OLPX - Olaplex stock plunges on continued sales margin erosion

2023-05-09 11:52:51 ET

Olaplex ( NASDAQ: OLPX ) shares fell nearly 20% at an intraday low on Tuesday as weak forecasts overshadowed a Q1 earnings beat.

For the first quarter, the haircare product provider posted a beat on top and bottom lines, even as revenue slumped 38.9% year over year and adjusted gross profits dipped over 40%. The company also noted a 650 basis point contraction in gross margins from Q1 2022 as the company encountered increased headwinds and lagging customer demand.

“We delivered high impact innovation and made important investments in sales, marketing and education that are expected to strengthen our business and extend our leadership in the prestige hair care category,” CEO JuE Wong commented. “While we recognize that we are in the early stages of this plan achieving its intended results, we remain confident that our competitive differentiators and the execution of our priorities will enable OLAPLEX to return to consistent and sustained sales growth at continued top-tier profitability in the future."

For the full-year, the company expects net Sales to range from $563M to $634M against the consensus estimate of $592.09M.  An adjusted EBITDA forecast of between $261M and $322M was essentially in line with the consensus expectation at $280.5M. Gross profit margin is expected to decline between 300 and 400 basis points as compared to 2022 and an adjusted EBITDA margin in the range of approximately 46.4% to 50.8% for the full year.

“The Company anticipates Adjusted EBITDA margins below this level in the first half of the year, with the most contraction in the second quarter of 2023, but higher than this rate in the second half of 2023 driven primarily by an expected improvement in net sales during that period,” the earnings release explained.

A sharp contraction for revenue in Q2 was also projected by the company. Net sales are expected to “remain down significantly compared to a year ago” amid a “reduced baseline level of customer demand” and negative impacts of new product size introductions.

Shares of Olaplex ( OLPX ) plunged nearly 20% at the intraday low, but rebounded to about a 7% decline near midday. The company courts notable short interest at about 10.11%.

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