Private equity-backed haircare brand Olaplex files for IPO

Dive Brief:

Haircare brand Olaplex is among the many newest client manufacturers to file for an preliminary public providing in a sizzling inventory market.
The brand was acquired in early 2020 by Advent International, which is able to retain majority voting energy over Olaplex after its providing, in response to its S-1 kind. 
Olaplex final yr pulled in some $282.3 million in income and made greater than $270 million in income in simply the primary half of 2021. In its submitting, the corporate warned buyers of its important debt, due partially to dividends paid to its non-public fairness sponsors. 

Dive Insight:
Olaplex touts its “science-backed” haircare system and engagement with the skilled stylist neighborhood. Founded in 2014, the corporate as we speak controls greater than 100 patents on shampoos, bonding oils, hair remedies and extra. Hairstylists, shopping for each for salons and promoting to clients, account for 55% of the brand’s gross sales. DTC gross sales make up one other 27%.  
The retail channel makes up the remaining 18%, with Sephora being the brand’s principal retail account. Even so, Olaplex, in its IPO papers, famous that it had “low penetration ranges amongst Sephora clients.”
Yet the corporate sees that as a possibility, noting that the “comparatively restricted brand consciousness present us with robust development alternatives in [Sephora’s] present areas and our merchandise have been curated by Sephora and Kohl’s as a status magnificence brand that will probably be obtainable as a part of the upcoming Sephora at Kohl’s partnership.”
While Olaplex sells in 30 retailers in all, the corporate highlighted its probably dangerous dependence on Sephora, which accounted for greater than 10% of the brand’s gross sales in 2020, as did SalonCentric and Beauty Systems Group. In the primary half of this yr, Amazon additionally accounted for greater than 10% of gross sales. Olaplex’s provider base is essentially additionally reliant on single-source producers.
Another danger for the corporate is its indebtedness. The firm carries $766.8 million in complete debt. A good chunk of that follows a $470 million dividend paid to an entity managed by Advent Funds and financed principally with loans.
Servicing that debt takes plenty of money, which is cash the brand cannot spend on product improvement, development and different key capabilities. In 2020, Olaplex spent practically $38.6 million on curiosity expense, taking a significant chunk out of earnings. For simply the primary half of 2021, curiosity expense totaled greater than $31 million. 
Olaplex joins a sizzling IPO market within the client and retail house. So far this yr, 10 corporations within the business have filed to go public, together with the DTC manufacturers On, Brilliant Earth, Honest Co., Warby Parker and Allbirds.

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