Sources: sales at Jessica Alba's Honest Company, which reached $300M in 2016, were flat in 2017; CEO says firm is culling products to focus on core categories
Sales fell flat in 2017, hurt by recalls and product changes; new CEO says startup is 'getting out of businesses we can't win in' Tweets: @wsj Tweets: The Wall Street / @wsj : After battling moldy baby wipes and other issues, Jessica Alba's Honest Co. has struggled to grow http://www.wsj.com/...
Context & Ripple Effects
The Honest Company's arc has been a steady deflation from its peak: after the $100M raise at a $1.7B valuation in 2015 and work with Goldman Sachs and Morgan Stanley toward an IPO, the company returned to market last October raising $75M at a valuation below $1B — a 57% markdown from its Series D.
Now the WSJ reports sales were flat in 2017 against $300M in 2016, hurt by recalls and quality problems like moldy baby wipes, and the new CEO is responding by exiting product lines the company can't win in. The story matters because it converts a valuation reset into an operating strategy: shrink to core categories rather than chase growth.
First-order effects
- Honest Co.'s new CEO is cutting non-core product lines outright, directly shrinking the catalog that drove the $300M revenue base and redirecting resources to categories where the brand still competes.
Second-order effects
- Rivals in natural baby and household products inherit customers from Honest's exits, while the recalled-product damage makes quality assurance a competitive weapon across the category.
Third-order effects
- The pattern — a celebrity-founded subscription commerce startup going from $1.7B valuation to sub-$1B down round to retrenchment — raises the bar for how investors underwrite founder-brand consumer companies, tying valuations to repeatable operations rather than fame-driven acquisition.
The trend: Celebrity-backed direct-to-consumer brands are entering a consolidation phase in which quality failures force portfolio cuts and valuation markdowns replace growth-at-all-costs fundraising.