Honest Company (HNST) stock drops as face masks come off – Fast Company

The Honest Company’s stock is suffering after a quarterly earnings report disappointed investors with greater-than-expected losses, in part due to weakening sales of pandemic must-haves like hand sanitizer and face masks.

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The company’s share price tumbled over 40% early Friday, and is hovering at around a 24-point drop as of midday.

In its Q4 report Thursday, the Honest Company revealed it lost 10 cents per share year-over-year, compared to analyst predictions of 6 or 7 cents per share. The loss was driven by a steep decline in revenue from the household and wellness category, which fell by 68%, or $9.7 million. Of that, “$8.6 million was a result of reduced COVID-19 related consumer demand for sanitizing and disinfecting products and face masks,” said the report. Household and wellness items represented 5% of the company’s total revenue in 2021.

Founded by actress Jessica Alba, and marketed as a natural and health-focused purveyor of myriad body-related products (for babies and beauty junkies), The Honest Company launched hand sanitizers and various disinfectant sprays and wipes in the latter half of 2020, at the height of the pandemic-fueled cleaning craze. The products took off as people tried to sterilize everything they owned without having to inhale volumes of toxic chemicals or release destructive fumes into the environment.

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Perhaps troublingly, the most recent quarter’s drop-off in demand for face masks and such happened just as winter brought huge surges in cases of COVID’s omicron variant. But now that we’re over the spike, it seems unlikely that demand will recover. Looking at the big picture, it may be a net positive for the world, as studies have shown how vast quantities of disinfectant are hazardous to humans, animals, and plants.

But for Alba’s organics bazaar, it may need to regroup. The company did report sales growth in its diaper and skincare departments, despite supply-chain challenges, and an overall growth in revenue. In future guidance, it said it would hike prices on roughly two-thirds of its products to offset rising inflation.

The company rang its IPO bell on the Nasdaq in May of last year, and has lost nearly 80% since then.

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