SmileDirectClub should be the Peloton of oral hygiene right now — but it's not
So, this is awkward... Pre-corona, SmileDirectClub was one of the worst-performing IPOs of 2019. The direct-to-consumer brand sells teeth-straightening aligners online (think cheaper DIY Invisalign), along with electric toothbrushes, tooth-whitening kits, and dental device cleaners. You'd think the lockdown economy would be perfect for its D2C biz model — but things are actually worse:
- In the corona-concomy, tele-everything is winning — Zoom soared on teleconferencing, Netflix is rejoicing on streaming subs, and Teladoc Health stock has more than 2X'd in the past six months.
- While telemedicine is thriving, SDC's sales growth rate plummeted from 50% to 11% in just one quarter — it also posted a loss of $107M.
- SDC orders were down nearly 40% throughout April into May. After its disappointing earnings, SDC's shares are down a whopping 62% since its September IPO.
"Challenging times"... Mentioned twice in SDC's earnings statement. Invisalign-maker Align Technology also reported a significant earnings miss for the quarter — but that can be explained by the fact that Invisalign requires patients to actually visit an orthodontist/dentist in person. SDC is mainly direct-to-consumer, so it doesn't have the same excuse.
SmileDirectClub (ironically) has a word-of-mouth problem... It doesn't have a cultural "fan" following — even Invisalign got mentioned in a Billie Eilish song. SDC just slashed its marketing spend by 90%, and demand for its kits fell 40%. Meanwhile, Peloton is cutting advertising and still has too much demand. Either SDC needs to be more effective with its marketing, or users just aren't spreading the word about the product.