Vista-based maker of nontoxic and eco-friendly personal and household products posted second-quarter earnings and revenue that fell short of Wall Street expectations.
The 30% stock dip also pushed the company’s market value to $914.5 million, down from $1.5 billion after its May 5 debut on the Nasdaq.
The markets were likely responding to Honest Co.’s losses, which increased to $20 million, or 17 cents a share for the quarter that ended June 30. That’s up from a loss of $375,000, or 1 cent a share, for the second quarter of 2020. Analysts had anticipated a loss of 14 cents a share.
Net sales were up 3% to $74.6 million compared to the same period last year. Ecommerce revenue declined 24% to $34.8 million but was up 11% versus the second quarter of 2019.
Retail revenue increased 51% year over year to $39.8 million, “aided by a strong rebound in store traffic and vaccinated consumers increasingly return to in-person shopping as compared to the second quarter of 2020 when consumers sheltered in place and shifted their behavior heavily to online shopping,” Chief Financial Officer Kelly Kennedy told analysts during an Aug. 13 earnings call.
Honest Co.’s digital channel revenue was “impacted by the reduction in inventory on hand by our key digital partner who cut inventory in consumables in the second quarter to free up space for other products ahead of a major promotional event,” Kennedy added. “While this inventory reduction was not specific to Honest, due to our higher digital penetration, it was more impactful for us.”
Honest Co. also breaks down its revenue in three product categories: diapers and wipes, skin and personal care, and household and wellness. The first category decreased 2% in the second quarter, falling behind the same period in 2020 that saw “significant diapers and wipes consumption during the stock-up surge at the onset of the pandemic,” according to the company. The category was up 19% when compared to the more stable second quarter of 2019.
Revenue from household and wellness products also trailed behind 2020 sales due to lower consumption of sanitization products.
“There’s a lot of uncertainty around Covid,” Kennedy said. “And while we might get some kind of pickup from the lows that we’ve seen, kind of, in sanitizing and disinfecting sprays in Q2, we are not anticipating that this has a comeback to prior level.”
Revenue from skin and personal care products added up to $23.8 million, a 16% increase, driven by increased sales volume across the retail channel.
Kennedy said the diapers and wipes, and skin and personal care product categories will “perform in line with our expectations for the year, which reflects continued market share penetration and double-digit, top-line growth in total.”
The forecast did not include sales from household and wellness products, which the company anticipated to be about the same as in 2020 but then revised its estimate to about half of last year’s revenue for the category.
“As we look forward to the future of our household and wellness product category, we are developing plans to reinvigorate this category, including product innovation that will allow us to continue to diversify our portfolio and drive growth,” Kennedy said.
