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ODDITY ODD shares have gained 6.7% in the past three months, underperforming the Zacks Internet - Software industry and Zacks Computer and Technology sector’s return of 8.5% and 8.4%, respectively.
Although ODDITY has underperformed its industry and the broader tech sector, the company is scaling its business with a strong direct-to-consumer model and personalized products. ODDITY’s brands like IL MAKIAGE and SpoiledChild are also showing strong double-digit growth, reflecting ODD’s robust competence.
Technology Integration Fuels ODDITY's Growth
Over the course of the past few years, ODDITY has heavily invested in artificial intelligence (AI), data science, machine learning and computer vision. ODD's direct-to-customers business model enables the company to drive higher consumer engagement compared with the other offline brands through online advertising campaigns. With greater engagement and a rising number of page visits by potential customers, ODD also gains direct data insights that are inaccessible offline.
The cosmetics industry is characteristically slow-moving, reluctant to innovation and mainly offline in operations. Leading cosmetics companies like The Estée Lauder Companies EL, Ulta Beauty UL and Coty COTY mostly rely on brick-and-mortar distribution, in-store sales, beauty stores and other physical retail outlets.
Cosmetics and wellness products are highly complex as these require a high degree of personalization, including shade matching and formulation for specific skin types. Legacy players like Ulta Beauty, Coty and Estée Lauder use offline channels to attract customers where their customers can try out products on their own. In this case, ODDITY heavily relies on consumer data and uses it for personalized product recommendations. This way, the company has become one of the few disruptors in the cosmetics space.
ODDITY Price Performance Chart
Image Source: Zacks Investment Research
ODDITY Navigates Macroeconomic Headwinds
The entire legacy cosmetics and wellness market players are suffering from macroeconomic headwinds and persistent pressure from low sales in the Chinese and Asian markets. Therefore, ODDITY is leveraging its consumer insights expertise to expand its sales in the U.S. market. In 2023, ODDITY’s U.S. sales reached $414.1 million, up 71.7% from $241.1 million in 2022 and 48.9% from $162.0 million in 2021.
The online cosmetics space also offers a massive total addressable market of $600 billion globally, giving ODDITY ample opportunities to expand its categories and subcategories. ODD has plans to launch two new brands one of which includes a telehealth platform.