Affordable beauty brand Morphe announced via Twitter it would be closing all retail stores in the US citing the “broader beauty landscape throughout the last year,” according to a statement obtained by Insider from a representative for Forma Brands, which owns Morphe. Morphe will still be available to purchase online and at select retailers, and Morphe stores outside of the US will remain open.
The announcement comes after employees were laid off without warning, and stores were emptied of all product seemingly overnight. “A day in the life of a Morphe makeup artist: So when I walked into my store this morning, it was completely empty—absolutely nothing except for foundations," said makeup artist Sydney Kayla in a TikTok video that has since been deleted after garnering a reported 2.5 million views.
"Decisions that impact our people are incredibly difficult, and we extend our deepest gratitude to the dedicated Morphe store team members at the closing stores for delivering outstanding beauty experiences to countless consumers over the years," the brand’s statement read.
While the news may have been shocking to Morphe employees, all the signs were there that the brand was in trouble. In October of last year, Forma Brands was rumored to be considering a Chapter 11 bankruptcy filing after accumulating $600 million to $700 million in debt, according to information obtained by Reorg Research. BeautyMatter reported that the company was exploring multiple options to strengthen its financial position, but at the time of publishing, Forma Brands still has not filed for Chapter 11 bankruptcy protection.
After this news of a potential bankruptcy filing broke in October, Playa haircare founder Shelby Wild filed a lawsuit against Morphe and its majority owner, the private equity firm General Atlantic, in late November in New York State court. Wild alleges that General Atlantic falsely represented itself as an incubator capable of providing “the long-term logistical, operational, and financial support that the brand needed to reach its full potential,” according to court documents reviewed by Business of Fashion.
Forma Brands acquired Playa in 2020, and instead of receiving her payout upfront, Wild agreed to “longer-term, incentive-based compensation through an employment contract,” betting on the success of her business by leveraging Forma Brand’s channels and reach.
However, Forma Brands had other plans. In 2022, the brand was focused on keeping Morphe afloat. Sales had dropped from $500 million in 2019 to $295 million in 2021, which was in part due to COVID-19, the decline of the color cosmetic category industry-wide, and supply chain issues. Around this same time, Morphe also found itself at the center of controversy brought on by its ongoing relationship and collaborations with Jeffree Star and James Charles, who were accused of racism and sexual misconduct. The brand cut ties with both influencers in 2020 and 2021, respectively. Some would argue that Morphe’s reputation has yet to recover from the scandal, and in 2022, the New York Times reported that Morphe had fallen out of favor with Gen Z, the brand’s target demographic.
Playa was put on the back burner during these turbulent times, stalling its momentum and missing crucial growth opportunities in the process. According to Glossy, Playa brought in $1 million in revenue in its first year of business and was projected to do between $4 million and $5 million in revenue in year two. The brand launched in Sephora in May 2018 as part of the retailer’s Clean at Sephora program but was dropped by the retailer in early 2022.
Wild is seeking damages of $15 million, which is the maximum amount she said she would have been owed in “performance-based incentives” over four years.
The potential bankruptcy filing and ongoing lawsuit put pressure on Forma Brands, and was only accelerated by climbing inflation, leaving the brand with little options but to close up shop at its unprofitable locations.
The move comes on the heels of several other retail and department store closures. In November of last year, Sally Beauty Supply announced it would be closing 350 of its stores by the end of the year, citing that sales have been "unfavorably impacted by inflationary pressures that continued to impact consumer behavior." Macy's plans to close 125 locations over the next three years, and Kmart is down to just three stores in the US, down from the nearly 2,500 locations the brand operated at its peak.
According to a report by Business Insider, a “retail apocalypse” could be on the horizon in 2023, leading to a wave of department store closures. Analysts at UBS indicate that this could mean trouble for retailers like Nordstrom and Kohl’s.
Record inflation could be to blame for the mass closures at Morphe and elsewhere. Inflation increased 7.1% in November 2022 from a year ago according to U.S. Department of Labor data published Dec. 13, 2022. From 1989 to 2019, the average annual inflation rate was 2.5%.
The beauty industry had a turbulent year in 2022, with beauty brands Bite Beauty and Lilah B. going out of business. With retail and department stores on shaky ground and the direct-to-consumer model failing to produce profits in the way that it once did in the Glossier heyday, the beauty distribution landscape is in for some major changes in 2023—and Morphe may be just the beginning.
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