The Honest Company to raise prices amid growing losses

Dive Brief:

The Honest Company reported its fourth quarter revenue increased by 2% year over year to $81.9 million, according to a Thursday press release. Gains from price increases and retail consumption were offset by a decline in its digital revenue, which decreased by 14% in Q4.
Net loss for the quarter increased 40% year over year from $9 million to $12.6 in Q4, while gross margin decreased from 30% to 27.5% in part due to higher fulfillment and product costs. Revenue from The Honest Company’s retail network increased by 18% thanks to new wholesale partnerships and increased traffic, per the release.
While the company already raised prices in 2022, CFO Kelly Kennedy told analysts on a Thursday call that it will enact “mid to high single-digit price increases” in the second half of 2023 across product categories.

Dive Insight:

Marking the first earnings report for the Honest Company’s new CEO, Carla Vernón, the executive made it clear how she felt about Q4’s results.

“We are not satisfied with the revenue and margin results announced today,” Vernón said in a statement. “We do not believe they reflect the strength and potential of the Honest brand. In 2023, we will be relentlessly focused on taking actions and defining a strategy to set us up to be a stronger, more profitable Company in 2024 and beyond.”

Vernón took on the chief role in January, after Nick Vlahos stepped away from the position after six years to move to the company’s board of directors. The CEO transition cost about $5.8 million, contributing to a $2.6 million increase in operating expenses year over year for The Honest Company.

Looking ahead to its fiscal year 2023, the company expects revenue and adjusted EBITDA would be in-line with its 2022 results. The Honest Company reported a 2% decrease to $314 million in revenue for the full 2022, with digital revenue declining by 10% and retail revenue increasing by 7%.

The Honest Company worked on expanding its retail partnerships in 2022. In July, it announced a wholesale deal with Walmart and just a couple of weeks later announced it would be selling its beauty line through Ulta.

The brand — founded by actress Jessica Alba — went public in 2021 with an IPO target of $100 million. The Honest Company already sold through mass retailers like Amazon and Target at the time, with about 45% of revenue in 2020 coming from retail partners and their websites.