Beauty brand Morphe plans to close all of its stores in the US, casting a shadow over a company once valued at $2 billion and run by a social media celebrity.
Important reasons: Celebrity-backed brands are vulnerable to reputational risk, which could certainly cloud future market prospects, according to industry insiders.
what happened: The company tweeted yesterday that it had made the difficult decision to close its U.S. stores.
- “I am eternally grateful to the store team for their passion, talent and dedication over the years.
- Customers can continue to shop online or at select retailers. Our stores outside the US will remain open.
Flashback: In October, trade publication Women’s Wear Daily reported that Morphy’s parent company, Forma, was considering bankruptcy.
- The company had $650 million in debt when it was acquired by private equity firm General Atlantic in 2019.
detail: Per Bloomberg, the company is said to have generated $400 million from internet celebrities in 2019.
- “In the first 10 months of the year, revenue was [James] Charles, [Jeffree] Star and another social media star, Jaclyn Hill, fell 66% to $32 million,” Bloomberg reported.
- Still, Starr and Charles were the subject of scandals. The company ended both relationships.
environment: Reputational risk is certainly a factor when investing in celebrity-backed brands, Ryan Nelson, partner at early-stage VC Jobi, told Axios about the space in general.
- “You don’t want celebrities who are involved in scandals or whatever to invest in your brand,” he says. “It can negatively affect your brand’s reputation.”
State of play: Nelson adds that the beauty industry is crowded with celebrity and influencer-driven brands, and not all of them will succeed.
- “There may be some brands that are ahead of their time, but they may not be growing at the rate they need to be, and those are good candidates for M&A,” he adds.
To the point: The ultimate test of a celebrity-backed brand’s business model is how well it will perform in the long run.
- “We want to rely heavily on celebrities in the early stages to gain early recognition and accelerate growth, but by year three, four and five, we want to be less dependent on celebrities. is ideal,” he says.
Morphe’s parent company, Forma Brands, did not immediately respond to a request for additional comment.
