Shovon Chowdhury

Shovon Chowdhury asked for a deeper dive into diaper performance, clarifying if the decline was primarily due to retailer assortment shifts or competition, expectations for future performance, and details on pricing strategies, including the current price gap and willingness to adjust it.

Answer

CEO Carla Vernón attributed 2025 diaper declines to a volatile category (down 1% overall), macroeconomic pressures driving consumers to lower-priced items, lapping of promotional events, and retailer assortment shifts. She expects 2026 to remain challenging for diapers, which is reflected in the 4-6% top-line guidance. She noted Honest diapers typically carry a 20-30% price premium due to their higher standard of clean, and the company aims to balance value with margin expansion. CFO Curtiss Bruce confirmed that multiple scenarios for the diaper business are incorporated into the 2026 guidance.

Shovon Chowdhury questioned the drivers behind the double-digit decline in diaper revenue, asking if it was primarily due to the 'gender neutral print issue' at Target or intensified competition. She sought expectations for future diaper performance, details on thoughtful pricing and price pack architecture investments, the current price gap for Honest diapers, and the company's willingness to narrow this gap.

Answer

Carla Vernón, CEO, attributed 2025 diaper declines to a volatile category (down 1% overall), macroeconomic pressures driving consumers to lower-priced items, lapping large promotional events in Q3 2024, and portfolio simplification including the loss of gendered prints at a large retailer. She expects 2026 to remain challenging for diapers due to similar factors and ongoing portfolio simplification, but this is reflected in the 4%-6% organic growth guidance. Carla noted that without Target, Honest's diaper consumption grew 2% in 2025. She stated the average price premium for Honest diapers is 20%-30%, reflecting a higher standard of clean, and the company aims for the right price-value offering while maintaining margin expansion. Curtiss Bruce, CFO, reiterated that the guidance reflects multiple scenarios for the diaper business.