Honasa Consumer: Honasa Consumer slips into Rs 19 crore loss on restructuring; operating revenue takes a hit too

Honasa Consumer, the parent company of beauty and personal care brand Mamaearth, reported a decline in its operating revenue for the September quarter while also slipping into losses, on account of a significant hit from its offline distribution restructuring exercise.

For the July-September period, Honasa Consumer reported a 7% year-on-year (YoY) decline in operating revenue at Rs 462 crore. It posted a net loss of Rs 19 crore in the quarter, compared to Rs 30 crore net profit in the same period last year.

“The impact (of the restructuring) was actually higher than what we had planned and expected…we initially had certain assumptions in place, which were based on a certain level of inventory but when we got into the actual execution, it turned out to be relatively higher,” the company’s founder and CEO Varun Alagh told ET.

“We had expected it to be a Rs 50-crore inventory impact but it turned out to be around Rs 70 crore…that led to scale reduction, provisions in expiry and damages of the return stock, which led to the impact on Ebitda as well, which was higher than what we had expected,” he added.

The company undertook a massive transition exercise for its general trade strategy – through which it is moving away from the super stockist model it has currently deployed to direct distributors.

This is a part of Honasa Consumer’s strategy to increase the share of its offline sales to the overall topline.

In an earnings presentation, Honasa Consumer said that even adjusted for the impact of the offline restructuring, the company would’ve clocked a 5.7% on-year revenue growth, which Alagh said, was below expectations.This was largely on account of the company’s biggest brand Mamaearth’s performance slipping over a period of time.

“Overall growth has been lower than expectations and that’s largely because of Mamaearth not growing in line with what we had imagined it to,” he said. “Offline is one reason but we have also recognised that we need to structurally address a few areas,” he added.

In addition to Mamaearth, Honasa Consumer owns five other brands – The Derma Co, Aqualogica, Dr Sheth’s, BBlunt, and Staze. It discontinued its ayurvedic beauty brand Ayuga in the first quarter of FY25.

“We have recognised that there are a few strong tweaks that we need to make across the mix from a product mix perspective… and to narrow our focus on two or three categories and go deep within them with our skills,” Alagh said.