The Honest Company entered 2026 having completed several major portfolio and channel exits as part of its “Powering Honest Growth” transformation, which management said has narrowed the business to its core “right to win” categories: wipes, personal care, and diapers. On the company’s fourth-quarter and full-year 2025 earnings call, executives emphasized that these changes have produced a leaner operating model and set the stage for organic growth and margin expansion.
Strategic exits reshape reported results; organic growth remains positive
Carla Vernón, chief executive officer of Honest (NASDAQ:HNST), said the company has exited Honest.com as a direct-fulfillment website, the apparel category, and its Canadian business. With the streamlined structure, management said it has also “right-sized” SG&A and expects additional efficiency later in 2026 as it consolidates its warehouse footprint.
In the fourth quarter, reported revenue was $88 million, down 11.8% year over year, again largely due to the exits. Organic revenue rose 0.7% to $71.3 million as wipes and personal care strength offset continued diaper declines. Vernón said organic momentum improved in the second half of the year, noting Q4 organic revenue returned to growth after lapping two retailer-specific activations that were largely contained to Q3 2024.
Wipes and personal care drive share gains as diapers remain challenged
Management pointed to strong consumption trends in wipes and personal care during 2025. Vernón said total company consumption grew 5% for the year, driven by double-digit unit growth and outpacing comparative category growth of 2%.
- Wipes: Management reported consumption growth of more than 30% in 2025. Vernón highlighted the all-purpose baby wipes collection, which she said grew consumption 25% and delivered the largest dollar share growth of any all-purpose baby wipes brand.
- Personal care: The personal care portfolio posted 12% consumption growth in 2025, according to management.
- Diapers: Vernón said diapers posted double-digit consumption declines, driven by retail assortment shifts at select brick-and-mortar retailers, lapping two large promotional events, and consumers trading down amid macroeconomic pressures.
On diapers, Vernón described the broader category as volatile, noting the diaper category was down 1% in 2025. She added that when excluding Target performance, Honest’s diaper consumption grew 2% for the year. Still, she said 2026 is expected to be “another challenging year” for the company’s diaper business, with ongoing macro uncertainty, aggressive moves by lower-priced competitors, and continued portfolio simplification.
Vernón also discussed the brand’s price premium, stating Honest diapers generally carry a 20% to 30% premium on average. She said the company is working to strengthen the value equation through investment in pricing and changes to price-pack architecture, while maintaining quality and clean standards.
Innovation and household expansion beyond baby
Looking to 2026, management outlined growth priorities centered on brand maximization, margin enhancement, and operating discipline. Vernón said Honest aims to continue growing in baby while also accelerating growth in households beyond those with babies, noting that 89% of U.S. households do not have children under age six.
Vernón cited Numerator data indicating 54% of current Honest buyers are in no-kid households. She described plans to expand into the “big kid” section of the store, including a Disney•Pixar Toy Story partnership featuring a six-item bath lineup that launched at Walmart and online, with additional retailer rollouts expected ahead of the Toy Story 5 release this summer.
Management also pointed to non-baby momentum in wipes, highlighting adult flushable wipes, which Vernón said grew consumption by 175% in 2025 and reached the top five in Amazon’s personal cleansing wipes set. The company has expanded brick-and-mortar distribution, including rollouts at H-E-B and Target in 2025 and a launch into Walmart stores earlier this month, according to management.
Margins, restructuring costs, and balance sheet strength
Honest’s fourth-quarter GAAP gross margin was 15.7%, down from 38.8% a year earlier, primarily due to a discrete inventory write-down tied to the apparel exit, Bruce said. On an adjusted basis, gross margin was 38.3% for Q4, generally in line with the prior-year period. For the full year, GAAP gross margin was 33.3% versus 38.2% in 2024, while adjusted gross margin improved 50 basis points year over year to 38.7%, which management attributed largely to favorable mix.
Operating expenses in Q4 increased $2 million year over year due to $4.2 million of restructuring costs, partially offset by lower SG&A driven by reduced legal expense, Bruce said. Full-year operating expenses declined by $9 million, reflecting lower SG&A, partially offset by restructuring costs and increased marketing investment.
The company reported a Q4 net loss of $23.6 million and a full-year net loss of $15.7 million, with management attributing the change primarily to one-time transformation costs. Adjusted EBITDA was $3.8 million in Q4 and about $22 million for the full year, compared with $25.9 million in 2024.
Honest generated free cash flow of $13.6 million in 2025, up from $1 million in the prior year, which Bruce said was driven by working capital improvements. The company ended 2025 with $89.6 million in cash and cash equivalents and no debt.
2026 outlook and share repurchase authorization
For 2026, management guided to organic revenue growth of 4% to 6%, while reported revenue is expected to decline 18% to 16% due to the previously completed exits. Honest expects adjusted gross margin in the low 40% range and adjusted EBITDA of $20 million to $23 million.
Bruce said the company expects sequential improvement in organic growth throughout 2026, with difficult comparisons in the first half—particularly Q1—due to retailer inventory buildup ahead of tariffs in early 2025. He also said tariffs will remain a year-over-year headwind until they enter the base period beginning in Q2. Supply chain savings are expected to materialize in the second half as the company consolidates from two fulfillment centers into a Las Vegas facility designed for automated large-scale retail fulfillment.
Management also announced that the board authorized a $25 million share repurchase program. Bruce said the authorization is open-ended with no specific time horizon and that the company intends to be opportunistic, citing a belief that the current valuation does not reflect the transformation’s structural improvements.
About Honest (NASDAQ:HNST)
The Honest Company, Inc (NASDAQ: HNST) is an American consumer goods firm specializing in eco-friendly and responsibly formulated products for babies, personal care, beauty and home cleaning. The company emphasizes transparency in ingredient sourcing and product safety, positioning itself in the premium segment of mass-market retail and direct-to-consumer channels.
Honest was founded in 2011 by actress Jessica Alba and environmental health advocate Christopher Gavigan with a mission to offer parents household and baby care items free from harsh chemicals and synthetic fragrances.
