Can New CEO From Amazon Reverse Jessica Alba’s Honest Co Stock Slump?

With Jessica Alba’s Honest Co. stock down 80% since its IPO 17 months ago, drastic action was needed.

As such, and signaling a new direction for the diaper and skincare brand, Honest Company said it is bringing in Amazon CPG specialist Carla Vernón to take over as CEO.

The move will see current CEO Nick Vlahos stepping into a board post, with Vernón stepping in as of Jan. 9, 2023.

In the announcement, Vernón said, “This brand was built to bring a rumble of change across industries, leading the way to bring clean and ethical products to the mainstream. And we will continue doing that with products designed in new and better ways that meet today’s and tomorrow’s needs.”

Rumble or Tumble?

Launched as a digital-first D2C business by actress and entrepreneur Jessica Alba in 2012 and building a fanatical following for its chemical-free products and after a much-hyped May 2021 IPO, the company immediately ran into problems with sluggish sales and a lawsuit claiming Honest Co. executives made “false and misleading” statements in the run-up to going public.

The stock briefly hit a high of $23 a share on their opening day, with Alba ringing the bell at the NYSE to mark the much-hyped trading debut, but have been heading down ever since. The market cap has fallen from $2 billion to less than $400 million, and the stock price has slipped to around $3 per share.

In fairness, early response to the new hire news was well received with investors bidding up the battered stock by 10% in Wednesday (Dec. 14) trading.

The Honest Company Expands Distribution With Walmart Deal

“Carla is widely recognized as a transformational leader and purpose-driven executive,” Honest Co. Chairman James White said. “She brings invaluable experience scaling and energizing businesses, developing and executing successful omnichannel strategies, and fostering diverse and inclusive workplace cultures,” he added.

Vernón left a 21-year career with General Mills to become vice president, consumables categories at Amazon in early 2021, where she began working with the brand as it sought online and brick-and-mortar expansion amid sliding D2C sales.

For its part, The Honest Company has spent the past year pursuing partnerships seeking to add brick-and-mortar distribution to its mix, which led to pacts with Walmart, Target, Ulta Beauty and GNC, and trying to diversify its business and break its reliance on its premium-priced diapers that have struggled at a time of decreased household spending.

Honest Co. Hopes Retail P’ships With Walmart, Ulta, and GNC Will Reverse Sales Slump

Honest About Scaling

Speaking at the Morgan Stanley Global Consumer and Retail Conference in November, outgoing CEO Nick Vhlaos said, “we’ve picked up about 2,500 Walmart stores over the last couple of months that we’re going to be scaling into 2023. We’ve picked up over 1,000 Publix stores in the southeast. This is a business that’s 50% digital and 50% retail roughly right now. We truly have this omnichannel experience” forecasting 7% to 10% growth in the first half of 2023.

He added that “what we’re seeing from a consumer perspective is we’re driving new distribution, and we’re driving additional footprint within the marketplace. We’re seeing that throughput from a consumption standpoint, because again, on the retail side of the business, this is where we’re really scaling right now. We’ve always had kind of a digital piece, but as consumers have now gravitated more into retail,” its strategy is leaning more into omnichannel.

In its third-quarter 2022 earnings report in November, The Honest Company reported record revenue of $85 million, but added that “revenue growth was negatively impacted by 8 percentage points due to a prior-year Skin and Personal Care rotational program with a key club retailer that did not repeat this year.”