Consumer products firm The Honest Company said it has broken its revenue record this quarter.
The company, which sells merchandise in categories such as baby care, beauty, personal care, wellness and household care, announced its third-quarter results on Wednesday (Nov. 8), saying that revenue had grown 2% to $86 million. The company attributed the growth to “strong retail consumption, growth in the digital channel, strong baby clothing performance, and the benefit of price increases, offset by exiting low-margin items in the club channel.”
The Honest Company also noted it had the highest gross margin in two years.
“Our Transformation Initiative, which we initiated at the beginning of the year, continues to drive strong performance. The three pillars of the initiative — Brand Maximization, Margin Enhancement, and Operating Discipline — were evident in our third quarter results,” said Chief Executive Officer Carla Vernón in a statement.
“The rigor we’re applying across the business, reflected in well-executed pricing, cost savings initiatives, and disciplined portfolio management, provides us positive momentum as we finish the fiscal year,” she added.
The company’s revenue by channel showed a 19% increase in digital revenue, supported by double-digit growth at its key digital customer. However, retail revenue decreased by 9% due to a shift in timing of shipments at a key retailer and a reduction in sales of low-margin items in the club channel, the release said. Despite the decline in retail shipments, the company experienced 27% growth in tracked channel consumption.
Looking ahead, The Honest Company has revised its outlook for the fourth quarter of 2023, expecting a low-single-digit increase in revenue compared to the fourth quarter of 2022. For the full 2023, the company said it expects a mid-single to high-single-digit increase in revenue and adjusted EBITDA in the range of negative $15 million to negative $18 million.
The Honest Company’s growth in its digital channel points to a shift in consumer preference toward online shopping.
PYMNTS Intelligence has found that as this trend grows, the share of retail in-store spending could drop as nearly a third of consumers expect to shop more on digital channels.
In the study “Tracking the Digital Payments Takeover: Catching the Coming eCommerce Wave,” a PYMNTS and Amazon Web Services (AWS) collaboration, a survey of nearly 3,000 U.S. consumers found that consumers who do shop online tend to spend more than their in-store counterparts.
“Consumers who buy retail items online spend an average of $42 more per purchase than consumers who buy their retail items in-store, representing a 48% increase,” PYMNTS reported in June.