Dive Brief:

• Haircare brand Olaplex is among the latest consumer brands to file for an initial public offering in a hot stock market.
• The brand was acquired in early 2020 by Advent International, which will retain majority voting power over Olaplex after its offering, according to its S-1 form. 
• Olaplex last year pulled in some $282.3 million in revenue and made more than $270 million in revenue in just the first half of 2021. In its filing, the company warned investors of its significant debt, due in part to dividends paid to its private equity sponsors. 

Dive Insight:

Olaplex touts its "science-backed" haircare system and engagement with the professional stylist community. Founded in 2014, the company today controls more than 100 patents on shampoos, bonding oils, hair treatments and more. Hairstylists, buying both for salons and selling to customers, account for 55% of the brand's sales. DTC sales make up another 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, noted that it had "low penetration levels among Sephora customers."

Yet the company sees that as an opportunity, noting that the "relatively limited brand awareness provide us with strong growth opportunities in [Sephora's] existing locations and our products were curated by Sephora and Kohl's as a prestige beauty brand that will be available as part of the upcoming Sephora at Kohl's partnership."

While Olaplex sells in 30 retailers in all, the company highlighted its potentially risky dependence on Sephora, which accounted for more than 10% of the brand's sales in 2020, as did SalonCentric and Beauty Systems Group. In the first half of this year, Amazon also accounted for more than 10% of sales. Olaplex's supplier base is largely also reliant on single-source manufacturers.

Another risk for the company is its indebtedness. The company carries $766.8 million in total debt. A fair chunk of that follows a $470 million dividend paid to an entity controlled by Advent Funds and financed mostly with loans.

Servicing that debt takes a lot of cash, which is money the brand can't spend on product development, growth and other key functions. In 2020, Olaplex spent nearly $38.6 million on interest expense, taking a major chunk out of profits. For just the first half of 2021, interest expense totaled more than $31 million. 

Olaplex joins a hot IPO market in the consumer and retail space. So far this year, 10 companies in the industry have filed to go public, including the DTC brands On, Brilliant Earth, Honest Co., Warby Parker and Allbirds.