Olaplex and Ulta Beauty reported fourth-quarter and year-end sales last week, with both setting records for growth.
Despite economic pressures related to inflation, the onset of Covid-19 Omicron variant and ongoing supply chain issues, both businesses were able to support the idea that the beauty industry is back in full swing and stronger than ever. As a historically recession-proof category, the resilience comes with little surprise, yet both companies also demonstrated just how much more room there is for added sales growth.
Glossy broke down the highlights of each earnings call. For Olalex, that included new levels of customer acquisition and upsell, alongside sales growth in Sephora and internationally. Meanwhile, Ulta Beauty reported a boost in loyalty members, as well as big retail and digital plans for 2022.
Olaplex Holdings Inc.
Olaplex has continued to leapfrog in quarterly growth since its public market debut in Sept. 2021, according to its fourth-quarter and fiscal-year 2021 financial results shared on March 8.
According to the earnings report, net sales for the year increased 112% to $598.4 million year-over-year, with all three of its sales channels reporting significant growth year-over-year. Its professional channel increased sales by 66% to $259 million, or 43% of net sales. Specialty retail sales grew 247% to $176 million, or 29% of net sales. And direct-to-consumer sales rose 117% to $163 million, or 27% of net sales.
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Olaplex has 11 products and more than 100 patents for existing and new technologies. JuE Wong, CEO of Olaplex, said in an interview with Glossy that Olaplex’s cadence of new products is only 2-3 every year, to keep new products to only 7-10% of total net shipments to retail partners. Instead, the strategy is to focus on marketing its core assortment of eight products, including the No.3 hair perfector, shampoo and conditioner. The earnings report also revealed that, in the last 12 months, Olaplex experienced a 25% increase in new customers and a 20% increase in purchases by existing customers.
“The whole idea is not to make you use more and more products. It is to let you have the ability to customize and personalize your regimen,” said Wong.
Olaplex has a similarly disciplined strategy with its retail partners Sephora and Ulta Beauty. Olaplex’s penetration at Sephora moved from 9% to 12% year-over-year. Olaplex is in all U.S. Sephora’s stores and will double its Sephora Europe store count in 2022. In addition, Olaplex will expand its Sephora-at-Kohl’s shop-in-shop store count from 200 to 650 in 2022. Additionally, Olaplex expanded to all Ulta Beauty doors in January, and 25% of Ulta Beauty’s back bar hair services use Olaplex as an additive treatment.
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The hair-care brand is also deepening its international operations. International sales increased 91% for the full fiscal year 2021 compared to 2020, with 40% of sales coming from outside the U.S. Olaplex is in the early stages of expanding into China through cross-border e-commerce platform TMall Global. During Singles’ Day promotions between Oct. 20, 2021 and Nov.11, 2021, Olaplex was the No. 1 hair-care brand in sales.
Olaplex recently made headlines concerning a fragrance ingredient called lilial. In Sept. 2020, the European Union’s safety regulators labeled lilial as “reprotoxic,” which is harmful to fertility and fetal development, and gave a March 2022 deadline for phasing out the ingredient in all products. The company stopped selling lilial products in January, but that did not stop a viral TikTok video from claiming Europe and the U.K. were banning Olaplex.
“Social media is a double-edged sword. It can build you up, but it can also disseminate false information,” Wong said. “We believe we controlled the messaging well; our retailers and distributors [said we] got ahead of this. Subsequently, we saw mainstream press talking about Olaplex, and it turned into positive messaging for us.”
Ulta Beauty Inc.
Ulta Beauty delivered record fourth-quarter financial results on March 10. That was despite Covid-19 and winter weather disruptions. Ulta Beauty’s net sales increased 24% to $2.7 billion in the fourth quarter, and the company reported record sales of $8.6 billion for the fiscal year 2021. All major beauty categories delivered double-digit comparable growth, compared to the fourth quarter of the fiscal year 2020. Ulta Beauty’s services business also increased in the quarter by more than 30% year-over-year, driven primarily by an increase in transactions. Salon capacity expanded to 100% during the quarter in all Ulta Beauty salons, and beauty services were relaunched in 130 locations.
Dave Kimbell, CEO of Ulta Beauty, called out four brands for driving excitement across Ulta Beautys merchandising, during the earnings call. The brands, which all launched at the retailer in January, were Olaplex, N°1 De Chanel, Supergoop and Billie Eilish’s fragrance. Additionally, Ulta Beauty launched The Wellness Shop in the fourth quarter. The cross-category platform for self-care products for the mind, body and spirit lives on Ulta.com and in more than 450 stores. During the fourth quarter, buy-online, pick-up in-store sales increased 20% to account for 17% of e-commerce sales, a 2% year-over-year increase. BOPIS is available in about 200 stores.
Notably, Ulta Beauty’s Ultimate Rewards members now sit at a record 37 million, a 13% increase from 2020. Kimbell said that Ulta Beauty worked with Target to connect the retailers’ two independent loyalty programs and make it easy for guests to link their accounts. More than 1 million members have linked their Target and Ulta Beauty rewards accounts.
Despite the chaos of inflation, political and geographical events, and the ongoing Covid-19 pandemic, Ulta Beauty is bullish on beauty precisely because of its mass-prestige pricing and recent merchandising additions.
“The category is healthy. It is growing. It’s emotionally important and connected to our consumers,” Kimbell shared on the fourth-quarter earnings call. “The fact that we are across all price points, all categories, mass, prestige, we are able to adjust and reflect evolving consumer needs as the world around us changes.”
Kimbell also said on the call that Ulta Beauty intends to execute several new brick-and-mortar and digital strategies during the fiscal year 2022, which runs between the end of January 2022 and the end of January 2023. Plans include piloting a new in-store experience with a layout and flow that reflects “key merchandising strategies” and consolidates guest services in a central location. It will also test a small store format with an “optimized assortment and service offering in a handful of small markets.” There are also plans to increase marketing to include more “action-based programming that addresses the needs of key audiences.” Plus, Ulta Beauty will expand livestreaming programming and social selling, increasingly use data and analytics to add more personalization to communications, and launch a retail media network called UB Media.
