THE HONEST COMPANY, INC.
'The strength of the Honest brand is reflected in our first quarter revenue growth of 21% and tracked channel consumption growth of 30%.(1) With well-balanced growth across digital and retail channels, both up over 20% in the quarter, we remain confident about our omnichannel approach of making Honest products available when and where they are most convenient for consumers,' said Chief Executive Officer,
(1) According to independent third-party data. Reflects consumption for Honest diapers, wipes, baby personal care, skin care and cosmetics items. All consumption in this press release reflects retail tracked channels, as well as online sales excluding Direct-To-Consumer sales (via honest.com) for the 13 weeks ending
Transformation Initiative
In the first quarter of 2023, the Company began executing a broad-based plan, reflected in the Transformation Initiative announced today. This plan is designed to build the Honest brand and drive growth in higher-margin areas of the portfolio, strengthen the Company's cost structure, drive focus on the most productive areas of our business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise.
We believe specific value drivers of the Transformation Initiative(2) include:
1) Brand Maximization: Align our pricing to reflect the premium nature of our brand, leverage the Honest brand to drive growth through innovation, and improve marketing effectiveness.
2) Margin Enhancement: Expand gross margins by exiting
3) Operating Discipline: Build a culture of executional excellence, take a focused approach to trade and promotion activities, and manage working capital through inventory reduction.
(2) The Transformation Initiative resulted in costs and related accruals in the first quarter of 2023 for product markdowns, inventory reserves related to product and international exits, restructuring costs, including costs to terminate contracts with
In the first quarter of 2023, the Company recognized
The Transformation Initiative is expected to result in annualized benefits in the range of
See 'Transformation Initiative' in the table at the end of this press release for more details on the Transformation Initiative costs. The Company may incur other charges or cash expenditures not currently contemplated that may occur as a result of or in connection with the Transformation Initiative.
First Quarter Results
(All comparisons are versus the first quarter of 2022)
This press release includes non-GAAP financial measures. See 'Use of Non-GAAP Financial Measures' at the end of this press release for more information.
Revenue increased 21% to
Revenue by Product Category
For the three months ended
2023 2022 % change
(Unaudited, in thousands, except percentages)
Diapers and Wipes$53,077 $43,289 23 %
Skin and Personal Care 22,792 21,266 7
Household and Wellness 7,519 4,164 81
Total Revenue$83,388 $68,719 21 %
Diapers and Wipes: Revenue from Diapers and Wipes (64% of total first quarter 2023 revenue) increased 23% due to retail consumption gains across diapers, wipes, and baby personal care, supported by new distribution and increased assortment.
Skin and Personal Care: Revenue from Skin and Personal Care (27% of total first quarter 2023 revenue) increased 7% due to retail consumption gains, a more focused assortment on best-selling 'hero' items, and innovation, including Daily Green Juice Antioxidant Super Serum, which launched in the first quarter of 2023.
Household and Wellness: Revenue from Household and Wellness (9% of total first quarter 2023 revenue) increased 81% driven by the integration of baby clothing in the third quarter of 2022.
Revenue by Channel
For the three months ended
2023 2022 % change
(Unaudited, in thousands, except percentages)
Digital$41,814 $34,260 22 %
Retail 41,574 34,459 21
Total Revenue$83,388 $68,719 21 %
For the three months endedMarch 31, 2023 2022
(Unaudited, as a percentage of revenue)
Digital 50 % 50 %
Retail 50% 50%
Total Revenue 100 % 100 %
Digital revenue increased 22%, supported by double-digit point-of-sales growth across Diapers, Wipes and Beauty items at our key digital retail customer, partially offset by lower Honest.com revenue.
Retail revenue increased 21% behind strong tracked channel consumption at key retailers and expanded retail distribution that launched in the second half of 2022.
Gross margin was 24.2% in the first quarter of 2023 compared to 30.0% in the first quarter of 2022. Gross margin included approximately 370 basis points of Transformation Initiative costs, including exiting portions of the international and sanitizing business, and SKU rationalization. Gross margin was also impacted by higher storage and inbound freight costs, and higher product and fulfillment costs, partially offset by the benefit of price increases and more efficient trade spending.
Operating expenses increased
Net loss for the first quarter of 2023 was
Adjusted EBITDA for the first quarter of 2023 was negative
2023 Outlook
Following strong consumption results in the first quarter, the Company is increasing its full year 2023 revenue outlook to be up low-single digits versus revenue reported for the full year 2022. The revenue outlook reflects continued positive tracked channel consumption and the benefit of additional price increases in 2023, offset by the Transformation Initiative impact of exiting low-margin businesses, expected to begin in the second quarter. The revenue outlook also recognizes the Company will be comparing against prior year pipeline shipments that supported significant retail distribution growth in the second half of 2022.
Adjusted EBITDA is expected to be in the range of negative
The Company ended the first quarter of 2023 with
To provide financial flexibility and to support continued growth investments in the business, the Company entered into a
Webcast and Conference Call Information
A webcast and conference call to discuss first quarter 2023 results is scheduled for today,
Forward-Looking Statements
This press release and earnings call referencing this press release contain forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. Such statements may address the Company's expectations regarding revenue, profit margin or other future financial performance and liquidity, other performance measures and cost savings, strategic initiatives and future operations or operating results. In some cases, you can identify forward-looking statements because they contain words such as 'anticipate,' 'believe,' 'contemplate,' 'continue,' 'could,' 'estimate,' 'expect,' 'intend,' 'may,' 'plan,' 'potential,' 'predict,' 'project,' 'should,' 'target,' 'will' or 'would' or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
our expectations regarding our revenue, cost of revenue, operating expenses, gross margin, adjusted EBITDA and other operating results, including as a result of the Transformation Initiative, in particular with respect to our 2023 outlook and long-term strategies, including our underlying assumptions, such as our expectation of continued challenges, as well as strengths, such as continued growth in the retail channel driven by consumption trends and additional price increases;
our expectations regarding the costs, impacts and benefits of the Transformation Initiative;
our ability to execute a broad-based Transformation Initiative to strengthen the Company's cost structure and to enable profitable growth;
our ability to execute the Transformation Initiative to improve margin structure, support a focus on the core of the business, and guide the Company's allocation of resources to its most critical priorities;
our strategic initiatives and priorities, including the timing, focus and cadence of our marketing, innovation, and distribution and costovation strategies;
our ability to deliver mission-driven innovation and lead growth with the high quality products our consumers love and value;
our focus on taking action and defining a strategy to set Honest up to be a stronger, more profitable Company in 2024 and beyond;
our ability to aggressively manage our working capital;
that strong momentum in our business, continued strong results in tracked channels, consumer acceptance of prior and future price increases, and recent retail expansion are expected to offset rising consumer uncertainty and tighter inventory management by retailers;
our ability to offset the high inflationary environment, including commodity prices, labor costs, input cost and transportation cost inflation with price increases, productivity or investing in digital capabilities and a growing revenue base;
our ability to drive innovation, maintain cost discipline, invest in digital capabilities, expand our distribution footprint, and execute our pricing and cost-reduction strategies to position Honest for long-term growth, including as part of the Transformation Initiative;
our planned innovation and expected plans for new distribution in the future;
our belief that consumer demand for natural and clean products will continue to outpace conventional offerings, and that Honest is poised to capture this modern consumer through its omnichannel business model;
our ability to implement our strategy to deliver sustained long-term growth and profitability, including as part of the Transformation Initiative;
that our strategy will continue to deliver behind pricing increases, reflecting the health of our brand, distribution gains, and tight cost management;
that our investments in innovation and digital capability will fuel long-term growth;
our expansion with retail and digital customers;
our ability to bring new products to market and to identify and successfully launch new category adjacencies;
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
the effect of macroeconomic factors, such as supply chain disruptions and inflation on our business and the global economy, including our costs and expenses and shifting consumer demand between our Digital and Retail channels;
our continued revenue growth through our omnichannel strategy and ability to capture growth in whitespace opportunities in the Retail channel;
expectations regarding consumer demand and the timing and amount of orders from key customers; and
our ability to achieve or sustain our profitability.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this press release primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results.
The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled 'Risk Factors' in the Annual Report, on Form 10-K for the year ended
In addition, statements that contain 'we believe' and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this press release. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this press release and the earnings call referencing this press release relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
About
Condensed Consolidated Statements of Comprehensive Loss: See full release at:
https://investors.honest.com/news-releases/news-release-details/honest-company-reports-first-quarter-2023-results
Investor Contacts:
saustenfeld@thehonestcompany.com
ebouquard@thehonestcompany.com
Investor Inquiries:
investors@thehonestcompany.com
Media Contact:
jrosenberg@thehonestcompany.com
(C) 2023 Electronic News Publishing, source
