What happened
Shares of The Honest Company (HNST +3.38%), a consumer staples maker that operates in the personal care, beauty, baby, and household products spaces, fell dramatically at the open of trading on Friday, losing as much as 30% of the value in the first few minutes of the market day. The big news was the company's Thursday earnings release, which hit the market after it had closed that day. Investors were not pleased.
NASDAQ: HNST
Key Data Points
So what
At first blush, The Honest Company's fourth-quarter 2021 results weren't all that bad. Sales came in at $80.4 million, up 3% versus the $77.9 million it recorded in the same quarter of 2020. In 2019, prior to the coronavirus pandemic, Q4 revenue was $63.8 million, with the current period representing a 26% increase over that figure. Clearly, the company is still growing, even after taking into account the temporary pandemic-driven demand boost in 2020. On the bottom line, The Honest Company reported a Q4 2021 loss of $0.10 per share, which was an improvement over the loss of $0.37 per share in the comparable quarter in 2020. So far, there's not too much to be upset about, noting that the company, with a market cap of just $400 million or so, is still a small and growing name.
Image source: Getty Images.
The problem here is that Wall Street had been hoping for more. On the top line, the consensus estimate was for revenue of $84.7 million. On the bottom line, analysts were calling for a loss of $0.07 per share. In other words, The Honest Company missed on both the top and bottom lines, and investors really don't like it when that happens. Management specifically noted that growth in core areas was offset by weakness in sanitizing and disinfecting products, which benefited from consumer demand during the pandemic.
Now what
To be fair, managing to increase revenue at all after the huge surge in demand for certain products during the pandemic is actually pretty notable. That said, when discussing the full-year 2022 outlook, management was only looking for sales to be flat. A relatively weak first quarter is expected to be supported by stronger quarters throughout the rest of the year. Inflation and supply chain concerns were also voiced, issues to which investors are hypersensitive today. So it really isn't shocking that there was a dour mood here today.
