While it’s been a great year for many in the beauty industry, with makeup finally joining skincare and fragrance for a post-pandemic sales rebound, there have also been some pretty significant declines (Revlon’s bankruptcy, Amyris’ bankruptcy, Estée Lauder’s plummeting stock price and more) .
Imperfections are outside the norm of beauty. For years, this category has gone from strength to strength and has continued to grow even during times of disruption, when consumers indulged in more affordable lipsticks, mascaras and face creams than fashion. Most of the beauty issues in 2023 were caused by company-specific issues, including the effects of the COVID-19 pandemic or the economic slowdown in China.
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The beginning of the negative trend was Revlon, which spent the first few months of the year stuck in bankruptcy proceedings amid a heavy debt pile after filing for Chapter 11 in 2022.
Revlon had been under Ronald Perelman’s control since he took over MacAndrews & Forbes via a hostile takeover in the ’80s. For years, she used the brand to catapult herself into the worlds of society, fashion and Hollywood, but problems escalated further in 2020 during the COVID-19 pandemic.
Almay and Elizabeth Arden, the parent company of the Revlon brand, emerged from Chapter 11 bankruptcy in May after less than a year with a new owner, a new board of directors and billions of dollars less in debt.
He also parted ways with the Perelmans: Ronald Perelman resigned as part of bankruptcy negotiations, while his daughter Debra Perelman stepped down as CEO in August.
Avon veteran Elizabeth A. Smith was named interim CEO in his place. He was named executive chairman of Revlon’s board of directors in May and continued in that role following the Chapter 11 bankruptcy.
But as Revlon emerged from Chapter 11 proceedings, another company was preparing to enter.
Amyris, a onetime biotech enthusiast who sought to disrupt the beauty industry with innovative and sustainable ingredients and later moved into brand development, filed for Chapter 11 bankruptcy in Delaware Court in August.
As part of the transactions, it put many of its brands up for sale. Four of them were recently sold at auction: Skin-care brand Biossance sold for $20 million to online beauty retailer THG Beauty, formerly known as The Hut Group; Scent Theory Products paid $600,000 for 4U By Tia; Dr. Reddy’s Labs paid $3 million for Menolabs; and HRB Brands paid $1.75 million for clean baby care brand Pipette.
There is also Estée Lauder Cos., which is experiencing a slowdown after years of rapid growth. There was. The owner of Clinique, Mac, Jo Malone and Tom Ford has seen a precipitous fall in its share prices this year due to declines in its China and travel retail businesses, as well as increased competition.
In November, Lauder again cut its full-year forecast due to potential risks of continued problems in its Chinese business and continued job disruptions in Israel and other parts of the Middle East. Although an increase of 5 percent to 7 percent was previously projected, 2024 net sales are now forecast to range between a 2 percent decrease and a 1 percent increase compared to the previous year. Adjusted diluted net earnings per common share are expected to decline between 33 percent and 25 percent.
The news saw the share price fall nearly 19 percent, closing at $104.51, a six-year low. The stock is down more than 50 percent since the beginning of the year.
Share declines also sparked speculation about what might happen to the company; some analysts have called for a management change and a move away from longtime CEO Fabrizio Freda, who joined in 2008 and oversaw a long period of growth. The change would require approval from the Lauder family (they have a 35 percent stake in the company, including voting rights).
An alternative option would be to add a chief operating officer role to the senior executive and implement a more gradual succession plan, multiple sources said.
Problems beyond management changes have called into question Lauder’s future in the public markets; this could include delisting the company, but that seems unlikely. Other scenarios include mergers and acquisitions involving L’Oréal and LVMH, although both could trigger antitrust concerns.
There is also the possibility that an activist investor will be involved. Reports were swirling in May that Nelson Peltz was considering making Lauder his next play.
Elsewhere in public markets, problems have arisen for scores of beauty businesses that have opened to the public in the past few years.
Waldencast, which has only two brands on its roster (Milk Makeup and Obagi Skincare), announced that it is in danger of being delisted from Nasdaq after joining via a special purpose acquisition company (often referred to as a SPAC) in the summer of 2022.
The company received written notice from Nasdaq stating that it may be delisted for failure to file its annual report with the Securities and Exchange Commission.
The issue appears to originate from Obagi Skincare, a professional skincare company that Waldencast acquired from Haitong International Zhonghua Finance Acquisition Fund in 2021, according to multiple regulatory filings.
The company was due to release its fourth-quarter earnings and annual report on March 15, but said on April 25 that it was delaying the filing due to its ongoing review of its 2022 year-end financial statements and related matters with Obagi. It further explained that the review was motivated by “concerns regarding the statute of limitations on the renewal of import licenses currently pending in Vietnam and related impacts that have triggered, among other things, the need for further analysis.”
Olaplex, which was celebrated as a successful IPO just a few years ago, has also faced difficulties. After building a following for its bond-forming products, the company fell on hard times amid increased competition and a since-dismissed lawsuit in which several plaintiffs claimed they suffered personal injuries to their hair and scalp, including hair loss and hair damage. Something the company vehemently denies.
But in October, Olaplex appointed Amanda Baldwin as CEO (from Supergoop, where she was CEO and helped grow the business into a sunscreen empire). JuE Wong, who joined the business in 2020, has left.
Andrew Stanleick also left publicly traded Hydrafacial owner BeautyHealth as chairman at the same time the company announced lower-than-expected U.S. revenue and $63.1 million in restructuring charges related to device upgrades of its early-generation Syndeo Hydrafacial devices.
The independent beauty world has also faced problems, with many start-ups closing due to rising costs and increased competition; these included men’s nail polish brand Faculty, clean makeup brand Athr and skincare brand Wildkat.
There are fewer flaws in 2024.
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