Honest hurt by waning cleaning sales, sees tough 2022

Bloomberg

Honest Co, the personal-care company founded by actress Jessica Alba, posted quarterly results that missed analysts’ estimates and projected a tough 2022, a disappointment for investors whose shares have fallen more than 60% from the initial public offering last May.
The loss for the fourth quarter was 10 cents a share, Honest Co said, wider than the 6.1-cent average of analysts’ estimates. Sales rose 3.2% to $80.4 million, but missed the $84.5 million average of estimates. Honest Co predicted losses excluding some items for the current quarter and year, compared with Wall Street forecasts for profit.
With the pandemic easing, sales of cleaning products slumped 68% in the fourth quarter, the company said, and led to a writedown of inventory. That’s added to challenges that include inflation and supply-chain bottlenecks.
The drop in demand for products “around disinfecting as well as sanitization is not what we expected,” Chief Executive Officer Nick Vlahos said.
The decline in cleaning products tempered double-digit gains in Honest Co’s baby and personal-care lines, which account for the bulk of its business. Honest Co recorded a $3.2 million writedown because of the household products, contributing to the earnings shortfall.
For the current quarter, Honest Co is forecasting a loss of $10 million before interest, taxes, depreciation and amortisation, compared with a $1.34 million profit seen by analysts. Revenue is expected to decrease 15%, mostly due to a comparison to elevated sales of sanitising and disinfecting products in first quarter of 2021 and one-time items.
For the year, the company projects a loss of $5 million to $10 million on that same basis, below the $5.68 million in earnings seen by Wall Street. Sales should grow at a mid-single digit clip after the first three months of 2022.
Honest Co will emphasize wellness products such as vitamins as the household segment struggles, according to Vlahos. The company is set to launch new supplements targeting sleep and immunity, as well as a product line with health and nutrition store GNC Holdings Inc.
With easing pandemic restrictions encouraging more of customers to shop in stores, Honest plans to offer its goods at Ulta Beauty locations as well as Walmart.