Los Angeles, CA
www.honest.com

Sales: $320 million (estimated)

With its initial public offering in May, The Honest Company, Inc is now trading on the Nasdaq Global Select Market under the ticker symbol HNST.  The company, which was founded by co-founded by Jessica Alba in 2012, was valued at $1.9 billion in its Wall Street debut, after its shares opened 33% above their offer price.

On its opening day, Alba said to current and future investors that her company would “passionately prioritize the health and well-being of people and the planet. We’ll fearlessly challenge the status the quo and innovative to deliver on our mission. And will continually push to be the best version of our selves. We are here to create an honest world and we are just getting started.”

Honest released its first Q1 fiscal earnings on June 16. Revenues were $81.0 million, up 12% from the same quarter of 2020. Sales of diaper and wipes, Honest’s largest segment, rose 2%. Skin and personal care revenues rose 42% to $26.2 million. Household and wellness revenue increased 53% to $5.2 million, driven by sales from its sanitization and disinfecting products introduced in the second half of 2020.

In personnel moves, Honest named Kelly Kennedy as its chief financial officer. She had most recently been CFO for Bartell Drugs where she spearheaded strategic shifts in the business to roll out updated financial practices and completed a successful transaction, selling the company to Rite Aid in October 2020. Also, James White, former chairman, president and CEO of Jamba, Inc., and Susan Gentile, chief financial and administrative officer of H.I.G. Capital Management, joined the board of directors.

Los Angeles, CA
www.honest.com
Sales: $315 million

Sales: $315 million (estimated).

It has been a little over a year since The Honest Company received a $200 million strategic minority investment from private investment firm L Catterton. At the time, the two firms said the infusion would help “accelerate The Honest Company’s innovation initiatives as well as provide access to operational capabilities that will bolster its supply chain and global reach.”

“L Catterton is the right partner for The Honest Company based on its expertise and extensive resources which will fuel our evolution into an iconic global brand,” said CEO Nick Vlahos in June 2018. “We will continue to execute against our strategy, which includes focusing our business on the baby and beauty categories. This investment will enhance our next chapter and accelerate the realization of our vision for the future.”

Around the same time, Honest also announced that it had inked a deal with Douglas, a leading beauty retailer in Europe with more than 2,500 stores, which would roll out Honest Beauty products to seven European countries in Spring 2019.

Founder Jessica Alba has been working hard to make women a greater part of the Honest team. According to reports, she has increased the percentage of women on the leadership team from 15% to 60%. She also developed an internal group called Women Excelling in Leadership and Living, known as WELL. In November 2018, Katie Bayne, a long-time Coca-Cola executive, was appointed to the board of directors.

One of Honest Company’s co-founders, Christopher Gavigan, has moved on from diapers and personal care to CBD. He has co-founded Prima, which offers a supplement and two skin care products formulated with the hot ingredient. Laurel Angelica Myers, who was also part of the Honest team, is also listed as one of Prima’s co-founders.

Los Angeles, CA
www.thehonestcompany.com

Sales: $300 million (estimated).

It’s been more than a year since Nick Vlahos came over from Clorox to turn around the fortunes of The Honest Company, which was once the darling of investors and environmentally-conscious consumers. Vlahos started his tenure by cutting 80 jobs in the first quarter of 2018.

According to the company, under his leadership, Honest has achieved double-digit retail growth of its diaper business and has doubled its distribution as well as its rate of innovation. Now, The Honest Company is realigning its business in the categories and segments where global consumers and retailers are demanding more natural offerings—baby and beauty—and focusing its operations to ensure efficiency. By the end of the year, The Honest Company maintains that it will launch more than 80 new and improved baby and beauty products including the company’s most significant diaper innovation since its inception and a reimagined lineup of high-performance clean beauty products.

Some investors certainly like Vlahos’ progress. Last month L Catterton made a $200 million investment to fund innovation initiatives as well as provide access to operational capabilities that will bolster its supply chain and global reach.

In other news, Honest reached an exclusive retail distribution partnership with Douglas, the No. 1 beauty retailer in Europe with more than 2,500 stores. This partnership will bring the full Honest Beauty line to seven European countries starting in spring 2019.

Los Angeles, CA
www.thehonestcompany.com

Sales: $330 million (estimated) for household and personal care products.

This year, Target introduced Honest Beauty to its beauty aisles and Target.com. Launched by The Honest Company in 2015 and known for its commitment to offering products that utilize a mix of botanically-derived ingredients backed by innovative science, Honest Beauty makes it easy for anyone to achieve beautiful, lasting looks and effective results. With most items retailing for under $34, the collection at Target includes a variety of skincare and cosmetic products, ranging from facial cleansers to crème blushes. Honest Beauty is launching for the first time at mass in select Target stores, with an expanded assortment online at Target.com, beginning March 26, 2017.

In other news, the Honest Company recently named a new CEO. Nick Vlahos, who previously oversaw natural personal care at the Clorox Company, will replace Brian Lee. Lee’s background, which includes leading online legal advice site Legal Zoom and online shoe seller ShoeDazzle, will remain on Honest’s board and continue to act as an advisor, according to reports.

Los Angeles, CA
888.862.8818
www.thehonestcompany.com

Sales: $150 (estimated) for household and personal care products. Corporate sales: $300 million.

Star-power sells movie tickets and baby wipes, apparently. Jessica Alba’s The Honest Co. may be shifting into sell mode, in addition to the original plan for an initial public offering.

The company hired Morgan Stanley and Goldman, Sachs & Co. to explore an IPO, but now is also said to be considering an M&A transaction, considering the continued coolness of the public markets, according to sources. The shift is a logical one given the volatility of the stock market, though several financial experts suggest Honest may still decide to float shares. Many companies that mull a public offering simultaneously contemplate a sale as part of a dual-track process. The final decision generally depends on which option provides a higher valuation.

Industry sources are somewhat divided on which is the more likely route, but most think that in today’s market, a sale would be the better option. “Given the scale of the company and the volatility in the capital markets, my guess would be a deal would probably be more attractive than the IPO,” said Martin Okner, managing director at SHM Corporate Navigators.

“Usually a strategic buyer who sees synergies and the ability to really grow distribution or new product can pay a premium,” said Andrea Weiss, founding partner at The O-Alliance.

Given Honest’s focus on household and baby products, potential buyers could include Procter & Gamble, Johnson & Johnson, Kimberly Clark, Unilever, Colgate and L’Oreal, sources said. Acquiring Honest would give a strategic buyer points of business in new channels and products with high margins, Okner said.

Valuations for consumer goods companies can run to two or 2.5 times sales. For something with a huge growth trajectory, which Honest is seen as having, those multiples could climb as high as three or 3.5 times, Okner said. With sales between $250 million and $300 million, according to sources, Honest could end up with a $500 million valuation on the conservative side, or $1.05 billion valuation on the higher side.

Honest has about $222 million in venture capital backing. Its most recent round in 2015 valued the company at about $1.7 billion—which is enough to deter further VC investors from putting more money in, financial experts have said.

An Honest Co. spokesperson said the company doesn’t comment on matters related to its capital structure. Goldman and Morgan Stanley declined to comment.

There are those, though, who believe that if—a big if—the stock market becomes more solid, floating shares would still be the best option. “The IPO route is still the more likely scenario, assuming the equity markets are there to support it, and there has not been a slowdown in performance as a result of recent events,” said Ilya Seglin, managing director at Threadstone Advisors. “M&A negotiations will get more complicated around discussions related to current and any future legal liabilities.”

As Honest has been on its rapid rise, it has come up against some issues. The firm faces allegations that its SPF 30 Sunscreen is not effective, and that products it claims are “natural” contain synthetic chemicals. The company has said the allegations are without merit.

Despite widespread media coverage, those claims haven’t hurt Honest all that much, sources said.

“The brand is almost on the cusp of being bigger than the lawsuits and the negative press around it,” said Okner. “It’s been in the press now for months and it hasn’t had a material impact on sales at this point.

“This particular company I would categorize as being the Annie’s Organic of home and care,” she said, referring to the food brand that set a high mark in the IPO market.

The reason the lawsuits aren’t causing the company more damage is in part due to Alba’s star power—consumers see her as someone with “young mother credibility,” Weiss said. “Her personal presentation…is very consistent with the value proposition of the product.”

If a deal materializes, industry experts expect Alba would stay on as the face of the brand for a few years, likely as a term of the deal.

Despite what industry insiders say is a solid growth record, the lawsuits could potentially affect the selling price of the company.

“It will potentially affect price because people will incorporate settlement costs into the value of the company,”  Weiss said.

The company started Honest Beauty in 2015, and the line launched in Ulta stores in February.