The Honest Company Files for IPO

The Honest Co., the consumer-products company founded by actress Jessica Alba, has filed for an initial public offering. The Los Angeles-based company filed to sell $100 million worth of shares, although observers note the figure is often used as a placeholder to calculate filing fees. 

In its prospectus, Honest said its sales grew 27.6% to $300.5 million in 2020, from $235.6 million in 2019. It lost $14.5 million in 2020, or 85 cents a share, compared with a loss of $1.83 a share in the previous year. The company has never been profitable. In fact, in its prospectus, the company admitted, “…we may not be able to achieve or maintain profitability in the future.” 

Last year, while all product categories grew from 2019 to 2020, The Honest Co.'s household and wellness revenue increased by 116.5% to $32.5 million. The company credits the gain to sales from the sanitization and disinfecting products that we introduced in 2020, in particular through the retail channel.
 

“Authenticity is our authority,” the company said. “When the COVID-19 pandemic hit and we went into lockdown, people became more aware of their health and what they bring into their homes. Honest never wavered in being there for them.”

Well, not quite. In 2017, the company  settled a lawsuit that claimed it fraudulently labeled some of its products as “natural,” “plant-based,” or “no harsh chemicals (ever!).”

Overall, diapers and wipes accounted for 63% of the company's total 2020 revenue. Last year's revenue growth was driven in part by a bump in digital sales, which represented 55% of its revenue. Digitally-native brands like Honest, which sells products on Honest.com and digital retailers like Amazon, benefited from a overall shift to ecommerce last year as brick-and-mortar stores shut down during the coronavirus pandemic. US e-commerce sales jumped 32.4% in 2020 to $791.7 billion, according to the US Census Bureau.

“We see consumers increasingly self-educating on the benefits of clean and natural products through social media, influencers and other online content, driving digital engagement and purchasing that supports continued outsized growth of the ecommerce channel,” the company wrote in its prospectus.

The Honest Company got its start in 2012 when Alba has linked up with Christopher Gavigan, Brian Lee and Sean Kane to launch an eco-friendly line of family essentials offered through a monthly subscription service at Honest.com. At the time of the launch, the founders contended they were “committed to making safe, sustainable products more convenient, beautiful and affordable,” and whould offer consumers products ranging from personal care to baby needs like diapers wipes to household cleaners.

“I've spent way too many hours researching products and driving around trying to find safer, eco-friendly options for my kids,” said Alba at the launch. “I knew that most people didn't have that kind of time, nor the means to pay the premium prices. We had to make it easier.”

The Honest Company's biggest shareholders include L Catterton, IVP, Lightspeed Venture Partners, Fidelity, and General Catalyst.