Olaplex shared its first quarter 2023 earnings on Tuesday, kicking off a “reset” year after the company decreased its 2022 earnings forecast in Oct. 2022.
Net sales for the quarter were $113.8 million, down 38.9% year-over-year. Professional channel sales were $48.4 million, down 37.2% year-over-year, followed by specialty retail store sales at $34.9 million, down 45.8%. Direct-to-consumer sales were $30.5 million, down 31.9%. These results were within expectations of Olaplex’s earnings forecast. In an interview with Glossy, Olaplex CEO JuE Wong cautioned against looking at the company’s performance on a quarter-by-quarter basis. Righting the ship will take time, and the company does not want to chase short-term profits at the disadvantage of long-term sustainability, she said. The bond-building hair-care brand is experiencing a sales slump, brought on by a mix of competition from new bond-building brands, macroeconomic concerns and retailers having too much product. Olaplex’s stock price fell immediately following the earnings call on Tuesday, by 7-8%. At the time of this reporting, it was sitting at $3.70 per share.
According to the earnings call and press release, marketing accounted for $17 million in expenditures in the first quarter and will be $70 million for fiscal year 2023. In 2022, the company spent $40 million on marketing. Furthermore, Olaplex is launching a new full-funnel campaign at the end of May to not only amplify its scientific qualities, but also generate an emotional connection with professionals and consumers. The campaign will encompass digital, social and OOH channels. Wong declined to share creative aspects of the campaign.
Wong is also investing in external public relations, including through Olaplex’s own social channels and a new page on the brand’s website dedicated to hair health education, to combat misperceptions about the brand’s ingredients and how they work on hair. Olaplex has also formed an advisory board of medical and scientific experts, which will work with Olaplex’s team on products and education.
Olaplex is also upping its sampling program, by distributing 10 million samples in 2023. Sampling will take place through Olaplex.com orders; Sephora’s buy-online, pick-up in-store program, for those who did not purchase hair care; and at Ulta Beauty, for customers partaking in in-salon Olaplex services. The latter will focus on Olaplex’s No. 3 product. The brand will also distribute sampling in European-based Douglas and Sephora locations, a first for the brand. Olaplex’s net sales decreased 60.3% in the United States but increased 0.1% internationally. In 2023, it’s expanding into travel retail via Dufry in 12 U.K. airports, with additional countries set to be added later.
For the professional channel, Olaplex is getting set to refresh its educational assets for stylists, including with new curriculum that will enhance the professional website and app. And, in addition to beefing up its own field team, Olaplex is engaging with third-party field teams to reach 400 additional Sephora and Ulta Beauty retail stores. Currently, Olaplex has an 11% sales penetration in Sephora and a 15% sales penetration in the professional channel. According to Wong, Sephora has informed the brand that “best in class” brands have a 20-25% sales penetration and that there is, therefore, a significant runway for growth. For the professional channel, Olaplex is targeting chain and premium salons as new customers.
“The goal of this work is to better educate stylists and consumers about how to use our core products and reinforce the benefits of our products, with versatile usage [examples] and tips. [We also want to] introduce new claims and testimonials about the superiority we deliver,” said Wong on the Tuesday earnings call.
In the second half of 2023, Olaplex expects its net sales to grow, compared to the first half of 2023, due to new product introductions, additional distribution and improvements in customer demand based on the company’s efforts. Recent new products include a dry shampoo launched in January and an eyelash growth serum in March, which represented Olaplex’s first cross-category expansion. The lash serum, which does contain the brand’s proprietary bis-aminopropyl diglycol dimaleate, has seen positive sales performance, said Wong. She added that there are opportunities to use the hero ingredient in both skin care and nail care, due to the keratin compositions. Bis-aminopropyl diglycol dimaleate functions as a keratin bond repairer.
“We are already the No. 1 dry shampoo at Sephora, and we’ve been holding that position. It’s very encouraging because dry shampoo is also a mainstream segment. To capture the imagination of the consumers who not only want to try it, but replenish, is a step in the right direction,” said Wong. “Olaplex leads with science and technology. [If you ask me if] we are going to consider skin care, what we want to make sure is that, if we do anything in skin, it will be because we want to, not because we need to.”