As Ulta Beauty says it expects a slowdown in retail’s most resilient category, an upstart says it’s bucking the trend.
Oddity Tech – the newly public Israeli cosmetics platform that uses AI to develop products — posted first quarter results that blew past expectations and raised its full-year guidance.
Here’s how the beauty retailer behind the Il Makiage and Spoiled Child brands performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: 61 cents adjusted vs. 49 cents expected
- Revenue: $211.63 million vs. $205 million expected
The company reported net income of $32.98 million, or 53 cents per share, for the three-month period that ended March 31, compared with $19.59 million, or 35 cents per share, a year earlier. Excluding one-time items, Oddity reported earnings of 61 cents per share.
Sales rose to $212 million, up about 28% from $166 million a year earlier.
The company is now expecting full year revenue to be between $626 million and $635 million, compared to a prior outlook of $620 million to $630 million. Analysts had expected $627 million, according to LSEG. It expects adjusted earnings per share to be between $1.57 and $1.62, up from prior guidance of $1.49 to $1.54. Analysts had expected $1.51, according to LSEG.
For the current quarter, Oddity is expecting sales to be between $185 million and $189 million and adjusted earnings per share to be in the range of 61 cents to 64 cents. Analysts had expected revenue of $186.5 million and earnings per share of 56 cents, according to LSEG.
Oddity, which started trading on the Nasdaq in July, aims to disrupt the legacy beauty and wellness industry by using AI to develop new products and tailor recommendations.
Oddity believes beauty and wellness products are best sold online, and that consumers won’t need to visit beauty shops like Ulta and Sephora if product selection can be improved.
Last month, Ulta Beauty CEO Dave Kimbell warned that demand for beauty products was cooling – sending its stock down by 15% that day and hitting shares of E.l.f. Beauty, Estee Lauder and Coty.
“We have seen a slowdown in the total category,” Kimbell said at an investor conference hosted by JPMorgan Chase. “We came into the year — and we talked about this on our [earnings] call a few weeks ago — expecting the category to moderate. It has [had], as I said, several years of strong growth. We did not anticipate it would continue at the rate that it’s been growing.”
He added that the slowdown has been “a bit earlier and bit bigger than we thought.” Kimbell said the downturn has cut across price points and beauty categories, but has been more significant in prestige makeup and hair care.
Lindsay Drucker Mann, Oddity’s CFO, disagreed that the category is slowing down.
“There’s no slowdown for us, not in our new users, and not in the way our existing users are behaving. If anything, the quarter shows there’s massive demand for online,” Drucker Mann told CNBC in an interview.
“What we do see is an industry that’s transforming,” she said. “So the consumer is moving online and the consumer is moving to high efficacy products that really solve their problems and these are two really unstoppable trends that we see driving the industry that we are leading.”
Read the full earnings release here.
