Shares closed down 57 percent, or $5.50, to $4.24, marking quite the fall from the beginning of the year when they stood at around $30.
The Santa Barbara, California-based company issued revised guidance after the market closed Tuesday for the 2022 fiscal year, reflecting a slowdown in sales momentum that it attributed to macroeconomic pressures, increased competition in the bond-building space including discounting, and customers choosing to reduce weeks of supply on hand amid an uncertain economic backdrop.
As a result, it’s now expecting net sales between $704 million and $711 million in 2022, down from its prior forecast of between $796 million and $826 million. Adjusted EBITDA is expected to come in at between $425 million and $431 million, compared with $504 million to $526 million.
“We are disappointed to lower our fiscal 2022 guidance. As an agile business, we have already identified and put actions in place to accelerate demand,” said JuE Wong, Olaplex’s president and chief executive officer.
“We remain focused on executing our long-term growth strategy and are confident that our competitive advantages: our powerful brand, patent-protected science-based technology, proven innovation model, strong community of stylists and end-consumers, and synergistic omnichannel model, have us well positioned to navigate during this dynamic period and to be powerfully positioned in the future,” she added.
Olaplex also released unaudited figures for the third quarter, revealing net sales of approximately $176.5 million, up 9.2 percent from a year earlier. Within that, professional declined 16 percent, specialty retail increased 60 percent and direct-to-consumer declined 3 percent.
At the same time, the company said Tiffany Walden is stepping down from her role as chief operating officer and moving into a longtime advisory role, a decision that is understood to be for personal reasons. Walden was an early Olaplex employee.
Wall Street responses to the news were mixed. Joanna Kim, an analyst at Cowan, said: “We believe the slowdown in sales will likely extend into [the second half of 2023], and near-term pressure from competition [and] macro pressure could keep the stock at bay. However, expectations will likely reset [and] we remain positive about OLPX’s [long-term] opportunities.”
Jefferies downgraded Olaplex to “hold,” with analyst Ashley Helgans noting that “growth has peaked” and the firm sees “potential for more” downward revisions.
Raymond James’ Olivia Tong also downgraded shares of Oaplex to “market perform.”
“The more troubling driver of the outlook reset is increasing competition. A number of brands have now entered the hair repair market, and Olaplex has so far chosen to promote with less intensity relative to peers,” she said. “Still, we continue to believe the prestige haircare category is one of the fastest growing categories in Beauty with OLPX capable of reaccelerating its growth in the mid-term behind management’s initiatives already in place today.”