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Olaplex’s Sales Growth Slows

In October, the hair care brand downgraded its full-year forecast.

Olaplex’s sales increased in the third quarter, but growth rates are slowing.

The hair care company’s net sales increased 9.2 percent to $176.5 million in the third quarter ended Sept. 30. Analysts polled by Factset had been expecting $176.2 million. Sales decreased 4.3 percent in the U.S., but were 27.8 percent higher internationally.

Specialty retail increased 60 percent to $74.2 million, professional declined 16 percent to $63 million and direct-to-consumer declined 2.6 percent to $39.3 million. In contrast, professional rose 58 percent last year, while d-to-c surged 87 percent.

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Net income increased 7.4 percent. Adjusted diluted earnings per share were 11 cents for third-quarter 2022, as compared to 11 cents for third-quarter 2021.

JuE Wong, Olaplex’s president and chief executive officer, said: “Our third-quarter performance was in line with the preliminary estimates provided in our business update in October 2022. In response to the moderating sales growth trends, we are taking actions that we believe will strengthen our forecasting capabilities and accelerate demand for Olaplex products.”

She added: “More broadly, we believe that the fundamental competitive advantages of our business remain intact and that we are well-positioned to capitalize on a broad and exciting range of future growth opportunities.”

Last month, Olaplex’s shares took a tumble after the hair care brand downgraded its full-year outlook, spooking investors.

It’s now expecting net sales of between $704 million and $711 million in 2022, down from its prior forecast of between $796 million and $826 million. Adjusted earnings before interest, taxes, depreciation and amortization is expected to come in at between $425 million and $431 million, compared with $504 million to $526 million. This reflected 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.

In a call with analysts following the earnings report, Wong detailed actions the company is taking to address some of the short-term issues.

“We are primarily focused on two key areas. Our first priority is to accelerate demand. Secondly, we are taking actions that are designed to enhance our forecasting capability,” she said.

In the U.S., this includes relaunching its pro affiliate program, providing stylists with the ability to receive a commission on net sales when their customers buy Olaplex using an affiliate code.

But chief financial officer Eric Tiziani added: “As it relates to the fourth quarter, while we have actions in place to accelerate growth, we are still planning for an increasingly difficult macroeconomic operating environment and for further inventory rebalancing by several key customers related to our slower sales momentum. Based on today’s macro environment and our current forecast, we expect this inventory rebalancing to normalize by the end of the first quarter of 2023 in our professional and specialty retail channels.”