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July 29, 2021, 9:50 a.m. EDT

A Sustainable Beauty Story That Needs Financial Fine-Tuning

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Jul 29, 2021 (IAM Newswire via COMTEX) -- The beauty industry has a bad habit of labeling everything as a trend, even eliminating toxic ingredients. Clean beauty is no exception of this phenomenon, resulting in many brands using the term vaguely without a real green commitment. However, consumers are demanding better quality, cleaner and more eco-friendly beauty products. Jessica Alba’s Honest Company /zigman2/quotes/226449347/composite HNST -1.60% was one the first brands to lead the way back when the state of clean beauty was both expensive and terrible. Not to mention that not everything natural is necessarily good, not to mention that some natural ingredients such as almonds are being overused and linked to deforestation.

Unveiled in 2015, revamped in 2018 when the company opened its in-house lab, it's been a bit more than two months after Honest made its public debut.

The IPO

Honest was able to sell nearly 26 million shares at $16 each (19.4 million of those coming from selling stockholders) raising $412.8 million at a reported valuation of $1.44 billion upon launch. With its public debut, the company's mission, "to drive the clean lifestyle conversation in the industry, inspiring everyone to love living consciously" accelerated to new heights. At the time of the IPO, the case was made for an established clean brand in its niche, a reasonable valuation and significant room for expansion. So why did the stock head in the wrong direction after its big first-day pop?

Q1 figures

Honest's share of the diaper market is under 1.5%. International revenue in 2020 was 2% of the company’s total, or in the range of just $6 million. There are new retail partners to find, and new doors and shelf space to add with existing distributors, with Honest citing success on both fronts with Target /zigman2/quotes/207799045/composite TGT +1.50% . Marketing spend rose $5 million YoY with revenue excluding the inventory transaction increasing about $5.3 million, our a significant part was due to the launch of the company’s new Clean Conscious Diaper so part of the return on that spend will be seen in the second quarter. Still, to some extent Honest paid up for at least some of its top-line growth.

Management warned on the call that consumption is outpacing shipments in the second quarter which means that some shipments slipped into the tail end of the first quarter. All told, looking closer the top line performance does not look nearly as strong as the 12% figure suggests.

There are also bottom line concerns. Adjusted EBITDA dipped from a $4.5 million profit the year before to a modest loss of $132,000.

In simple words, this is a company that still has a lot of work left to do. Despite being helped by the pandemic ‘big time’, 2020’s revenue of $300 million is less than four years ago. But then again, $28 million was forfeited by ceasing sales of ‘non-core’ products. However, even when this is taken out of the equation, annualized revenue growth rate was a low-single-digit.

Revenue increased 12% YoY and that growth came off the top of difficult compare: sales increased 36% YoY during the first quarter of 2020.

New packaging

The latest launch is a collection which also features sustainable packaging from compostable "tree-free" cartons made from upcycled sugarcane byproduct. Alba described secondary packaging as dope, because it's taking basically something that would be used as trash, sugarcane husks, and then turning it into paper. No one can disagree that turning garbage into something beautiful is pretty cool. This innovative packaging will be rolled out to other products as well. Yes, you’ve read it right: Honest Beauty products are wrapped by 100% recyclable or compostable carton, and completely tree-free as literally no trees were harmed.

The new range, which launched on July 19 [th] on Honest.com, uses the boxes, as well as aluminum tubes, tin compacts, glass, PCR and refillable jars. Additionally, all orders from Honest.com are now carbon-neutral. Moreover, that’s just a snapshot of the changes the brand is implementing,

The company, which launched direct-to-consumer, has an omnichannel approach and can be found in about 32,000 retail locations across the U.S., Canada and Europe, partnering with Costco /zigman2/quotes/201191698/composite COST +0.38% , Target and Amazon.com Inc /zigman2/quotes/210331248/composite AMZN +3.31% since 2013, 2014 and 2017, respectively, while continuously improving its website experience to better understand and track shopping behavior.

Takeaway

There's no arguing that Honest has clear opportunities for growth but until then, it needs either a cheaper price or accelerated growth to kick in. Revenue growth has been solid, but the pandemic fueled 2020 results and the long-term trend looks far more muted. Despite being a brand ahead of its time and definitely worth watching, Honest still needs to impress with its figures.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full . IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact:

The post A Sustainable Beauty Story That Needs Financial Fine-Tuning appeared first on IAM Newswire .

COMTEX_390608887/2618/2021-07-29T09:50:17

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/zigman2/quotes/226449347/composite
US : U.S.: Nasdaq
$ 9.24
-0.15 -1.60%
Volume: 439,163
Oct. 15, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$834.12 million
Rev. per Employee
$1.57M
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/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 245.71
+3.62 +1.50%
Volume: 3.63M
Oct. 15, 2021 4:02p
P/E Ratio
19.58
Dividend Yield
1.47%
Market Cap
$119.92 billion
Rev. per Employee
$228,756
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/zigman2/quotes/201191698/composite
US : U.S.: Nasdaq
$ 452.39
+1.73 +0.38%
Volume: 1.49M
Oct. 15, 2021 4:00p
P/E Ratio
40.15
Dividend Yield
0.70%
Market Cap
$199.88 billion
Rev. per Employee
$680,309
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,409.02
+109.16 +3.31%
Volume: 5.18M
Oct. 15, 2021 4:00p
P/E Ratio
59.41
Dividend Yield
N/A
Market Cap
$1726.47 billion
Rev. per Employee
$297,430
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