Q3 2021 Honest Company Inc Earnings Call
Ladies and gentlemen, please stand by your conference call will begin momentarily once again, ladies and gentlemen, please stay on the line.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the honest companies third quarter of fiscal 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session. Please be advised today's conference is being recorded I would now like to turn the.
Hops over the Mr Sung Kim V P finance and strategy at the artist Company. Please go ahead Sir.
Good afternoon, everyone.
Thank you for joining the third quarter.
Oh cool.
Joining me today.
Chief Executive Officer, and Kelly Kennedy Chief financial.
Before we start I would like to remind you of our legal disclaimer that we will make.
They are bored looking within the meaning of the <unk>.
Including statements about the outlook of our business and other matters.
Urgent issues today.
Forward looking statements involve a number of risks.
That could cause actually result to different materials.
Please refer to file as well as their earnings release issued today for a more detailed description of the risk factors that may affect of it.
Please also note that the boys reflect our opinion.
And then the date of this call and we undertake no obligation ribeye publicly really the result of any revisit these board with these statements in light of new information or future, but.
Also during this call will discuss non-GAAP financial measures.
Which is just our GAAP results to eliminate the impact of 35.
You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP get measured in today's financial results very easily.
Ah life broadcast of this call is also available on the Investor Relations section of our web site and investors Dot.
Dot com.
With that I'll turn the call over to Nick.
Thanks So.
Good afternoon, everyone. We're excited to speak with you today honest is dedicated to providing safe clean and effective products to consumers around the world.
We continue to work tirelessly to drive our mission of inspiring everyone to love living consciously.
As noted in our earnings release, we delivered a solid quarter with top line growth versus the third quarter of 2020 and gross margin expansion from the first half of 2021 <unk>.
Revenue growth was primarily driven by volume, reflecting increased productivity and existing distribution and new omnichannel expansion.
August grew market share in the quarter across our four product categories and accelerated household penetration reflective of our brand values and efficacious products that resonate strongly with consumers.
We're all we're proud of our teams contribution to our results we delivered on our brand mission, while navigating headwinds stemming from a dynamic operating environment with significant inflationary pressure and supply chain challenges.
We recorded our eight consecutive quarter of year over year revenue and volume growth.
Delivered 20% year over year growth in our diapers, and wipes and skin and personal care categories and improved gross margin performance by 40 basis points from the first half of the year.
Our financial results demonstrate the ongoing strength of our business.
Priority continues to be executing against our strategic initiatives.
We're focused on broadening awareness of our brand.
Producing grapefruit innovative products and expanding our digital retail presence.
Now I'll provide an update on our progress across these initiatives in Q3 2021 star.
Starting with marketing innovation, we continue to expand brand awareness and consumer touch points through the use of marketing campaigns, leveraging our content community and commerce strategy.
By inspiring authentic dialogue and creating lasting connections we increased our household penetration to 3.5% this border up over 10% as compared to Q3 of 2020.
We continue to invest in driving household penetration within our skin and personal care business, where we drove 28% year over year revenue growth both of this quarter and for the first nine months of 2021.
This remains a strategic priority for us.
Is more than 40% of year to date, new honest dot com consumers have been acquired through our skin and personal care products.
Second we continue to support our breakthrough innovative products in the third quarter of 2021, we saw strong results from our clean conscious diaper that we introduced in the middle of the first quarter.
Behind the improvements in performance and sustainability of this product we witness nearly 20%.
Year over year revenue growth for the quarter on our diaper business.
Our diaper market sure continued to increase this quarter of her diaper retail consumption growth outpaced the market honest grew 24% compared to the total diaper market up 14%.
In the third quarter of 2021, we also introduced are sustainable packaging initiative for beauty.
Why now features treat repackaging on all our secondary cartons as part of this launch we also introduced our daily Defense collection.
A new line of skin care products designed to defend the scheme against environmental aggressors.
The beauty restaged.
Has already begun to show signs of positive performance and has led to retail distribution games. We expect this restage to be a growth drive him to the business going forward.
Third.
We're pleased to deliver strong growth in a retail channel is are integrated Omnichannel strategy has led to a more balanced mixed up revenue across our channels are.
A retail channel accounted for 53% of our total revenue in the third quarter as opposed to only 44% in the third quarter of 2020, when consumers remains at home and shifted significantly to online shopping.
In line with this macro trend, we've seen increased consumer willingness to get back into stores as more people will become vaccinated.
As a result, we have seen a channel shift from digital to retail, causing acceleration and revenue growth within a retail channel or retail channels with 28% in the third quarter of 2021 compared to 2020.
We believe we're well positioned with our omnichannel strategy to capture growth wherever or consumers choose to shop.
Significant white space opportunity exists to expand on shop presence in the depth of our product offering with new and existing retail partners.
And the third quarter, the number of stores selling August products expanded to over 40000 retail locations up double digits compared to the same period in 2020 led by a significant increase in stores selling our skin and personal care products.
The hydro sustainable packaging initiative for beauty, we're excited to announce that we will continue standing into an additional 385 target stores with our beauty products in Q1 of 2022.
This will bring our beauty line into over 1600 total target stores and will increase our total points of distribution and beauty of target by approximately 30%.
In addition, we have gotten exciting new distribution wins on our beauty restaged with a key strategic retail partner in the drug channel.
In Q4 of 2021, we are adding an incremental seven skin care items in line and roughly 3000 Walgreens stores. In addition to that distribution in queue for we.
We are setting 1500 and caps at Walgreens in Q1 of 2022 double add 15, new items to our current assortment.
Before I turn it over to Kelly I wanted to take a moment to reiterate our commitment to ESG, which has been part of our DNA since our founding.
From developing products designed to be safe to working hand in hand, with our charity partners to serve those in need to embracing diversity and inclusion where an ambition to create real and meaningful impact on society.
In summary, we believe we have built the foundation for on US to continue to grow as a leading clean and natural wellness brand. We continue to capitalize on a strong content community and commerce platform to drive good growth across product categories, and all consumer touch points.
We are pleased with our solid progress this year and believe we are well positioned to advance our strategic growth plan.
Now I would like to turn the call over to Kelly Kennedy, Our Chief Financial Officer to review, our third quarter results.
Okay.
Hey, welcome everyone.
Reflect back au consecutive quarter, a year over year top line growth.
I'll take your liver.
Martin and EBITDA profitability department, despite the challenging macro environment, including significant level of concentration and supply chain disruption.
In order to performance reflect the President's day.
That'd be earning brand as well as our team.
Against our strategic priority.
Starting with our financial Etsy driver.
Third quarter revenue totaled 83 million, a 6% increase over Q3 2020.
This is 47% growth as compared to the third quarter of 2019.
Combined year over year revenue growth in the third quarter of 2021, and the diaper and light skin and peripheral characters.
Which represented 96% of total revenue with 20%.
No I think you can see drivers byproduct category.
Thanks for the link to sit.
15% as we saw strong double digit growth sectors and wait.
Thank goodness significantly behind it continued adoption of a clean conscience. Thanks for innovation launched earlier in the year.
Blake office Ophthalmograph, especially in the retail channel.
Based on third party data for the third quarter are diaper.
Okay ended up 24% and our bikes consumption does that 23% with both achieving market share gain.
Getting peripheral characters, 28% COVID-19 by higher sales volume within the retail channel.
Omnichannel demand for getting peripheral cabinet is driven by additional retail distribution incremental assortment and consistent investment in our contact community Commerce strategy.
Based on third party data for the third quarter, our personal care consumption does that 25% year over year driving higher market share penetration during the quarter.
Household a moment, which represented corporate Pedic pillow Bethany declined 71 per day.
The launch of our new sanitizing needed detecting panic in Q3 of 2020 fuelled household category revenue to four times the level and couponing Q2 of 2020.
Both consumer and retail customers were eager to stock up on product anytime.
Consistent with an industrywide trend, we've seen consumption and customer demand for these products significantly decline as consumers have become vaccinated and return to pizza They did Jean.
Great demands reflect a return to pre COVID-19 revenue for the category.
Now turn into results back channel.
In that industry trend.
Doc continued rebound and the retail channel and the third quarter of 2021.
Outflanked retailed breath is aided by a small increase in store traffic as consumers return the interest in shopping.
Retail channel revenue increased 28% to $43 5 million.
61% on a few years back pain.
Corresponding to consumer night shift back to retail digital channel Bethany declined 11% to $39 1 million, but with 32% on a two year stack basis.
For the quarter retail accounted for 53% of total revenue up from 44%.
A quarter in 2000.
Feel that our Omnichannel model is it true competitive advantage.
We were able to be wherever our consumer chooses to shop and can capture consumer changing shopping behavior.
Turning now to growth market.
Gross margin achieved 36% for the quarter.
Gross margin headwinds for the third quarter of 2021.
Third quarter of 2020 included higher input costs as well as the normalization tree.
Retailers pulled back on trade Commission during the COVID-19 pandemic.
History gross margin 40 basis points above first task of my debt as we benefited from cooperation okay.
Mkay and operating leverage.
Key areas of year over year cost inflation city transportation, great and warehouse labor call, which have progressively increased throughout the year.
He continued our efforts to offset these edwin and part fast continues to locate an observation productivity improvement and improved neck across the business.
In Q3, we captured a full quarter of our clean conscience, diaper aviation, which had improved our diaper margin by over 100 basis points.
We've also had a number of other conservation initiative launching throughout 2021 headlines by a sustainable packaging initiative for beauty. It launched a key K, which we anticipate will include 80 gross margin by approximately 800 basis points.
Given the record levels of compensation competition productivity and pricing will be leveraged spratt to deliver I guess, our long term market and profitability target.
Our pricing strategy has been to wait I'm thinking pricing in order to expand market share and we've been able to increase share all of our four categories in the third quarter as well as a year to date.
Given the continued inflationary pressures we've seen in the market. We believe now with the bright time to take typing exit and our confidence that our product will continue to have the correct price value relationship to drive share game into the future.
We've taken pricing action in diaper and collected items that are white and personal care business that will go into effect at the beginning of Q1 2020.
Each time to increase it includes mid to high single digit increases.
On the majority of our diaper to offset inflation in our transportation and warehouse labor costs.
Similarly increased call and collect baby weight and personal care items.
We're monitoring Interpol plus our portfolio and believe we have the ability to take additional pricing action twenty-twenty escondido across the rest of our portfolio.
Total operating expenses increased three 2 million versus Q3 of 2020, primarily driven by 80 stock based compensation expense and cost of operating as a public company.
He invested $14 million in marketing quarter, which reflects 17% of revenue behind our content community and commerce strategy, which funded increased influencer campaign and investments and paid media, perhaps getting personal care product category to drive higher household penetration.
During the quarter, we also meet robust investment in research and development as we built our product innovation pipeline.
This includes investments in product development claimed that clinical testing qualifier products for certification and performance claims Bethany with a consumer and differentiator putting punch out.
Now turning to the bottom line top line growth and solid growth markets allowed us $1.2 million and adjusted EBITDA to the third quarter of 2021.
We ended the quarter in a healthy condition with $90 million in cash and short term investments with no debt on our balance sheet.
We believe we are well positioned to execute against our 2020 feet strategy and continue to retain financial flexibility to invest in incremental marketing product innovation and domestic and international expansion coming here.
Looking towards the remainder of the year.
Transfer the balance of the year for main dynamic as we navigate and evolving environment with significant income cough pressure continued uncertainty around the COVID-19 pandemic and its impact on consumer behavior.
With that in mind I will now share some thoughts on our outlook for the remainder of 2021.
As it relates to your revenue our expectations for the year remains can skip that.
With what we shared under that earnings call.
We expect typewritten white and get them Crystal care in total to grow double digit in line with our expectations for the year.
We expect to drive continued sure expansion and overall household penetration in the fourth quarter.
Based on macro household and wellness trends consumer demand for stereotyping and disinfected by hedge remains of 2020 level.
Given the current level of consumer demand and high level of customer inventory, we expect to see increases in price permission and merchandising in the household and wellness category over the next quarter.
As we look forward to the future of our household and wellness product category, we're developing plan to reinvigorate the category, including product innovation that will allow us to continue to enhance our household wellness affiliate.
As it relates to marketing similar to the entire industry. We are seeing continued input cost inflation and in some cases and acceleration of headwind in areas, such as transportation, great labor and packaging.
To help mitigate these headwind.
Went to the first nine months of the year, we have constipation and productivity initiatives in place for the remainder of the year.
As a result, we expect our annual growth market for the year to be in the range of 35% to 35.5%.
An operating expenses, we expect marketing for the full year 2021 to be roughly 17% of revenue.
We expect SG&A for the full year 2021 to be roughly 27% of revenue.
As we reflect on 2021 performance to date.
We are pleased with the momentum and core strength of the visit and thanks for design and skin and purple hair, which collectively represent 96% of our revenue and have grown in double digits year over year.
We are also pleased with our growth market and adjusted EBITDA results that we've been able to achieve even an extremely challenging supply chain and inflation environment.
And we continue to execute our strategy 2023, we have conviction and our long term growth alligator.
The cleaner natural market outpacing growth versus conventional brand and our product category.
We'll go into market share in our core product category at the in depth and products and marketing innovation.
We are expanding our points of distribution and driving are unavoidable strategies detail and digital starter.
We are focused on execute our growth plan and driving higher long term shareholder value will solidify audit physician at the next generation modern CPG company.
With that I'll turn it over to the operator to begin to Q&A portion of the call.
Ladies and gentlemen, you have a question or comment at this time. Please press the star them in one key on your Touchtone telephone. If your question has been answered you wish to move yourself from the queue. Please press the pound key.
Our first question comes from Andrew Sex Sharp with J P. Morgan.
Hi, Thank you and thank you for taking my question.
So.
Do we think about like the and I appreciate Kelly all of the background information on the guidance not a formal guidance, but in terms of like how we should be thinking at the components how.
How you were saying like you said the budgets for diapers and wipes you also had for the beauty continuous triumph weekdays restaging should be be thinking therefore of a high or low double digit topline grow for for the ear I think that.
Kind of like where we we can at least although the budget the growth in the fourth quarter, which leads to about a high single for the for the ear and then how we should be expecting as you commented that it seems that like.
Like the pretty much things and party levels at retail have been normalized within the within the diapers and the category and you're gaining a lot of shed you see that continue and how you see the responses and passing on some of the pricing off off the cost increases that you suffer it into into the next <unk>.
Yeah I'll start just that you know, we're not giving specific.
Full year guidance, but given that there's been no change.
You kind of the the overall trend.
Kind of we're guiding too we'd be consistent to what we had in the last in the last call. So no change at all to pull your outlook I need certainly we'd like where the business is trending you'll have noted that we.
Grew 20% in Q3 combined between typewritten wipes and personal care.
And you know certainly currently in the business we're trending.
Double digit growth as you've seen in consumption data.
Between diapers wipes his mouth with our personal care.
Regarding your second question, we have seen really strong acceleration and the diapers and wipes you know we feel we've gotten really strong traction due to the launch with a clean conscience, typer, but as well a lot of our marketing kind of innovation.
Innovation influence our campaign AD general kind of.
Traction that we're getting overall with the brands, we think has created sauce.
You know kind of.
Continued.
Positive trending about what historically has been more of a single digit growth, we've seen stronger growth there than what we've seen historically.
And one of the certainly we're keeping our eye on very closely our birthrate. There's time early indications that Darren that trend may be changing slightly but clearly the story behind our consumption growth I think for some lights on our ability to increase market share and household penetration has been the overall growth.
In the category, which is the natural category outpacing in total.
The corner or diaper his be highlighted categories is 14% our consumption and the 12 weeks ending 10, three was 24% so between sideburn consistent with our clients and our personal care of weird well out pacing and on the.
Let me see.
Uhm.
The category.
Your last time it was about like what where did you have a follow up.
Yeah, No that's super helpful and I I think the Guy this kind of implies that 35 to 35 and I have found is Shirley correctly for gross margin for the year that towards place you. If my math is correct that you're going to have a an expansion in the fourth quarter and I understand that the cost of Asian <unk>.
<unk> and you have more of the beauty coming in in the fourth quarter.
Is that the way it implies pretty nice uptick visa fees last she and that's the way it's probably the mixing packs that we should be aware of that will help you. Despite all this cost pressures.
Yeah.
Or when you think about our year to date versus what were guidance for the margin that is below where b R. A year to date. So the year to date, where at 35 635 six of our guiding to 35.0 to 35 five.
And that the reason for that is that we are seeing some additional headwind versus what we talked about a quarter ago and those come in further cost increases in transportation, particularly ocean freight, which impacts are white and that we talked a little in the call about the price promotion, which we're seeing a lot.
Work to grow demands and sanitizing, disinfecting, and you'll see us as well really promoting to kind of build that business and then we have also seen some price limited price increases from our contract manufacturers as they're passing to cost increases that they're seeing in that area.
Such as packaging is rather than prices have increased and their own transportation costs of their components that are coming in so we're actually saying that we're seeing some additional headwinds.
In margin versus what we saw and talked about in the queue to call.
To the tune now.
Kind of that 35% to 35.5% and when you when you go into your model, you'll you'll see that that actually.
It kind of creates a pretty wide range for Q4.
But the top end of the range would be kind of at the year to date results Uhm.
The broader.
Certainly with the volatility market.
Kind of what we're seeing right now we thought.
Some of the cost increases and experienced chief nine transportation coughing and level.
Can we talk further and further.
Q3 and going to choose.
Yeah, No I think I am I can totally seen that and the model was a small referring to the level I guess slash C. M. I think last you had a 33.6% so that was probably the beginning of the pressures and some of the mix. The fact of having warm diaper speeds of peace.
The beauty Restaging. So it was more like when I you have for your base, but I can take it offline.
Because I think that's correct, you're you're exactly right Andrew I mean, the the can you take away here is we like how the business is trending diapers and wives skin personal care for businesses that we've been talking about.
Growing 20 per cent you know combined here and there's two three we see that trend the pacing of double digit continuing so we feel really good about and then this perhaps sooner we faced in this kind of supply chain space input costs.
We had about roughly two to 3 million and supply chain disruption this past quarter, largely and whites and personal care so to be able to drive that top line at the level, but we did you know and mitigate.
Two to 3 million of pressure in the system based on the supply chain disruption, we're pleased with where we stand today and again similar to what we talked in in queue to based on kind of the trends we see it again positive numbers when it comes to the core business.
There's still continued volatility in the supply chain, we just wanted to be conservative and maintain those expectations for the year, that's best to take away.
Thank you very much for personal.
Thank you.
Our next question comes from Morocco Guggenheim.
Afternoon, Nick N Kitty well, maybe your <unk>.
First that would be a photo from from the previous question. So could you maybe share with us what the the delivered of inventory you do have in diapers and and and the widespread I treat them.
Uhm.
Are you are you sending as much as you as a consumer and spying from your from retailers. So my turn to some distrust.
Good question, Yeah, we have nothing to call out the level of orders have been reflective of the underlying kind of consumption. So we're not seeing any disconnects I know that was something that we talk about in the second quarter, but we haven't seen they they've been running generally in line and there's nothing to call out there.
Thank you and then an in person and skincare. So it was <unk> almost 70% of gross October 45% last year, but obituary that's pretty what we were expecting so.
Is there a reason why and and if you can give a bit more cut her about the gruesome in that segment that would be great. I mean, you mentioned about.
Four 4000 stores and <unk>.
Mm additional that's probably more me now cause I don't care so.
<unk>.
What kind of stores you should can give us some more color here as well.
Is the gross west coming from before you make so price.
Yeah, I'll take the first part and I'll like totally out some additional color you know, we're really pleased with the beauty restage from a progress that we're making with this initiative and as we have discussed this last quarter. There was a lot of transition that took place is a bird change too short stores setting you know the new product line target, which is a <unk>.
Strategic partner of ours was in the process of setting and making those transitions was passed border and based on the performance to date. That's why you see them also adding an incremental $385, which is roughly around a 30% increase to take us to 1600 doors. So that 385 is gonna be.
Added into one of this year. So that's a good example of hey, we're pacing well, we see the retailers taking that product on an expanding it Walgreens, which has been a strategic partner of ours is a kind of reinvent themselves through this health and wellness lens based on the new leadership the behalf within their Oregon.
The station Big partnered with us to be able to introduce relieve a product line or sub menu items that are gonna go into 3000 stores in Q4.
And then we also have solidified 1500, and perhaps with 15 of our core items and one that's gonna take place. So when you put that together, we'd like to progress that we're making against the beauty restage, there's always a timing component of when these stores get cycled inventory comes.
New in and I think the way the consumption is pacing when you look at kind of the skin and personal care business consumption being up 25%.
That doesn't lie so we might be progress and as we've looked at kind of this next year going beyond cute or there's a large commitment space with our key strategic partners and you're going to continue to see send in July of that part of the business. The other interesting four years, we also from an auto.
Dot Com perspective, when you look at skin and personal care.
Really sourced from a number of perspective, 41% of our you folks that are coming into honest dot com came is Bruce and personal pier compared to 34% a year ago. So again, a testament to the new innovation and the new news within the marketplace tell me anything else.
So far the Bbc's still pattern early evening, we feel extremely well received by consumer consumers and customers.
The retailers really believe in it certainly is gaining a distribution landed Nick highlighted and it really see us as leaders in that space. So we're pretty excited but it does it does tend to take a little time to get it's like 100.
Cause you guys high coffee down thank you.
Thank you.
Our next question comes from stuff with sick with Jeffrey.
Thank you and good afternoon, everyone I tell you I wanted to go back to your comments on taking price action now I think in the last quarter, you talked about deferring. It sounds like you will be taking any of the fourth quarter margin pressure in the guidance, if the timing effect of having not taken place yet.
And still seeing some costing increases grill time.
Yes, I need certainly just caught the new pricing goes into effect in early January and so that doesn't benefit the quarter on when we kind of took a step back and we kind of took a look at our portfolio and the pricing is actually going to be impacting about 35% to 40% of our portfolio.
We mentioned the majority of time purchase and select the whites and some other personal care items.
Absolutely one of our considerations was really around aren't really cover our input costs headwinds not just you know that we're seeing in queue for but we expect and anticipate continuing into 2022.
Being very thoughtful on just price value relationship competition and diaper.
Has already taken pricing, we feel we've gotten what we set out to do for the year, which is the market kind of share games on being kind of not the leader, but a follower on pricing on and we feel that the timing is right now in the paint valued relationship is still there for the consumer for us to to implement that new pricing early in two.
922.
Thing that I would add stuff when it comes to the space is you'd think of kind of pricing and kind of the choices. We made strategically that we measured we didn't take price and we wanted to capture incremental sure on diapers and wipes for school.
Personal care and when you look at our household penetration numbers you know we've added about 450000 households over the last year, which is you know from a strategic perspective is a key area for us as we drive you consumers and to be honest brand. We're currently in about 1.5 million.
Household so to add an incremental 450000 is a testament to kind of a marketing strategy that we have around contact community commerce, and we think that bodes well for us as we look in because you go into next year, we will be taking price around 35% to 45% of the portfolio, but again the price value.
Relationships should maintain based on the suggested retail pricing within the market and based on those new household. So we've also captured selling that second third item et cetera, making it an honest lifestyle household.
Is the opportunity in front of us.
The only other thing I would add seven.
When we think about 2022 and look at the input costs overall pressures the pricing that we're proposing is sufficient to cover that the key areas and you know the majority of our cost structure is not subject contemplation, we've about a third of our cost structure and then it is.
Will be impacted by cost inflation in 2022, but again the key areas are the same ones, who talked about in the house transportation.
Small article.
And also.
Which is 32.
And started certainly is over the course of 2021.
Okay. That's totally helpful. One more Kelly on the margins I wanted to understand a little bit about what short term versus the bigger picture. You also mentioned promotion and the Sanitization category sounds like there's some accent the inventory that needs to be worked down. So also wondering how much of a burden that is on the fourth quarter margin relative to what would be.
And more structural it sounds like that's quite transitory not something that you expect to carry forward into the year.
Yeah. It certainly the price promotion, we're kind of expecting and planning for Q4 and into Q1 on but we do feel.
Kind of again price following that's what a lot of the industry is doing and we want to be competitive and we felt.
The pricing that we were at Watson at the place that made a competitive we have.
Seen some some some good acceleration you're kind of in the overall velocities now that we've taken some pricing professional pricing on that on and so we will <unk> will be in great position to kind of work through.
That but that would be transitory nature, and you say within the market Stephanie when you look at hand Sanitization for example consumption within the market look at our Roy the latest 13 weeks down about 64%. So you are seeing the market right now and then the market react around more price promotion as retailers were.
Looking to move through inventories in the space because they've been again pretty backed up in this area and you're gonna see again kind of this element.
Totally highlight since it's a point in time, but you know long term.
No commitment to household and wellness.
Look at the innovation Cadences I think you saw in September when we did our innovation day around new news within a variety of segments as we get into this next year.
Very helpful. Thank you both.
Thank you.
Our next question comes from John Keyboard Bank of America.
Hi, Thanks for taking my question.
Okay.
I think you've answered this already I, just wanna be pretty explicit the benefit we saw in diapers and wipes three Q that there was no timing or or.
Or you know.
Quarterly impacts that are worth calling out that they are.
May not reversed in four key right that was just consumption pulled away.
Yeah, you're saying consumption all the way when you look at the diapers like reset 24% increase in consumption. This last quarter that you're seeing the other pieces you know from a diaper perspective. This conscious diaper, we're all from Genie share within the marketplace right now so the consumption solid.
Market share growth overall, and as we've highlighted going into Q4, we continue to see kind of the trends that we've seen in 233 diapers wipes <unk> personal care continue from a double digit growth perspective.
Okay. Thank you and then if you guys could shed some light on uhm quarter to date trends you're saying.
Does that are worth calling out specifically.
Yeah, I guess you just you just covered the diapers and wipes go up double digits and if.
If you guys have anything else to that the might've been glossed over.
No I would just say you know all we can say ordered the date based on the data that's out there in the market and kind of where we're feeling good about where things are trending and I've, just diapers and wipes I Wanna also her white skin and personal care returned perspective, there's really been a positive reaction around our conscious diaper. There's also again.
Early but you know a good you know beat that especially when you look at some of our ratings and reviews as it pertains to our new Jersey, restaged skin and personal care.
And at this point, we're executing exactly against the plan that we've discussed around diapers wipes getting personal care uhm. So we feel good.
Tuesday, and the Sanitizing disinfecting, we did call that out of the queue to call pretty much in line with our kind of it in terms of what we called I think some of the promotion will mean more volume, but doesn't really change that overall perspective on where we are that's trending for the order right fair enough I guess just lastly.
Some marketing it's a percent of sales.
I appreciate the guidance on the year.
It seems like you guys have have maybe taken a little bit.
Have a more bullish approach more emphatic on marketing willing to spend a little bit more which are we.
Are you guys thinking about like 15 16, 17% just just sort of you know even high level, where you guys are thinking.
That number will be training as a percent of sales longer term.
Yeah, you know we've already said that we thought steady state was roughly 15% of sales we have moved in.
As you seem because we were supporting kind of what we had really strong innovation with a clean conscious diaper launch in Q1 in the <unk> age we didn't lean in which is why this year will be landing it roughly 17% of revenue on and again as we go forward rebuild mean in in <unk>.
<unk> on as needed to support, particularly category extensions or other bigger innovation projects. We just happen to have two very large initiatives uhm launch innovation initiatives launched in 2021 answer that certainly got us on the high end of the range you would you could expect going forward between.
15% to 17% and we're both land within that will depend on kind of level level of innovation, it's launching within a year.
The only thing I would add to it is when we look at the Roy and the investment profile in this space. Because you know we have a lot of work that we do throughout honest on the analytics seen.
Seen the household penetration number go up adding 450000 households, and obviously seeing you know 20% combined growth on diapers wipes and just kinda personal gear also some pretty aggressive comps a year ago is kind of a testament to that that marketing strategy and that investment profile.
Working for US right now so that is something that we're gonna continue is Kelly highlights not only are we kind of micromanaging. It from the wrong perspective, we're seeing the results on top of some pretty aggressive comps on the top line as well as when you look at the household penetration.
Boehner than 450000 added to the forefront five that we currently have.
It's it's working.
Alright, thank you.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press the star them in one key on your Touchtone telephone.
Our next question comes from large no problem with lucasville.
Thanks for taking my question, it's a follow up on the marketing side. So.
Obviously expressed a willingness to to keep spending at high rates.
That remain focused on the launches in diapers is it about expanding beauty or or is this just kind of evenly spread across the board on your products.
No I think from the top level really were really trying to kind of extend our positioning is a lifestyle brand. So when we think about the consumer.
Have products that range from Cyprus up in the beauty, we're really looking to kind of increased touch points to ask that consumer by kind of this halo of lifestyle within as we invest.
Clearly you know proportionally.
Spend in areas of growth.
Still outpaced investment behind our beauty or personal care is certainly we're seeing the results and driving growth there, but we will continue on to kind of share across our product portfolio to ensure that you have all of our all of our product category.
Some of the marketing investment.
For US have you talked here can hurt us talk about increasing tuck-point, increasing the share of wallet and getting a consumer that already knows and loves honest products to be aware.
<unk> breath on kind of even within Q Q.
Q3, and Q4, we have some new products that we're excited about for the holiday gift that you know we have the launch of hand creams and some great innovation that is launching and so really will utilize some of that uhm marketing to really engaged in consumer.
To ensure that they are aware of our products, where we have products and there will be a little bit of outpaced investment behind new area.
We're we're we're seeing growth and new product launches.
Got it and then if I can follow on on your price increases that you mentioned and we'll start to see in Q1, historically I think on it to try to charge of 10% to 20% premium on mainstream brands will that sort of umbrella stay at about that same range.
Even as you raise prices in the in the next year.
Okay. That's a great. That's a great question, but what's really important for us and this is why we are strategic and kind of monitoring kind of were pricing would net out within the marketplace. So as we've seen for example in the diaper category pricing starting to be reflected in the marketplace, we're gonna be able to Maine.
<unk> based on the increases that we're targeting the price value relationship versus the competitive set so the percentages will be equivalent eyes versus competitive subs and you know thus far as we've had discussions in this space with two partners we believe.
The reflection work is based on the suggested retail prices should be balanced based on historical.
Great. Thank you.
And you know.
And I'm not showing any further questions at this time of like turn the call to management for any closer remarks.
I'll just thanks, everybody for taking the time to listen to a story you know we obviously.
Are happy to be able to deliver against the commitments.
Good against this order.
We wish everybody a happy save holiday season, and we look forward to visiting with two next quarter.
Well, ladies and gentlemen, this does conclude today's presentation, you may not disconnected and have a wonderful day.
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