Il Makiage owner Oddity’s share price closed down more than 7 percent Tuesday after a short seller published a 50-page note about the beauty company’s business.
Amid various claims, Ningi Research, which has a short position in Oddity, alleged that the company, whose other brand is SpoiledChild, is not the pure-play digital platform it has positioned itself as, and that it has a retail fleet in Israel that contributes meaningfully to sales and profits.
“It is our opinion, that Oddity concealed its brick-and-mortar operations to inflate its earnings and boost its IPO valuation,” the report said. “Oddity owns and operates 43 stores, and six beauty schools, which have never been disclosed to investors in SEC filings.”
Related Articles
The report also questioned Oddity’s AI capabilities and repeat customers, claiming that “the secret to Oddity’s digital growth is its non-cancelable subscriptions, which customers are lured into via bogus AI quizzes.”
In a statement issued to the market, Oddity said it fundamentally rejects the short seller report, and that Ningi’s allegations are based on “demonstrable factual inaccuracies, incorrect assumptions and unfounded and malicious speculation.”
“The main allegation in the report that the Israeli brick-and-mortar business is a significant portion of Oddity’s revenue and EBITDA is a complete falsehood,” it said.
The company confirmed that it has 43 retail stores and six beauty schools in Israel, but stressed that this accounts for less than 5 percent of Oddity’s net revenue and less than 5 percent of Oddity’s EBITDA in both fiscal year 2023 and first quarter 2024.
“The Israeli business operations have always been reflected in our financial disclosures,” it said.
It added that it firmly stands behind its use of technology to deliver a personalized beauty experience to consumers to drive conversion, customer loyalty, repeat purchase rates, and business results. “Any other claim is purely false,” the company said.
Oddity’s net revenue came in at $212 million in the first three months of the year, compared to $166 million in the same period last year, beating Wall Street forecasts of $205 million. Net income was $33 million, up from $20 million in the first quarter of 2023.
Brother-and-sister founding duo Oran Holtzman and Shiran Holtzman-Erel relaunched cosmetics brand Il Makiage in 2018 after receiving a $29 million investment from L Catterton, which bought a 35.8 percent stake in the business in 2017. Oddity launched its second brand, SpoiledChild, in February 2022, with 17 refillable stock keeping units across hair care and skin care, priced from $45 to $95. It went public through an initial public offering in July.
Its share price closed down $3.01 to 37.97 Tuesday.
