The Honest Company, a US-based digitally native consumer products company born in the Gen Z era, has reported a 2 per cent decrease in revenue to $314 million in fiscal 2022 (FY22), compared to FY21. The company cited a reduction in shipments to a key digital partner and lower traffic to its website as reasons for a 10 per cent decline in digital channel revenue, partially offset by a 7 per cent growth in retail channel revenue due to increased retail distribution and price increases.

Gross margin also decreased approximately 480 basis points to 29.4 per cent, mainly due to inflationary pressures in product and fulfilment costs, and higher trade spending to support retail distribution gains, offset by cost savings and price increases. Operating expenses decreased by 3 per cent due to lower marketing expenses, the company said in a press release.

The Honest Company's net loss for FY22 was $49.0 million, compared to a net loss of $38.7 million in 2021. Adjusted EBITDA was negative $22.5 million, compared to negative Adjusted EBITDA of $3.5 million for the full year 2021.

In the fourth quarter of FY22, revenue increased 2 per cent year-on-year (YoY) to $81.9 million, driven by strong retail consumption, distribution gains, and price increases, partially offset by a decline in the digital business. However, gross margin decreased to 27.5 per cent YoY due to higher fulfilment and product costs and inventory write-offs and reserves of $2.5 million.

Digital revenue in Q4 FY22 decreased 14 per cent YoY as customer orders lagged consumption and the company shifted marketing spend to higher return opportunities to support retail expansion. Furthermore, retail revenue increased 18 per cent YoY as a result of new distribution at several retailers.

Revenue from diapers and wipes (61 per cent of total Q4 FY22 revenue) increased 1 per cent YoY in Q4 FY22. Revenue from household and wellness (11 per cent of total fourth quarter 2022 revenue) increased 101 per cent YoY driven by the integration of Honest Baby Clothing in the third quarter of 2022.

Net loss for the fourth quarter of FY22 was $12.6 million, compared to net loss of $9 million in the Q4 FY21, while the adjusted EBITDA was negative $1.6 million.

The company anticipates that its FY23 revenue and adjusted EBITDA will be in-line with FY22 results without taking into account the margin improvement roadmap currently being formulated, the release added.

“Honest’s mission to provide purpose-driven and purpose-designed products that reflect an ever-diversifying set of consumers is as meaningful today as when it was launched 11 years ago. Since joining Honest, just over two months ago, I've been impressed with the quality of the products, the strength of the brand, and the commitment of our teams and partners,” said chief executive officer, Carla Vernon. “Honest is a brand with a demonstrated ability to deliver mission-driven innovation and lead growth with the high-quality products our consumers love and value. That legacy will remain our North Star as we build a glide path to a stronger and more profitable Honest in 2024.”