Former L’Oréal execs set out to build a $1.2 billion beauty empire. Now all that’s left is Milk Makeup, and its sales just fell 57%

Waldencast's remaining Milk Makeup business reported first-half 2026 net revenue down 57.1% year over year to $26.1 million and adjusted EBITDA swinging to a $14.8 million loss from a $9.7 million profit. The company sold Obagi for up to $460 million versus its original $858 million enterprise-value assessment, delisted from Nasdaq, and recorded a further $52.3 million Milk goodwill impairment, implying an approximately $180 million reporting-unit fair value. Following debt repayment, Waldencast held $138.6 million in cash as of Aug. 31 and is restructuring around Milk, targeting a doubling of 2025 revenue over five years while stressing that the goal is not formal guidance.

Analysis

The investable question is now whether the remaining cash exceeds the present value of a turnaround that will require sustained marketing, retailer support, and inventory reinvestment. Central-cost cuts can remove roughly $15-17 million annually, but that alone does not restore operating profitability: the implied annualized first-half EBITDA deficit requires a substantially larger gross-profit and/or revenue recovery. The revenue comparison is also not fully explained by nonrecurring prior-year shipments; underlying demand erosion appears material, making this a brand-relevance problem rather than merely a cost problem.

Near-term catalysts are sell-through data from the Sticks relaunch, Sephora reset productivity, and holiday replenishment trends over the next 1-3 months. OTC migration changes the shareholder base and sharply reduces liquidity, analyst coverage, institutional eligibility, and price discovery; this can create a cash-value dislocation but also makes a short or conventional pair trade operationally unattractive. Over 6-18 months, the key falsifier is whether new-product velocity converts into repeat purchases without promotional intensity; if not, the remaining cash becomes a runway for losses rather than a valuation floor.

Consensus may overstate the significance of founder involvement and the headquarters savings. Specialty beauty turnarounds are won at retailer-level productivity and social-product innovation, while reduced corporate infrastructure can constrain precisely the field education and launch cadence needed to repair distribution economics. ULTA and L'Oreal are potential marginal share beneficiaries from shelf-space reallocation, but Milk's scale is too small for a standalone earnings thesis in either name.

Key Decisions for Investors

• Do not initiate a directional position in WALD/MLKM until post-delisting OTC liquidity, fully diluted share count, net working-capital needs, lease obligations, and any residual transaction liabilities are reconciled. A long is only actionable if enterprise value trades at a material discount to net cash after reserving at least 24 months of expected cash burn and relaunch investment.
• Set a 1-3 month operating alert around Q3/Q4 disclosures: require evidence that the Sticks reset and Sephora displays improve comparable sell-through and reduce markdowns. Failure to show sequential revenue stabilization or a narrowing EBITDA loss would invalidate a turnaround thesis regardless of reported cost savings.
• Avoid shorting MLKM after OTC migration despite weak fundamentals: limited borrow, wide spreads, and cash on the balance sheet create asymmetric squeeze and execution risk. Reassess only if the stock trades materially above a supportable cash-adjusted brand value while burn remains elevated.
• No trade in ULTA, NDAQ, BX, or OR on this development alone. Monitor ULTA's prestige-cosmetics category commentary for incremental shelf productivity or vendor-funding pressure, but Milk's direct financial contribution is unlikely to move consolidated estimates.