Depends who it is. If it was someone I didn't know that well, I probably wouldn't be totall yblunt and say it looks awful, but I wouldn't say it looks nice either, if it was horrible. I'd probably either change the subject or say it looks "interesting" or that it's not really what I'd go for or something like that.
Would you ever keep something you bought for someone else as a present because you ended up liking it so much yourself?