates a slight improvement in the adjusted gross profit margin. This improvement is attributed to the completion of measures taken to address excess inventory and the anticipated efficiencies resulting from an internal cost savings program.
