Cult hair care brand Olaplex’s shares slid as much as 25 percent in Tuesday morning trading after it cut forecasts as its second-quarter performance fell in need of Wall Street’s expectations, but offset a few of those losses later within the day.

The corporate, which went public through an initial public offering in 2021, is forecasting net sales within the range of $445 million to $465 million for fiscal-year 2023. That is roughly $144 million lower than its previous forecast.

JuE Wong, Olaplex’s president and chief executive officer, said: “We’ve got updated our assumptions for the rest of the yr and reduced our fiscal 2023 outlook. We’re intently focused on stabilizing demand trends within the second half of 2023, while increasing and optimizing the combo of our marketing investments in support of this objective.”

For the second quarter ended June 30, net sales were $109.2 million, down 48.2 percent from a yr earlier. Analysts polled by Factset had forecasted $130 million. Direct-to-consumer sales got here in at $38.5 million, down 6.4 percent, and specialty retail sales were $29.8 million, 53.7 percent lower than within the prior-year period.

Net sales decreased 58.7 percent within the U.S. and 34 percent internationally.

Wong told WWD in an interview that Olaplex continues to be negatively impacted by competition, a more promotional environment and misinformation related to the brand. Specifically, in a suit against Olaplex, several plaintiffs claimed they’ve sustained personal injuries to their hair and scalp including hair loss and damaged hair, something Wong vehemently denies.

“All of this has played a component within the slowdown in demand,” she said. “This doesn’t mean that we are usually not investing behind the brand. Despite all these headwinds we still imagine in investing behind our 4 key priorities: sales and marketing, supporting the professional and stylist community, education, PR.”

And through a call with investors, Wong highlighted the importance of working with the skilled community, which is how customers are sometimes first introduced to the brand.

“The skilled community stays at the foundation of our brand and is core to maintaining our credibility in the category. We know it is critical to address and solve the issues we are facing in that channel by increasing our visibility and investing more to deepen engagement with stylists.” 

Net income was $6.2 million and adjusted net income was $21.2 million for the quarter, as in comparison with $87.7 million and $98.8 million, respectively, in the course of the same period in 2022.

Adjusted diluted EPS was 3 cents, as in comparison with 14 cents for the second quarter of 2022. Analysts had penciled in 5 cents, in keeping with Factset.

Raymond James analyst Olivia Tong said: “Overall, Olaplex is experiencing challenges stabilizing its business as competitive products proceed to enter the hair care category. Management acknowledges marketing initiatives weren’t effective enough to stabilize sales losses, with the updated guide now also assuming recent launches and distribution gains can even be a smaller contributor versus prior expectations.”

Olaplex’s stock closed down almost 10 percent to $3.23.