Honest Company (HNST) Q2 FY26 earnings call: guidance and Q&A

Clarification on whether full-year profit guidance includes the tariff refund, and expectations for marketing/SG&A spend in the back half, including ROI.

Curtiss Bruce clarified that adjusted gross margin guidance includes both tariff benefits and apparel liquidation impact, emphasizing underlying performance. He stated that marketing and SG&A investments would step up in H2, focusing on wipes and personal care to drive household penetration and on capabilities for scaling. Carla Vernon added that marketing is working well, citing 8% consumption growth and successful campaigns for Toy Story, flushable wipes (targeting no-kid households), and a portfolio-covering campaign.

“We will be investing, as the remarks said, we started off with marketing investment against both wipes and personal care. We will continue to focus on those 2 categories to drive additional household penetration in the second half. It will be a step-up both in dollars and a percent basis.”

asked by Aaron Grey · answered by Curtiss Bruce

Rationale behind switching to an apparel licensing model and expectations for the segment's evolution beyond 2026.

Curtiss Bruce explained that the licensing model aligns with the company's asset-light strategy, allowing participation in the apparel category with low capital intensity and margin-accretive propositions. He expressed excitement about the new partner but declined to speculate on longer-term financial impact.

“Our strategy of this enterprise being asset-light and so the licensing model really lives into our asset-light DNA. And so we're excited to be able to be in the apparel business for consumers who love the Honest brand for babies, both clothes and bedding and such.”

asked by Aaron Grey · answered by Curtiss Bruce

Details on how incremental investment dollars are prioritized across marketing, innovation, and distribution.

Carla Vernon detailed that investments are mapped to growth levers, primarily wipes and personal care platforms. Marketing will focus on increasing brand awareness and recruiting new households across various wipes categories and baby personal care, including campaigns targeting no-kid households. Additionally, investments will go into operating discipline, such as bringing online technologies and improving supply chain approaches for greater efficiency.

“Our spending is across both marketing and how we operate.”

asked by Patrice Kanada · answered by Carla Vernon

Insights into promotion and pricing dynamics in the diaper category and the company's outlook.

Carla Vernon described the diaper category as 'very challenged' and facing structural dynamics for the foreseeable future, with major national brands losing share and unit growth. Honest is investing in improving diaper technology and value. She emphasized that the broader baby portfolio (wipes, personal care, new apparel licensing) is offsetting diaper headwinds, with diapers now less than 25% of overall consumption.

“What we're seeing in the diaper category is something that looks structural and looks like it will be the dynamic for the foreseeable future.”

asked by Patrice Kanada · answered by Carla Vernon

Update on current distribution levels and how expanded door growth could support future growth, especially in high-growth categories.

Carla Vernon explained that discussing distribution by doors became complicated due to category differences (e.g., flushable wipes vs. baby). The company now focuses on household penetration (HP) as a more holistic metric, accounting for e-commerce. She highlighted significant runway, noting that while overall HP is 8.1%, specific categories like baby personal care have less than 3% HP (worth $25M-$30M annual sales per point) and flushable wipes less than 1% HP (worth $20M-$30M annual sales per point), despite being a #2 brand or 4th largest brand respectively.

“I mean we are doing phenomenally, #2 baby personal care brand, and we have less than 3% household penetration in that aisle.”

asked by Anna Glaessgen · answered by Carla Vernon

Breakdown of Q2 organic growth acceleration between distribution gains and velocity improvement, and its durability.

Curtiss Bruce stated that the company expected sequential improvement in organic revenue, with Q1 distribution gains leading to acceleration in Q2 and the rest of the year, driven by momentum in personal care and wipes. Carla Vernon added that innovation launches typically occur earlier in the year, followed by investments in velocity, awareness, and trial, leveraging tentpole merchandising events like Amazon Prime Day. She emphasized the consistency of consumption numbers as an indicator of durable momentum.

“And I think that the consistency of the consumption numbers is another indicator for you that this is not some kind of high heat and then cool down periods, very consistent growth.”

asked by Owen Rickert · answered by Carla Vernon

Status of 'Powering Honest growth' program costs and whether P&L noise is largely complete.

Curtiss Bruce confirmed that the team is delivering more savings and less cost than previously guided. The warehouse consolidation is live, with savings realized in Q2. He stated that the company is largely, but not completely, through the costs related to the program, expressing satisfaction with its impact on structural profitability.

“From a completion standpoint, we are now live in our warehouse. So we've executed against the warehouse consolidation and begin seeing some of those savings in Q2. And we are largely through, but not completely through the costs related to the program.”

asked by Owen Rickert · answered by Curtiss Bruce