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$208.61 5.7  2.8%

Last Trade - 13/05/21

Sector
Consumer Cyclicals
Size
Large Cap
Market Cap £73.88bn
Enterprise Value £76.85bn
Revenue £66.59bn
Position in Universe 121st / 6851

BREAKINGVIEWS-Honest is a baby consumer firm on the make

Mon 12th April, 2021 7:43pm
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.) By Jennifer Saba NEW YORK, April 12 (Reuters Breakingviews) - On the celebrity health craze spectrum, Jessica Alba gets credit for launching a solid business. The actor, who starred as the Invisible Woman in Marvel’s “Fantastic Four” series, is just as famous for her startup The Honest Co. The company, which targets eco-conscious parents with baby, cleaning and other products, is going public. It could get gobbled up by a larger competitor, too. The risk is that the brand’s perceived advantage of transparency could easily soil. Alba started Honest in 2012 after a fruitless quest for hypo-allergenic consumer goods for her children. So Honest is about disrupting traditional giants like the $336 billion Pampers-maker Procter & Gamble PG.N . Indeed, diapers and wipes are Honest’s biggest sellers, accounting for 63% of last year’s revenue. It also offers skin and beauty products as well as household cleaning items pitched at anyone worried about unnatural ingredients. The brand is sold online and through partnerships with retail chains Target TGT.N , Costco Wholesale COST.O and Amazon.com AMZN.O . Last year the top line gained 28% to $301 million. But it lost money and it doesn’t manufacture its own products, relying on third parties to churn out shampoos and other items. Most expenses are related to marketing and salaries. Meanwhile, research and development made up around 5% of last year’s operating expenses. But Honest’s top line is growing much faster than P&G, Clorox CLX.N – owner of earth-friendly Burt’s Bees – and Reckitt RKT.L . The big guys enjoyed a Covid-related bump in sales, though nowhere near Honest’s. That probably makes Honest worth more on an enterprise value-to-sales metric than P&G or cosmetic maker Estee Lauder EL.N , which are both valued at 5 times and 7 times trailing 12 months revenue, respectively. At, say, 10 times sales, it could be worth around $3 billion. While pricey, that makes it an easy bite for larger peers on the hunt for niche startups. Unilever ULVR.L , for instance, snapped up crunchy paper company Seventh Generation in 2016 for some $700 million. Honest’s brand hasn’t always passed the smell test. The company settled multiple class-action lawsuits over misleading ingredients related to its sunscreen and other products. In the end, Honest’s value will be judged on Alba’s ability to keep it real. On Twitter https://twitter.com/jennifersaba CONTEXT NEWS - The Honest Co, a consumer packaged goods company founded by actor Jessica Alba, filed to go public on April 9 with the U.S. Securities and Exchange Commission. - The company was launched in 2012 and sells clean and sustainable baby products, including its biggest revenue category, diapers and wipes. - Honest said revenue in 2020 increased 28% year-over-year to $301 million. It reported a loss of $15 million last year compared to a loss of $31 million in 2019. - For previous columns by the author, Reuters customers can click on SABA/ <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Jessica Alba's Honest Co files for U.S. IPO urn:newsml:reuters.com:*:nL4N2M23RS S-1 https://www.sec.gov/Archives/edgar/data/0001530979/000119312521111539/d27841ds1.htm#toc BREAKINGVIEWS-Unilever finds better recipe with new growth focus urn:newsml:reuters.com:*:nL4N2HD1ZS BREAKINGVIEWS-Unilever’s latest race row shows drawbacks of size urn:newsml:reuters.com:*:nL8N2G54RW BREAKINGVIEWS-How to play the post-Covid return to getting it on urn:newsml:reuters.com:*:nL8N2M53Z8 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | Editing by Rob Cox and Amanda Gomez) ((jennifer.saba@thomsonreuters.com; Reuters Messaging: jennifer.saba.thomsonreuters.com@reuters.net))
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