CEO: The Honest Co. Has ‘Broad Shoulders’

CEO: The Honest Co. Has ‘Broad Shoulders’
Jessica Alba, founder of The Honest Co.

The Honest Company Inc. widened its net loss in the fourth quarter, which sent the price of the company’s shares plunging. 

The Playa Vista-based business founded by actress Jessica Alba has seen its share price decrease by 49% from the start of the year. Shares closed at $2.92 in the first day of trading this year, and they finished at $1.49 on May 4. The stock closed at $4.30 a year ago. 

The company reported on March 16 a net loss of $12.6 million (-14 cents a share) for the quarter ending Dec. 31, compared with a net loss of $9 million (-10 cents) in the same period a year earlier. Revenue increased by 2 percent from the fourth quarter of the prior year to $82 million. 

The company attributed its small increase in revenue to strong retail sales, distribution gains and price increases, partially offset by a decline in digital revenue. 

Honest releases its first-quarter earnings on May 9.

Carla Vernón, the chief executive of Honest, said that she was not happy with the quarterly results. 

“We do not believe they reflect the strength and potential of the Honest brand,” Vernón said in her first conference call with analysts to discuss fourth-quarter earnings. Vernón became head of the company in early January; she replaced Nick Vlahos, who stepped down after nearly six years as chief executive.

Carla Vernón

Still, Jon Andersen, an analyst with William Blair & Company LLC in Chicago, rated Honest’s stock as outperform or buy. 

He wrote in a March research report that The Honest Co. is a “mission-driven brand” with the ability to disrupt large consumer categories with safe and sustainable products, supporting consumers’ health, families and homes.

“Risks are 1) competition, 2) a dynamic beauty market, and 3) execution across multiple categories and channels,” Andersen wrote. 

During the conference call, Andersen asked Vernón specifically about the company’s ability to succeed in multiple categories. 

“What gives you a kind of confidence that that is the case?” Andersen asked.

Vernón replied by describing Honest as a brand built on a number of values, including high-quality ingredients and products that one can believe in. 

Additionally, the company has a brand that needs to speak to all consumers, all demographics, all cultural groups and all life stages, which is important to Honest and its founder, Vernón said. 

“And those tools are the thing we bring with us as we expand Honest into more
categories,” she added. “So, I am extremely confident that the shoulders of Honest are broad, that the shoulders of Honest are strong to bear the weight of many categories and that there are categories waiting for Honest values to come in and energize the category and change what consumers think they can expect from the category.”

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